Executives of American Airlines said Thursday that they want to quickly reach agreement with union leaders on new cost-saving contract proposals or they will ask a bankruptcy judge to step in.
"I think we have weeks to accomplish this," said Jeff Brundage, American's senior vice president of human resources, adding that the airline is willing to meet with union representatives round-the-clock."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 an 1113 petition."Under Section 1113 of the U.S. Bankruptcy Code, companies can ask the judge to change collective bargaining agreements. Brundage said the airline can also request contract changes that are necessary for restructuring and that are "fair and equitable" to all stakeholders. Once American files its 1113 petitions, the process could last five to six months, he said.The proposals that Fort Worth-based American outlined Wednesday aim to reduce annual labor costs by $1.25 billion. They would cut 13,000 jobs, terminate pension plans, streamline health benefits and end medical benefits for future retirees.The company also announced plans to close its maintenance base at Alliance Airport in Fort Worth.American's parent, AMR Corp., filed for bankruptcy protection Nov. 29.CEO explains the planUnion leaders said Wednesday that they were shocked by the depth of the proposed cuts and pledged to challenge them.But Tom Horton, AMR's chairman and CEO, said Thursday that the changes are necessary to fix American's problems and let it compete."The company was on a very bad path. Eighty thousand jobs were at risk. This was not going to end well. And what we have done now is we've put the company on a very different track," Horton said during a meeting Thursday with the Star-Telegram Editorial Board."It's about creating the best outcome for the greatest number of people. There will be tens of thousands of jobs that will be saved."Horton said the airline waited two months to make proposals to the unions because it wanted to show how they would contribute to the overall reorganization plan and provide workers with a vision of the airline's future.The airline filed for bankruptcy after years of unsuccessful contract negotiations with its unions and shortly after leaders of the pilots union rejected a comprehensive offer.Asked whether the proposals outlined this week are negotiable, Horton said the targets are needed: $2 billion in cost reductions and $1 billion in revenue improvements."This is our plan," he said. "If somebody has a better idea as we're talking through this, we'll listen to better ideas. But we need to be able to achieve the business plan."American's executives said that they have staked their reputations on the reorganization plan and that it will return the airline to profitability. Horton said changes in "scope" clauses that govern how pilots work would let American better match the size of airplanes with the size of each market, helping it boost revenue and compete.He said other creditors or third parties -- such as US Airways or Delta Air Lines -- may not agree with management's plan and want to see American sold.Horton said reports that US Airways is interested in merging with American may make sense for US Airways, but not for American, since American is bigger and has hubs in more important markets."This is the fourth time they've tried this," Horton said. "They tried it twice with United. They tried it once with Delta in restructuring. This is No. 4. I have no doubt this will be every bit as successful as their last three attempts. I'm not sure what's in the water out there [at US Airways' headquarters] in Phoenix, but I think we have a better plan."Painful but necessaryIndustry analysts described Horton's restructuring plan as tough but necessary to help American survive.Maxim Group analyst Ray Neidl said that had the proposed changes been in place in 2011, American would have reported a $2.6 billion operating profit instead of a projected operating loss of over $400 million."AMR has to get things right the first time because it probably will not get a second chance," Neidl wrote in a research note Thursday.But cost cuts may not be enough if American's management team cannot improve its revenue, said Gimme Credit analyst Vicki Bryan."As in 2003, even the stunning labor cost savings targets announced (on top of the $1.8 billion AMR won back in 2003) could evaporate if revenue doesn't grow faster than costs," she wrote."Labor is one cost AMR can force lower, its fuel costs are another matter."Andrea Ahles, 817-390-7631Twitter: @Sky_TalkDetails of the plan
Allied Pilots Association
Jobs to be lost: About 400
Key proposals:
Increase maximum monthly work and schedule time; eliminate premium pay.
Eliminate two pension plans and replace them with a defined-contribution plan with a 13.5 percent company contribution.
Allow greater use of regional jets with up to 88 seats by American-owned or contracted carriers.
Lower pay scale for pilots flying smaller Airbus A318 jets.
Association of Professional Flight Attendants
Jobs to be lost: 2,300, primarily former TWA attendants
Key proposals:
Eliminate separate international and domestic pay rates and institute one pay scale at the existing domestic rate. In each of the five years after a new contract is signed, the pay rate would rise 1.5 percent.
Increase the monthly flight schedule maximums from 77 hours (domestic) and 82 hours (international) to 100 hours for all flight attendants, with the aim of a monthly average of 80 to 90 hours.
Increase the monthly actual maximums from 80 hours (domestic) and 85 hours (international) to 100 hours for all flight attendants.
Increase daily maximum on-duty times.
Transport Workers Union (mechanics and related)
Jobs to be lost: 4,600
Key proposals:
Shut down maintenance facility at Fort Worth's Alliance Airport, affecting 1,200 workers.
Outsource up to 40 percent of aircraft maintenance work now done in-house.
Reduce maximum vacations by one week.
Eliminate limits on how many of the airline's available seat miles can be scheduled on the American Eagle system.
Transport Workers Union (fleet service)
Jobs to be lost: 4,200
Key proposals:
Outsource certain fleet service clerk functions such as cleaning cabins, fueling and handling cargo.
Outsource staffing at airports with fewer than 20 daily departures.
Eliminate local overtime agreements.
Eliminate limits on how many of the airline's available seat miles can be scheduled on the American Eagle system.
Source: AMR Corp.
American plans to cut 13,000 workers nationwide:
400 pilots
4,600 mechanics and related workers
4,200 fleet services workers
2,300 flight attendants
1,400 management and support staff
American Airlines offers remaining workers 'renewal and hope'
Chat transcript: On unions, politics and executive compensation
American Airlines plans to cut 13,000 jobs and close Fort Worth maintenance base
Fighting for American Airlines jobs in Tulsa and Fort Worth
AMR seeks more time to renegotiate aircraft leases
Court puts hold on AMR's hiring advisers
American Airlines workforce will be 'getting leaner,' CEO says
PBGC files liens against American Airlines over pensions
American to reveal its survival plan today
An interview with American Airlines' CEO
American Airlines' maintenance base has been mainstay at Alliance Airport
AMR wants to terminate all four of its pension plans
American Airlines' layoff plan prompts anger, angst among workers
Employee health plans to be overhauled 
Flight attendants: Proposal "even more extreme and despicable than we had anticipated"
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