Judge Denies AA Request to Cancel Pilots’ Contract

By Paul Riegler on 15 August 2012
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An American Airlines’ maintenance hangar in Dallas

American Airlines cannot scrap its existing contract with the pilots’ union and impose far more draconian terms, following a ruling set forth by Judge Sean Lane of the U.S. Bankruptcy Court for the Southern District of New York.

The ruling was a rare exception to normal Chapter 11 proceedings, where the courts have traditionally allowed companies to abogate labor contracts and impose terms under court supervision.

In his ruling, Judge Lane wrote that AMR, the airline’s parent company, had in fact demonstrated that significant changes to its labor contracts are necessary for a successful restructuring to occur, but he found that the airline had overreached on two requests, namely to remove all restrictions on furloughing pilots and outsourcing flying with the use of code-share agreements with other airlines.

Lane stated that these requests have “not been justified as necessary either in American’s business plan or by the practices of American’s competitors,” but he also said that American could fix those elements of its plan and try again to abrogate the contract.

If the airline’s second request is granted by the court, American will impose working terms on the pilots which include requiring pilots to fly more hours and outsourcing more flying.  No U.S. airline has ever emerged from bankruptcy with terms imposed on its pilots instead of a negotiated contract, however, and it is likely that both parties will at some point return to the negotiating table, a move which could lengthen the airline’s stay in bankruptcy.

American’s 18,000 flight attendants are currently voting on whether to accept the airline’s last best offer and the court ruling could impact the outcome of that vote, which ends Sunday.  The contract does not include either of the two provisions Judge Lane ruled unnecessary.

Accura News

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