Wings Magazine

American Airlines fails to reach agreement with pilots

Oct. 17, 2011, Dallas, Tx. - American Airlines parent AMR Corp. failed to reach a labour agreement with its pilots over the weekend, pushing down its stock price Monday and briefly triggering a halt in trading.

October 17, 2011  By Carey Fredericks

AMR shares fell 21 cents, or seven per cent, to US$2.73 in afternoon trading. They dropped as much as 11 per cent to $3.04 earlier in the day.

The company and the Allied Pilots Association said Friday they would meet through the weekend, raising expectations for a deal. By Sunday night, however, those hopes were dashed.

American has fallen behind as other airlines benefited from a recovery in air travel and higher fares.

AMR, which hasn't earned a full-year profit since 2007, has blamed its problems largely on high labour costs, and it wants pilots to accept contract terms that will boost productivity and cover a shortage of pilots caused by a wave of recent retirements.


AMR spokeswoman Missy Cousino said Monday that there was "significant progress'' in the talks and "there is a path to an agreement.'' She said talks would resume by midweek, after union negotiators brief their board on Tuesday.

Pilots want pay increases to make up for concessions they accepted in 2003.

Union spokesman Sam Mayer said pilots were willing to help the company deal with temporary crew shortages. But, he added, "Unless you see some pretty significant pay raises, whatever (the union
sends) to the membership has zero chance of ratification.''

Ray Neidl, an airline analyst with Maxim Group LLC, said AMR shares appeared to be falling because of the lack of a deal with pilots.

Further weighing on AMR is the prospect of weaker air traffic next year. The International Air Transport Association said Monday that premium travel, mostly by corporate fliers, fell sharply in August compared with earlier in the summer. Business travel is crucial to American.

The airline also has an aging fleet of gas-guzzling planes, and large debt and pension obligations.

AMR is scheduled to report third-quarter results on Wednesday. Analysts believe that the company lost about $136 million, or 41 cents per share, after one-time items.

By comparison, analysts think United Continental Holdings Inc. and Delta Air Lines Inc. earned more than $700 million each in the quarter, as higher fares boosted profits. Both lowered costs in
bankruptcy court several years ago. Speculation has increased recently that American could be headed toward a bankruptcy filing, although most analysts think the airline has enough cash to avoid
that step for now.


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