AMR pilot group cannot form own committee-judge

Tue Mar 6, 2012 5:16pm EST

* Former TWA pilots had sought own bankruptcy committee

* Had said pilots union would not serve its interests

* Two more committee requests tabled until March. 22

By Nick Brown

March 6 (Reuters) - A bankruptcy judge on Tuesday denied a bid by a group of American Airlines pilots to form its own committee to speak for it in the bankruptcy of the carrier's parent, AMR Corp.

An official creditors' committee already includes a representative of the pilots' union to vouch for the group's interests, Judge Sean Lane ruled at a hearing in U.S. Bankruptcy Court in Manhattan.

The group, comprised of former TWA Inc pilots who joined AMR in 2001, had asked to form its own committee, saying the pilots' union, the Allied Pilots Association, harbored ongoing "hostility" toward the group and that the creditors' committee would therefore not represent the group's interests.

In court papers, the TWA group said ongoing tension between it and its union stemmed from AMR's 2001 purchase of TWA's assets, in which disputes arose over the seniority of TWA pilots being integrated into AMR's ranks.

It went as far as to accuse the pilots' union of unfairly ousting some of its members from official union positions, a charge the union denied.

Judge Lane said the group did not make a convincing enough argument to justify the "rare" step of forming a separate committee.

"The official creditors' committee that's been appointed here already includes the (pilots union), and there's been no demonstration of inadequate representation" of the TWA group's interests, Judge Lane said. "With nothing on the record on this important factual point, that's fatal."

The group includes around 700 pilots. It was well-represented in court on Tuesday, where a smattering of its members turned out in uniform to hear the day's arguments.

The pilots' union represents roughly all of American's 10,000 pilots, including the TWA group.

A spokesman for the union told Reuters last week that the TWA group, called the American Independent Cockpit Alliance, carries the "stated goal" of discrediting and destabilizing the union.

Judge Lane acknowledged that the shaky relationship between the sides has "a lot of history," but said appointing a bankruptcy committee was inappropriate. Bankrupt entities typically must foot the bills for official committee fees.

Two other factions -- AMR retirees and a group of passenger service agents -- have also asked to form committees. Those requests were slated to be heard on Tuesday, but the sides agreed to push the matters off until a March 22 hearing.

Labor has been a contentious issue in the bankruptcy since AMR told its unions it needs $1.25 billion in labor-related savings and must cut 13,000 jobs. Bankrupt airlines have traditionally saved hundreds of millions of dollars through labor concessions and are allowed to reject labor agreements.

Separately at Tuesday's hearing, Judge Lane approved an agreement that will give Citibank the right to assert certain claims against AMR if its current collateral decreases in value.

Citibank had asked for added protection in the form of liens on AMR assets, saying it feared the value of its current collateral, including airport space and take-off and landing authority, is diminishing. The request was met with objections from AMR and other parties.

Judge Lane last week rejected a similar request from Wilmington Trust Co and US Bank NA, but said Citibank's place in the capital structure was different.

He said he was "satisfied" with the parties' compromise, which grants Citibank the right to make claims but does not grant outright liens.

"It resolves an issue I don't think was going away," the judge said.

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