Last updated: August 20, 2012 10:20 pm

Flight attendants agree new AMR contracts

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AMR, the bankrupt parent of American Airlines, is close to resolving the most contentious part of its restructuring after flight attendants became the last group to accept new contract terms and a judge scheduled a hearing likely to impose new terms on pilots.

The conclusion of the restructuring of American’s labour contracts – whose high costs were a significant factor in forcing the company into bankruptcy protection last November – should allow it to focus on wider strategic issues, including whether to merge with a rival.

Tom Horton, AMR’s chief executive, wrote in a letter to staff on Monday that the company would “continue to evaluate strategic alternatives” as it sought to realise the most value for its owners and best outcome for staff.

Mr Horton told the Financial Times earlier this month that the company would decide “within weeks” whether to pursue a merger, including the potentially attractive option of one with US Airways.

AMR has balloted pilots, flight attendants and seven ground staff groups on whether they accept new contract terms or not. Most staff receive higher basic wages and a stake in the restructured company under the new contracts but substantially lower pension and healthcare entitlements.

Bruce Hicks, an American Airlines spokesman, said the company was “very pleased” with the flight attendants’ decision to accept the new terms and said they would receive several benefits as a result of the vote. They include an “early out” option offering incentives for attendants to take voluntary redundancy and lump sum payments on transfer to the new contracts.

The flight attendants’ decision means that only American’s pilots have rejected management’s new contract offers. Sean Lane, the judge overseeing AMR’s bankruptcy, on Friday scheduled a hearing on pilots’ future contracts for September 4 after American resubmitted proposals to reflect the judges’ objections to the contract’s treatment of two minor points – the handling of when staff are laid off and the handling of code share flights.

Analysts expect, given that the judge has previously said a major rewriting of the contracts is necessary to allow American to restructure, that he will agree at the hearing to impose the new contracts on the pilots.

Mr Horton wrote in Monday’s letter that he recognised the extent to which the restructuring had involved trade-offs and differences of opinion among staff.

“As with other airlines that have been down this road, it will take time to turn the page on a challenging chapter,” he wrote.

US Airways, the US’s fifth-largest airline by revenues, has conducted a noisy campaign stressing the potential benefits of a merger between itself and AMR. AMR has said it is looking at a range of potential merger partners and remaining independent.

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