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Pilots approve new contract with American Airlines

Published on NewsOK Modified: December 7, 2012 at 6:48 pm •  Published: December 7, 2012

Friday's vote filled in the last unknown piece in AMR's labor-cost puzzle. The company's creditors "very much wanted a contract because they want some visibility on what the cost structure will be," said Ray Neidl, an airline analyst for Maxim Group PLC.

US Airways has proposed a merger that would give AMR creditors 70 percent of the combined company, which would be run by US Airways CEO Doug Parker, according to a person familiar with the discussions and who spoke on condition of anonymity because the talks are private.

There have been reports that AMR might seek up to 80 percent for its creditors, which could be unacceptable to US Airways Group Inc. shareholders, the person said.

AMR creditors could push for a change in management even if they get a bigger share of the company. Last month, a group of AMR bondholders including JPMorgan Chase told the pilots' union that they would only support an independent American if AMR had a new board that would pick managers to run the airline.

American has about 7,500 active pilots plus a few hundred others on furlough. The union said the vote to ratify the contract was 5,489 to 1,951.

The six-year contract will raise pilots' pay by 4 percent on signing and 2 percent per year after that, with an adjustment in the third year to bring pay in line with that at other big airlines. The union will get 13.5 percent of the stock in the new AMR when it emerges from bankruptcy, which analysts estimate would amount to at least $100,000 per pilot.

In exchange pilots will fly more hours and American will get more flexibility to outsource flying to other airlines.

American, which has already frozen pension plans and made other changes in benefits and work rules, is trying to use the bankruptcy process to cut annual labor costs by 17 percent or about $1 billion.

In recent months flight attendants and ground workers have ratified separate contracts that reduced benefits and outsourced thousands of jobs. American expects to cut about 10,000 jobs, with 3,000 layoffs and the rest coming from early retirements and attrition.


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