NEW YORK (AP) —
American Airlines argued before a federal bankruptcy judge Monday that
its union contracts need to be changed to make the company financially
The airline lost more than $10 billion in the decade
leading up to its declaration of bankruptcy in November. During that
same period most of its major rivals used the bankruptcy process to cut
wages and benefits, which American says has left it saddled with higher
American wants to eliminate 13,000 union jobs — about
one in every four union workers — freeze or terminate pension plans,
curb health benefits, reduce time off, and impose many other cuts.
restructured job is better than no job at all," said Jack Gallagher, a
lawyer for the airline. Noting that once-great airlines such as PanAm
and TWA have disappeared, he said, "We don't want to join them."
The airline also told the court that management costs will be cut by 20 percent through layoffs and wage cuts.
airline's unions say company leaders are unfairly blaming workers
instead of doing something to make American grow and bring in more
On Friday, the unions expressed their defiance by
supporting a potential bid by US Airways to merge with American's parent
company, AMR Corp. In effect, they were saying that US Airways'
management could run American better than the current leaders.
Monday, the unions rallied outside the courthouse, blocks from Wall
Street, saying that the workers were part of "the 99%." They carried
signs that said, "Profits First, Workers Last" and "Merge don't purge."
is expected to take the entire week to make its case. Those arguments
will be followed by a two-week break for the company and unions to try
to negotiate an agreement. If none is reached, the unions present their
case and the judge is expected to issue a decision by June.
hearing is about more than just American, the nation's third-biggest
airline. If American gets its way, it will cement a decade-long overhaul
of the airline industry that has seen major carriers use the bankruptcy
process to cut wages and eliminate cumbersome union work rules.
by lower labor costs achieved in bankruptcy, United Continental
Holdings Inc. and Delta Air Lines Inc. returned to profitability. Of the
major U.S. airlines, only American lost money last year, about $2
billion. And the losses keep piling up — another $1.7 billion in the
first three months of 2012, although most of it was for
"We're going through a major
restructuring of labor relations in the airline industry," says Gary
Chaison, a professor of industrial relations at Clark University in
Massachusetts. "The entire industry is preparing itself for hard times
ahead that might be caused by high fuel prices or by the continuing
recession — forces beyond its control."
The unions, which forced
American to capitulate on wages in the 1990s, have lost much of their
clout. Even if they agree to concessions now, Chaison says, they'll
probably be asked to give up more in a few years as the airlines go
through more cost-cutting.
The company's demands for lower pay,
longer hours and reduced benefits would be devastating, says Laura
Glading, president of the Association of Professional Flight Attendants.
She says regular workers are still angry over years of stock bonuses
paid to management after the unions accepted concessions in 2003.
"We get it that the company is in bad shape," Glading says. "All we're asking is to be treated fairly."
Management is incorrectly blaming labor for AMR's losses, says Scott Shankland, a top officer for the Allied Pilots Association.
Airlines has a revenue problem that's much bigger than their cost
problem," Shankland says. He says the company needs to grow through a
merger with US Airways. That way it can compete with bigger United and
Delta for valuable business travelers, who demand huge route networks to
get them where they need to go.
AMR CEO Thomas Horton says the
company can do just fine on its own, thanks to new revenue from
international flying, a planned expansion at five big U.S. hubs, and
orders for 460 new planes that will be more fuel-efficient and
To make the turnaround work, American says, it needs relief from union work rules that limit its flexibility and drive up costs.
"There would be much more suffering and sacrifice if we don't get this restructuring right," Gallagher told the court Monday.
wants to outsource more flying to other airlines, something that is
currently prohibited by the pilot-union contract. It wants to eliminate a
slew of work rules, such as one that lets crews fix seats while a plane
is outside but not while it's in the hangar.
Bruce Hicks, a
spokesman for American, say the company still would prefer to negotiate
concessions with unions rather than hope that the judge will let the
company throw out the union contracts.
Hicks says even if American voids the contracts, it would immediately offer to start negotiations with unions on new agreements.
And if the judge rules against American and upholds the union contracts? "We keep talking" with the unions, Hicks says.
depth of labor's distrust of American's management was underscored when
the unions threw their support to a merger with US Airways, which
American opposes at least until it gets out of bankruptcy.
illustrates the incredibly toxic state of labor relations at AMR, which
seem to hit a new nadir with every negotiations," says Robert Mann, an
aviation consultant in Port Washington, N.Y., who once held finance jobs
Severin Borenstein, a University of California
economist who has written often about the airline business, says
airlines once would have been hesitant to take such a strong stand
against their own unions. They were afraid of strikes. The financial
pressures on the industry from high fuel prices and lingering economic
weakness are changing the airlines' approach.
"When you go into
bankruptcy," Borenstein says, "your back is to the wall and you can much
more credibly say, 'We're going to have to make some changes.'"
Follow David Koenig at http://www.twitter.com/airlinewriter
Airlines Writer Scott Mayerowitz in New York contributed to this report.
Copyright 2012 The Associated Press.