American, Unions Deal; Bankruptcy Avoided
Monday March 31, 2:31 pm ET
By Brad Foss, AP Business Writer
Source Says American Airlines Reaches Tentative Agreement With 3 Unions, Bankruptcy Avoided
American Airlines reached tentative agreements with three key unions, avoiding a bankruptcy filing, a source familiar with the situation said Monday.
The source, who spoke on condition of anonymity, said technicalities still needed to be worked out, but that it appeared that the world''s largest carrier achieved the $1.8 billion in labor concessions that it needed to avert Chapter 11. Any agreements reached between union and company negotiators would still need to be voted upon by the employees.
Negotiators for American and unions representing pilots, flight attendants and mechanics met Monday at the airline''s training center.
American said in a news release that it reached a tentative agreement with its mechanics. A representative for the flight attendants said the union has concluded negotiations with the airline. The pilots union would not confirm that a deal had been struck.
A spokesman for the company refused to comment.
Officials from all three unions had said company executives indicated that they would file for bankruptcy protection soon unless they had tentative agreements with all major labor groups Monday.
Shares of American soared 77 cents, or 49 percent, to $2.35 on the New York Stock Exchange.
The Allied Pilots Association has made a proposal for $660 million in savings by changing work rules and making across-the-board pay cuts. American has said $660 million is the pilots'' share of necessary cost cuts.
The union said it was confident that its proposal would let American Airlines compete with United Airlines and US Airways, which have cut costs in bankruptcy, and with low-cost carriers.
Last week, talks hit a snag when American said it would not count savings from nearly 1,000 pilot layoffs and retirements expected this year toward the $660 million cost-cutting goal. The union believes the cuts will save American up to $150 million.
A member of the National Mediation Board was called in to help resolve the dispute.
There were signs of slow progress in negotiations with American''s workers. Over the weekend, the company had reached tentative agreements with six groups of ground workers, totaling 2,500 employees. The company previously reached a tentative deal with 16,300 baggage handlers.
But by Monday morning, there were still no deals with the three most important labor groups in its work force of 99,000.
The Association of Professional Flight Attendants submitted its $340 million cost-cutting proposal Friday.
American''s parent, Fort Worth-based AMR Corp., has lost nearly $5.3 billion in the past two years as it has struggled with a slump in travel caused by the weak economy and terrorism. The war in Iraq has further weakened international travel.
American also has suffered as a result of competition from low-fare carriers on about 80 percent of its routes. That has kept fares down, reducing potential revenue.
Another person familiar with the airline''s situation said it was in discussions with lenders Monday afternoon to put together a financing package that would help the airline operate, given the entire industry''s tough economic environment.
The lenders involved in the talks were Citigroup, J.P. Morgan Chase, CIT Group and Merrill Lynch, the person said, speaking on condition of anonymity.
American is also talking with suppliers about reducing costs.
Angela K. Brown in Fort Worth, Texas, contributed to this report.
TWU has been giving concessions have having them voted in for years. Why should this be somehow different? Before the threat of a strike and being replaced was enough to bring in the YES vote. The idea of BK and the company going for the throat in a 1113 filing will be better.
I cant say how I will react of vote until I see what''s been negotiated. I have heard a hundred rumors. Nothing substantive for any of us yet.
I am not trying to trash only on TWU, APFA has done its share of give ups,give back''s and screw up''s.