By Mitchell Schnurman
mschnurman@star-telegram.com
Some deals don't come around twice.
In late August 2001, the pilots union at American Airlines rejected the highest-paying contract in the industry, including raises up to 22 percent. A few weeks later, after 9-11, that offer was gone forever. In 2003, American's rank and file gave back $1.6 billion in pay and benefits so the company could avoid bankruptcy.
Fast forward to today, and the Allied Pilots Association has a chance to get more pay for members and preserve its pension, which are no small feats in the airline business. It could also start American on a path to becoming more competitive and maybe even profitable.
But the union appears to have lost some urgency lately, and optimism at American is fading. Management keeps setting -- and missing -- deadlines for a contract, and pilots seem to think they've gained the upper hand.
Does anyone need a reminder about how quickly things can change?
American wanted a handshake agreement with pilots last month, hoping to offset its dismal third-quarter results. Didn't happen. Then it wanted a deal last week, in time for Wednesday's board of directors meeting for the parent company, AMR Corp.
But after lunch Friday, negotiators for the pilots decided to stay home and simply send a text message to their counterparts at American. They later said they planned to take off Thanksgiving week, too.
Posturing is part of every negotiation, but the pilots are playing with fire. American's cash position is eroding fast, and a financial shock wouldn't be required to tip it into bankruptcy.
Wall Street has been pounding on the company for more than a year, because American keeps losing money while the rest of the industry is in the black. The pressure is mounting for management and the AMR board to do
something, and their first choice is to deliver a labor deal.
That sounds like a win-win, as long as the unions play along. Most employees know that bankruptcy would be a worse fate, but they don't realize how those wheels could start turning soon.
There are already plenty of arguments for reorganizing through Chapter 11, starting with the fact that it would give American a chance of profitability in the future -- if it survived as an independent company, that is.
Like its rivals, American could dump pension obligations, get more flexible labor contracts and slash healthcare expenses. American doesn't want to go that way, but it could be backed into a corner.
If the pilots reached a tentative agreement this week, the contract probably couldn't be ratified by the rank and file until February. And it could be rejected then.
Would there be time to do it all over again?
American also has to work simultaneously with flight attendants and transport workers. It's not impossible to get labor contracts with all the work groups, but it demands a good-faith effort from all sides.
After Wednesday, the AMR board doesn't meet until January. Would it wait that long to talk with lawyers about mapping out a potential bankruptcy strategy?
With most airplanes pledged as collateral, American would need plenty of cash to reorganize in court. And it would probably hire advisers for that, too.
That process gathers its own momentum and advocates.
American may be facing financial pressure for years, even with new labor contracts. But the deals would serve as a relief valve now, and for workers, it would be money in the bank.
Mitchell Schnurman's column regularly appears Sundays and Wednesdays.817-390-7821
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