American Airlines Continues Attacks on Union Contracts

In the latest in a long line of airlines seeking to use the bankruptcy court to wipe out their employees’ collective bargaining agreements (“CBAs”), American Airlines recently sought rejection of CBAs with its pilots’ union, flight attendant union, and mechanical workers’ union.  In seeking this relief, American argued that it had made the best offers it could to the unions—each of which were asked to make concessions from their existing contracts—and that without the changes American was seeking, it could not survive.  American has argued that it needs to save over $840 million per year from its existing obligations to its unions.

The three unions took different approaches to the bankruptcy court bargaining and litigation: under the looming prospect that the bankruptcy court might reject their CBAs, the mechanical workers were able to reach a consensual agreement, the flight attendants continued to negotiate and sought more time before a court ruling, and the pilots voted to reject American’s offer and have the case heard by the bankruptcy court judge. The flight attendants ultimately reached an agreement on Sunday, August 19 that includes significant concessions.  While American’s statement on the agreement indicated optimism about the company’s improved prospects for reorganization, the flight attendants’ union emphasized that despite its acceptance of this deal, the union still lacks confidence in American’s management team.  

In addition to seeking financial concessions and the foregoing of pay increases, American has sought to use the negotiations to extract concessions regarding layoffs, furloughs, outsourcing and code-sharing.  In denying the company’s motion against the pilots’ union on August 15, the bankruptcy judge ruled that American’s proposal that would have given the company unlimited furlough power and code-sharing rights was not necessary for the company’s reorganization. Just two days later, the company changed its proposal to fit the suggestions the judge indicated he might approve and filed another motion with the court, again seeking to throw out the existing CBA with the pilots’ union.  A hearing on the new motion will be held September 4.

By Jordan Mazur

Legal Developments