AA keeping bankruptcy at bay

AMERICAN Airlines is in talks with union leaders on new cost-saving contract proposals.

The carrier aims to reduce annual labour costs by US$1.25 billion by cutting 13,000 jobs, terminating pension plans, reducing health benefits and ending medical benefits for future retirees.

AA employs about 9,900 in the Chicago region and 88,000 nationwide. AA sees union talks as the last step before having to call in a bankruptcy judge.

“We will do our very best to reach consensual agreements. But at that point in time, when we come to the conclusion that it is unlikely that will happen, we will need to file a 1113 petition,” Jeff Brundage, AA’s senior vice-president of human resources, says.

Companies can ask the judge to change collective bargaining agreements under section 1113 of the US Bankruptcy Code. The airline can also request contract changes that are necessary for restructuring and that are “fair and equitable” to all stakeholders, Brundage says.

AA’s parent company AMR filed for bankruptcy protection on 29 November last year.

“The company was on a very bad path,” Tom Horton, AMR’s chief executive officer, says. “Eighty thousand jobs were at risk. This was not going to end well. And what we have done now is put the company on a very different track.”