December 8, 2012 12:19 am

AMR recovery closer as pilots back deal

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AMR Corporation, the bankrupt parent of American Airlines, on Friday “crossed an important milestone” in its restructuring after pilots voted heavily in favour of a new labour agreement, the company’s chief executive said.

Tom Horton told staff in a letter that the airline was now approaching the end of its restructuring and “the beginning of the new American” after pilots ratified the deal months after rejecting a previous agreement.

The lack of a new contract with crew has been one of the most important barriers in the way of an agreement for AMR to leave bankruptcy protection, which it sought on November 29 last year.

The pilots rejected a proposal in August and the company, operator of the third-biggest US airline by passenger numbers, subsequently suffered a serious decline in punctuality.

It blamed pilots’ insistence on reporting minor mechanical faults such as broken coffee-makers for the problems, which the pilots blamed on the airline’s ageing fleet.

AMR has been in talks with US Airways, operator of the US’s fifth-biggest airline by passenger numbers, about a potential merger, although it has said it could also emerge from bankruptcy as an independent company. One person involved said the agreement removed some uncertainty over American’s future costs and revenues.

It would also be easier with the new, more flexible pilots’ agreement to add new routes and improve flight frequencies.

However, the person warned that further, complex negotiations over the stake that unsecured creditors and others would hold in the post-bankruptcy company still lay ahead.

“There are many really complex issues that need to be discussed before the parties can be satisfied about valuation,” the person said.

Keith Wilson, president of the Allied Pilots’ Association, which represents American’s pilots, said there had been a 5,489 to 1,951 vote in favour of the new deal, which will give the pilots salary increases and a 13.5 per cent stake in the new company.

The pilots also agreed to allow more of the company’s flights to be outsourced to lower-cost regional carriers.

Mr Wilson said the APA would now turn its focus to ensuring that full consideration was given to strategic alternatives before the restructuring concluded.

The union has been a long-term supporter of a US Airways merger.

“The APA leadership continues to support a merger with US Airways as the best path to a stronger, more competitive American Airlines,” Mr Wilson said.

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