AMR Corp Set to Void Union Contracts of American Airlines Inc

The parent company of American Airlines Inc, AMR Corp has commented on Thursday, that during Chapter 11 proceedings in a bankruptcy court it is preparing to void union contracts within one week unless the unions’ labor proposals were changed radically. Harvey Miller, representing AMR Corp told in the court hearing in New York that there was no basis to expect “real forward movement” in obtaining union concessions and avoid rejecting collective bargaining agreements.

The lawyer representing AMR Corp stressed that time is of the essence and said, “Each day AMR is unable to remedy its cost structure puts the company further behind its competitors.”

The official creditors’ committee of AMR supports voiding the union contracts if a deal cannot be reached immediately.

The union issued a statement on Thursday in response to Miller’s comments and said the changes alluded to cannot be realized unless AMR compromises on concession demands that are totally divorced from going market rates.

The union statement mentioned “New aircraft, lie-flat seating and elegant first-class meals do not make an airline … it takes 80,000 workers. Should American continue to forget that fundamental principle, it will be left with only the shell of a company.”

The Transport Workers Union of America, which represents most ground workers at AMR said its lawyers were preparing to defend the interests of its members in court, if such became necessary.

James Little, the president of TWU said in a statement, “We’ve always been prepared to fight for our members, either be reaching an agreement or going to court. We are prepared for the eventuality.”

Gregg Overman, spokesman of the Allied Pilots Association said his association wanted to reach an agreement and would oppose a company move to use the bankruptcy court process to end union contracts.

On Wednesday, American Eagle, the company’s regional carrier unit, said it needs to gain $75 million in labor-related savings.

At Thursday’s hearing, the airline received permission of the court to retain its exclusive rights for proposing a restructuring plan up to September. This precludes creditors and potential acquirers from immediately pursuing their own proposals.

AMR has said that it is looking forward to cut at least 13,000 jobs under Chapter     11 protections and save some $2 billion, and needs another $1.25 billion in labor-related savings. The company is also actively seeking to freeze pension obligations.