American Airlines Pilots Union Rejects Contract – Is this One Step Closer to Merger?

August 10, 2012 by Leave a comment

Labor negotiations within American Airlines may provide a clue as to the Air Carrier’s future.  A clue that may be quite valuable to companies who are doing business with the the air carrier.

American airlines is in bankruptcy proceedings as it attempts to reorganize.  A part of that reorganization includes striking new deals with the unions that represent the air carrier’s employees.  These deals are very important.  Even though the bankruptcy court can modify the agreements without a union vote, union support of the air carrier is considered important to its continued viability and therefore is important to the ultimate decisions made by the bankruptcy court.  American Airlines has said that they do not want to consider a merger until after they are out of bankruptcy; USAirways would like to emerge as a “white knight” that would purchase American out of bankruptcy.

US Airways has already promised American’s unions better terms and conditions than American is offering them in the proposed contracts.  In exchange, the Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union had all agreed to support a merger between USAirways and American.

Thus, when American presented the Pilots union with a contract offer, the Air Carrier’s management had their work cut out for them to convince the pilots to accept it.

APA President David Bates had supported the measure and lobbied hard for it.  But in what appears to have been a referendum on the current America Airlines leadership, the union rejected the contract offer.  The pilot’s union rejected the proposed contract by a vote of 4,600 to 2,935.  The mechanic’s union narrowly approved their contract.

Two related reasons offered by pilots for voting against the contract were frustration with management, and a perception that ratifying the contract would strengthen management’s hand with respect to merger (or non-merger) decisions.

In the wake of the defeat of the contract, Bates has resigned his position within the union leadership.  Unsurprisingly, his replacement, Keith Wilson, supports a merger.

ASA members supporting American Airlines, US Airways, or both, will want to follow this story closely, as a merger could upset existing supply expectations, as the two seek to reduce redundancies.

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AMR Files for Bankruptcy (Restructuring): Tips and Data You Need To Know

November 30, 2011 by Leave a comment

Two months ago, we warned that American Airlines’ parent company (AMR) appeared to be headed for bankruptcy, and recommended that ASA’s members take steps to protect their companies from the adverse affects of a potential customer bankruptcy.  It should have come as no surprise to anyone that yesterday, American Airlines parent company, AMR, filed for bankruptcy protection under Chapter 11 of the bankruptcy code.

This is a restructuring, so it is expected that AMR will emerge form the restructuring.  Most aircraft parts are sold to airlines on credit, so many ASA members may have concerns about their receivables owed by AMR.

It is normal during restructuring for post-filing transactions to receive a preference in the payment scheme.  So if you sell AMR an aircraft component the day after the bankruptcy , then you are much more likely to get paid 100% of the transaction price than if you had sold the  same part the day before the bankruptcy petition was filed.

Existing creditors may receive only a percentage of the amounts owed them or they may receive all of their outstanding receivables from AMR depending on the nature of the debt and the negotiations with the bankruptcy trustee.  The bankruptcy trustee has the power to terminate contracts that are not favorable to AMR, and it has the power to make deals with irreplaceable vendors who demand payment of prior receivables in exchange for continued service.  If you have a very large receivable outstanding with AMR, or if you have an ongoing relationship with AMR, then you should seriously consider hiring bankruptcy counsel with experience in negotiating post-filing remedies.

Supplier and vendor inquiries are being routed through the Trading Partners Response Center (TPRC).  You can call that response center at (866) 736-9011 (toll-free from the United States) or (703) 286-2757 (international toll).

For questions pertaining to the administration of this Chapter 11 case, you can contact AMR’s bankruptcy claims administrator, GCG, at:

AMR Corporation, et al.
c/o GCG
P.O. Box 9852
Dublin, Ohio 43107-5752
Toll-Free: (888) 285-9438
International Toll: (440) 389-7498
Email: amrcaseinfo@gcginc.com
Website: http://www.gcginc.com/

These contacts represent the best interests of the AMR estate, so if you have serious legal questions, or need to discuss strategies for defending your right to get paid, then you should seek the counsel of a qualified bankruptcy attorney.

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