UPDATE 2-Pilots' union rejects American contract offer
* Decision on contract rests with bankruptcy judge
* American seeking $1.25 bln in labor cost cuts
NEW YORK, June 20 (Reuters) - Pilot union leaders at American Airlines have rejected the carrier's final contract offer, leaving it to a judge to decide whether to grant the company's request to vacate the labor group's collective bargaining agreement in bankruptcy court.
The Allied Pilots Association said on Wednesday that its board of directors voted 11 to 5 against approving management's "final offer" for a tentative deal and sending it on to the membership for a vote.
American filed for bankruptcy in November and is seeking $1.25 billion in annual labor cost savings to compete more effectively with rivals with lower labor costs. Most of the savings will come from unionized workers.
The two sides have been close in the past to an agreement. Key issues are wages, benefits, when pilots work and what planes they fly.
The pilots' board cited a lack of specifics "in various areas" and the need for more time to analyze contract provisions and related language, the union said in a statement.
New York bankruptcy Judge Sean Lane is expected to rule Friday on American's motion to abandon the current pilot contract and impose tentative terms.
Flight attendants have also spurned management's last offer and will have their case decided by the court as well. Unionized ground workers have yet to decide whether to accept a final proposal.
Other big airlines have won permission to void contracts in bankruptcy, only to reach voluntary agreements with unions in follow-up negotiations.
American said in a statement it was "very disappointed" with the pilots' decision.
"Both parties worked hard to reach a compromise on what are very intricate and complex issues, resulting in a proposal that provides significant benefits for pilots," said Bruce Hicks, an airline spokesman.
The proposal, he said, included pay increases, furlough protection, an equity stake in the restructured company, and a proposal to freeze the union's pension plan, rather than terminate it to save money.
Pilots and other unions at American are pushing the airline to merge with US Airways, saying a tie-up would sharply reduce the cost-savings needed from pilots and other labor groups.
American is focused on emerging later this year as a standalone carrier but has said it would consider all options, including consolidation.
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