Wings Magazine

Bankruptcy judge approves three contracts with American

Sept. 13, 2012, Dallas, Tx. - American Airlines will reduce retirement benefits and ease restrictions on outsourcing of flying to other airlines as it attempts a turnaround under bankruptcy protection.

September 13, 2012  By Carey Fredericks

American announced the changes Wednesday night.

Earlier in the day, a federal bankruptcy judge approved labour contracts that were ratified by flight attendants and mechanics. The judge gave American permission last week to throw out the pilots' old contract and impose its own working terms after pilots rejected a company offer.

American hopes to cut annual labour spending by about $1 billion with the changes.

After cancelling the pilots' contract, the company said it plans to relax limits this month on revenue-sharing deals with other
airlines – so-called code-sharing. The move is designed to boost revenue without adding flights. American will also gain more
flexibility to shift flying to regional airlines.


Earlier Wednesday, American Airlines announced a four-year deal to outsource some of its regional flying to SkyWest Inc. SkyWest will handle some flying currently performed by American Eagle, American's regional affiliate, in Los Angeles and Dallas.

American will increase the maximum work hours for pilots starting in November. And it will freeze the pilots' defined-benefit pension plan while terminating a supplemental retirement plan in November.

The new contracts ratified by other workers will let American reduce jobs for flight attendants and ground workers and close a
maintenance hub in Fort Worth, Texas. Pensions for workers other than pilots will be frozen but not terminated, and they will instead get an improved profit-sharing plan. Retiree health benefits for current employees will be reduced.

Thomas Horton, the CEO of parent AMR Corp., said he still hopes for a voluntary agreement with pilots but that the company needed to begin making "changes that are necessary for our restructuring.''

Horton said in a letter to employees that other airlines used bankruptcy to get stronger and cut costs, and that American is
becoming more competitive by renegotiating leases and labour contracts.

AMR and American filed for bankruptcy protection in November. US Airways Group Inc. is trying to force a merger, but AMR has resisted overtures from its smaller rival.


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