Judge weighs AMR bid to tear up union contracts

New York : AMR Corp's bid to reduce labour costs is in a judge's hands after the airline and its employees clashed in court over company claims that the cuts are needed to get out of bankruptcy.

US Bankruptcy Judge Sean Lane in Manhattan is considering whether to allow American Airlines to tear up union contracts after American and unions representing pilots, flight attendants and mechanics made closing arguments yesterday on the airline's plans. Lane said he expects to rule by June 22.

A win for American would allow the carrier to pare labour costs and make changes to operations to boost revenue, aiding its effort to restructure and become profitable after losses and failed labour negotiations drove the company into bankruptcy.

The trial over the contracts ends as US Airways Group Inc is pursuing a merger with Fort Worth, Texas-based AMR. US Airways has reached agreements on contract terms with the three unions, which say that they would be better off in a merged company. A combination of the two carriers would surpass United Continental Holdings Inc as the world's largest airline based on passenger traffic.

During closing arguments Friday, Jack Gallagher, an attorney for American, called the possibility of a merger between the companies speculation regardless of union support for it. Only American's business plan as a standalone company is relevant to the judge's decision on the contracts, he said.

"The suggestion that there is a transaction likely with US Airways is wholly speculative, wishful thinking," he said. "American Airlines is strong as a standalone company. American Airlines doesn't need a merger."

Lane urged American and the unions to negotiate a deal as he considers a ruling. Even if the judge lets the carrier tear up its union contracts, the two sides will be "stuck with each other" and have to negotiate new deals. "I urge, and cannot urge any more strongly, that parties resolve this dispute where it should be dealt with, at the negotiating table," Lane said. "That means people are going to have to pocket some really hard feelings on both sides that go back quite aways."

Staff, management talks on the agenda

New York: The flight attendants have said they'll meet with American starting Tuesday and the pilots on June 4. A date hasn't been disclosed for talks with mechanics and aircraft stock clerks, the only Transport Workers Union bargaining units not to approve American's last contract offer on May 15.

American is seeking to lower costs by $2 billion a year, including about $990 million from the unions, and boost revenue by $1 billion annually. Key to that effort is overhauling collective bargaining agreements that AMR says have saddled it with restrictions on how it operates and the highest labour costs in the industry.

The carrier warned in court papers that it "will have no viable business enterprise" if it can't void the agreements.

At the trial, which began in April, AMR witnesses, including Chief Restructuring Officer Beverly Goulet, promoted the business plan and explained the need to shrink labour costs. Goulet defended the plan after criticism by unions and their advisers, saying it ensures American will operate profitability over the longterm. When asked if American has a future as a standalone company, she said "absolutely."

American's plan calls for cutting as many as 13,000 jobs, changing work rules and benefits it says it can no longer afford, investing in its fleet, growing internationally and making greater use of regional jets.