American Airlines granted court approval to reject pilots' contract

By Caroline Salls

Pittsburgh, Sept. 5 - AMR Corp.'s renewed motion to reject American Airlines, Inc.'s collective bargaining agreement with the Allied Pilots Association (APA) was approved Wednesday by the U.S. Bankruptcy Court for the Southern District of New York.

American Airlines' original motion to reject the APA contract was denied by the court on Aug. 15.

However, in that ruling, judge Sean H. Lane left the door open for the airline to fix issues related to furlough and codesharing changes and file a new motion for rejection.

Lane said American had established that significant changes are necessary to the APA's collective bargaining agreement for reorganization, but the judge said proposed changes tied to the expansion in American's ability to furlough pilots and to use codesharing to expand the airline's network are inconsistent with Section 1113's "concept of necessity."

Specifically, the judge said, "these proposed changes would give American unrestricted use of furlough and codesharing where such unfettered discretion has not been justified as necessary either in American's business plan or by the practices of American's competitors."

Lane said he denied the initial contract rejection motion given the importance of these two specific issues in the context of American's overall proposal to the pilots' union.

In the renewed motion, the company said it remedied the two defects identified by the judge.

Furlough proposal gone

American said it withdrew the previous proposal on furloughs entirely in a proposal made to the APA on Aug. 16.

"Thus, American has no Section 1113 proposal on this subject any longer, and furlough protection is no longer a factor under Section 1113, which deals exclusively with changes to a collective bargaining agreement," the company said in the renewed rejection motion.

In addition, American said it modified its initial collective bargaining agreement term sheet proposal and "materially circumscribed the circumstances under which it would be permitted to engage in codesharing."

New codeshare terms

Specifically, American said its new proposal:

• Allows codesharing on Alaska Airlines but prohibits American from placing its code on Alaska flights between Hawaii and Dallas-Fort Worth, Los Angeles, San Francisco and Chicago O'Hare;

• Allows American to codeshare on Hawaiian Airlines inter-island flights but only as long as it maintains an average of 10 flights per day between the mainland and Hawaii;

• Allows American to enter new codesharing relationships with other domestic carriers and their regional partners, but only if the combined total number of air seat miles (ASMs) of all aircraft of the partner carriers on which the company places the America code during a rolling 12-month period does not exceed 50% of the domestic American scheduled monthly ASMs during the same rolling 12 months; and

• Eliminates entirely an existing provision for adding new domestic codesharing relationships formerly found in the collective bargaining agreement.

Union response

As previously reported, the APA filed an appeal of the Aug. 15 court order on Aug. 29.

In a message to pilots posted on the union's website on Tuesday, APA president Keith Wilson said, "Management may soon be implementing unilateral changes to long-lived collective bargaining agreement work rules and procedures."

"If management decides to make unilateral changes, it's their responsibility to explain to our pilots how those changes will work," Wilson said.

"Your APA leadership has informed management that we will not serve as their messengers."

In addition, Wilson told the pilots that American Airlines management won't be able to restructure successfully without first reaching a consensual agreement with the APA.

"During testimony today, the lead attorney for the unsecured creditors' committee was emphatic on that point, stating 'there has to be a deal' between APA and AMR," Wilson said in the message.

"He also emphasized that our two parties' ability to craft a consensual agreement will be enhanced if management takes a circumspect approach to exercising their right to impose new terms of employment.

"While we may be uncomfortable with the notion that management can now enact changes to our working conditions at will, I strongly suspect they and other important AMR stakeholders understand that's not a recipe for long-term success in our brutally competitive, customer service-centric industry."

Wilson said the APA board of directors is scheduled to meet on Monday to determine the next steps and to assess any information provided about AMR management's plans.

AMR Corp., the Fort Worth-based parent of American Airlines, filed for bankruptcy on Nov. 29, 2011 under Chapter 11 case number 11-15463.

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