Judge Denies American Airlines Request to Reject Pilots Contract

AA plans to make changes, resubmit motion to throw out contract

The federal judge hearing AMR's bankruptcy case denied the American Airlines parent company's option to throw out the Allied Pilots Association contract and impose new terms on the union.

Both AMR Corp. and the union are declaring victory.

The union said Judge Sean Lane's ruling is historic. It is the first time a bankruptcy judge has sided with a union instead of throwing out a contract.

But American Airlines pointed out that the judge actually agreed with the airline on most major points, except for two narrow issues involving temporary layoffs and outsourcing.

American Airlines said it would make changes to its motion and resubmit it by Friday.

"It doesn't prevent us from moving forward," AA spokesman Bruce Hicks said. "In fact, it gives us a clear road map -- could not be a clearer road map -- of what we need to change in order to renew our motion and move forward. And the judge said that in his ruling."

The APA said Wednesday's ruling was a limited, near-term victory.

"We hope to get back to the bargaining table," APA spokesman Tom Hoban said. "Our members have spoken loud and clear. They want an industry-standard contract, and that's something the corporation is going to have to address if they want to reach an agreement with the pilots of American."

The airline had no new comment when asked if it was open to going back to the bargaining table but repeated that it would file a revised plan with the judge on Friday.

Last week, the pilots rejected American's last contract proposal, with 60 percent of members saying no.

Five of the seven bargaining units with AMR have agreed to new contracts during the bankruptcy proceedings, but the pilots and flight attendants have not.

The Flight Attendants Union vote on a new contract ends this week as well, on Sunday.

The pilots said they didn't like the six-year deal in part because of pay raises and pay scale. The union said it believed it deserved a better deal.

But airline officials have said the deal pilots rejected is better than the terms submitted to the judge.

Commenting on the Lane's decision, the APA released this statement:

"JUDGE SEAN LANE DENIES AMR MANAGEMENT’S MOTION: United States Bankruptcy Judge Sean Lane issued a ruling today denying AMR management’s motion to reject the Allied Pilots Association-American Airlines Collective Bargaining Agreement. Judge Lane filed his 106-page ruling electronically at 5 p.m. Eastern Daylight Time with no accompanying hearing, and your APA legal team is now studying it. Given the document’s size, we will largely reserve commentary until we have had the opportunity to conduct a thorough review.

APA President Keith Wilson will issue a follow-up message later this evening concerning Judge Lane’s ruling.

In the view of your APA leadership, AMR’s efforts to reject our contract constitute an admission of failure—failure to reach a mutually acceptable agreement with a vital employee group, and in a broader sense, failure to avoid bankruptcy and to present a credible vision for our airline’s future. To be clear, our airline’s future must include a consensual, industry-standard contract that properly recognizes the profession, our pilots’ sacrifices and our critical role in the operation of American Airlines."

Hicks released the following statement:

“We appreciate Judge Lane’s thoughtful consideration of our Section 1113 motion regarding the pilots’ contract.  The judge supported American’s business plan throughout his ruling and agreed with the company’s position that changes to the collective bargaining agreement were necessary. He ultimately concluded that only two narrowly defined elements of the company’s proposal were too aggressive. We will adjust those elements, resubmit the term sheet to APA and, as the Court suggested, renew our 1113 motion for our pilots by Friday.  We will ask Judge Lane to consider our request expeditiously.

Judge Lane ruled that virtually all legal tests and standards under 1113 were met including:

  • All but two proposed changes are necessary for the successful restructuring of American.
  • All parties are being treated in a fair and equitable manner.
  • The company provided complete information necessary for APA to evaluate the proposal.
  • We negotiated in good faith and APA did not have good cause to reject our proposal.
  • Taking into consideration all the facts, American had clearly support the need for rejection.

“Even regarding the two items on which the Court found that American had exceeded what was necessary, Judge Lane agreed that the status quo was untenable. He concluded that American needs a significant increase in codesharing and latitude to furlough, but he believed that our proposals on both need to be modified. These issues were already remedied in the tentative agreement our pilots recently voted on.

“The Judge’s ruling makes clear that American’s business plan is well-grounded, that its plan for success is reasonable, and that it has approached the sacrifices required of its employees in a fair and equitable way. Judge Lane stated that American’s business plan is very similar to the business plans presented in other airline bankruptcies and thus provides an appropriate basis for establishing that significant changes are necessary to existing collective bargaining agreements.  The two areas that the judge said needed to be adjusted for pilots – furlough protection and codesharing – are not a part of the flight attendant term sheet.

“We hope our flight attendants see the immediate benefits of an early out, pay increases and more than 2,000 jobs saved in the offer they are voting on this week and that we don’t get to the point of Judge Lane having to rule on our APFA motion.

“The 1113 process is a difficult one, and one we hoped to avoid.  We have the Unsecured Creditors Committee’s support of our 1113 motion and the savings we’ve laid out, and will continue to move as quickly as possible to be able to move forward with our restructuring.”

NBC 5's Greg Janda, Chris Van Horne and Scott Gordon contributed to this report.

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