UPDATE 1-AMR pilots cite 'potential' for imminent labor deal

Tue Oct 30, 2012 5:18pm EDT

* Pilots seeking industry standard on pay rates, outsourcing

* Union acknowledges progress being made

* Union still supports merger with US Airways

By Nick Brown

NEW YORK, Oct 30 (Reuters) - The pilots union at American Airlines said on Tuesday that a labor deal could be close if the bankrupt airline is willing to make certain key concessions.

The Allied Pilots Association union, locked in years of tense contract negotiations with the AMR Corp unit, said in a statement that it wants a contract on par with other major carriers, namely Delta Air Lines, on issues such as pay.

"There is potential for an agreement with AMR in the days ahead, but it all comes down to a number of moves management will need to make on key deal points to bring us into the realm of industry standard," the union said.

American reiterated its desire to reach a consensual agreement.

Denise Lynn, American's senior vice president for people, "last week said that good progress has been made and we are approaching a deal that we hope the APA board of directors will soon agree to put out for a ratification vote," said Bruce Hicks, American Airlines spokesman.

AMR declared bankruptcy last November, in part to reduce labor costs. While it has reached new contracts with its flight attendants' and ground workers' unions, it remains at odds with the pilot group.

The pilots' union announced on Oct. 21 that AMR had agreed to certain concessions, including improvements to disability plans and a one-year moratorium on closing pilot bases.

But major items remain unresolved, most notably pay rates and outsourcing work to pilots not represented by the union, Dennis Tajer, the pilots' spokesman, told Reuters on Tuesday.

In its statement, the pilots' union said getting a deal would guarantee it a 13.5 percent equity stake in a reorganized AMR. It also said labor peace would give the union more influence in talks between AMR and its creditors over how the airline would emerge from bankruptcy.

AMR has said it wants to emerge as a standalone entity, but smaller competitor US Airways Group Inc is making an aggressive push to acquire the company in bankruptcy. The pilots' union, along with the rest of AMR's unionized labor force, supports a merger.

But while Tuesday's statement acknowledged the benefits of a deal, the union is not eager to sign a new contract at any cost.

"While there is progress being made, it will only continue if it results in an industry-standard contract," Tajer told Reuters.

The union must balance its demands against economic realities. It stressed in the statement that a deal must be economically feasible for AMR because it will require support from AMR's creditors and approval by its bankruptcy court.

The sides have been in talks on a labor deal since 2006. The union voted down a tentative agreement in August, but its board went back to the negotiating table earlier this month after September flight cancellations and delays that American blamed on a slowdown campaign by pilots.

Incidents in which seats came unbolted from the floor on American flights also raised concerns about safety at the airline and made it the butt of late-night talk show jokes. The pilots union has denied calling any work slowdown.

AMR is in merger talks with US Airways, although it has said it would prefer to consider a tie-up only after leaving bankruptcy. Some bondholders have expressed interest in funding a plan that would bring AMR out of bankruptcy on its own.

Power struggles can arise between creditor constituencies with differing ideas on how a company should exit bankruptcy.

One of the most powerful constituencies in AMR's case is its unsecured creditors committee, which advocates for all of the airline's unsecured creditors. The unions, which have lost faith in AMR management, including Chief Executive Officer Tom Horton, have seats on that committee and would prefer a US Airways takeover sooner rather than later. But labor discord with pilots could add uncertainty to the prospect of a smooth merger.

Tajer said on Tuesday that the union will continue to support a merger even if it signs a new contract.

A deal would save the union from having to endure unilateral work terms designed to cut costs, which AMR earlier won court approval to impose.

The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.

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