* AMR seeking long-term sustainability
* Pre-bankruptcy, company was trying to "limp along"
* Unions say AMR demands became steeper post-Chapter 11
By Nick Brown
New YORK, April 26 AMR Corp's labor
relations chief acknowledged on Thursday that the company tried
to "limp along" by negotiating burdensome short-term labor deals
before deciding to file for bankruptcy.
Testifying at a court hearing on AMR's request to abandon
its labor deals, Jeff Brundage said the concessions AMR asked of
its unions before its bankruptcy filing would not have "allowed
us to be a viable enterprise."
Brundage was addressing criticism from labor unions that the
AMR demands for concessions since filing for bankruptcy have
been unfairly steep, and that it sought more drastic cuts than
in earlier negotiations.
But Brundage said that is because the company's goals
shifted after it filed for Chapter 11 protection.
Before the bankruptcy, AMR's aim was to keep its unions from
striking, and to avoid bankruptcy.
"We were governed by how hard we believed we could push to
make changes and have them ratified," Brundage told a full
courtroom at U.S. Bankruptcy Court in Manhattan. "We were
governed by the art of what we thought the possible was, not
what thought was necessary."
Now in bankruptcy, AMR is trying to hash out union contracts
that will allow it to become viable and profitable in the
long-term, Brundage added.
The American Airlines parent filed for bankruptcy in
November, citing untenable labor costs. The company has since
said it needs about $1.25 billion in yearly concessions from its
labor force, including $990 million in annual cuts from its
Unions have balked at those requests, resulting in an
impasse in contract talks. That, in turn, triggered AMR to ask
court permission to abrogate its current labor deals altogether
and impose unilateral terms in the interim as long-term
Among the unions' complaints about the new demands is that
they seek deeper cuts than pre-bankruptcy proposals, in which
AMR sought between $600 million and $800 million in reductions.
But AMR executives internally referred to those offers as
"limp-along" or "kick-the-can" methods, Brundage said, adding
they were designed only to avoid bankruptcy and keep the peace
"It was not brilliant, but it was employed to meet those two
goals," he said.
In hindsight, Brundage said it is clear the pre-bankruptcy
offers would not have allowed the company to avoid bankruptcy.
The company hoped outside factors such as an improving economy
would then allow it to flourish.
"We hoped if we could get a little tailwind, rather than
headwind, we could capitalize on it," Brundage said.
AMR's bid to scrap its collective bargaining agreements has
been the subject of a hearing since Monday. It is expected to
last through Friday, after which AMR and its unions will have
two weeks to try to negotiate consensual deals.
If that window passes with no agreement, the unions will
have a chance to present their case in court in May. Judge Sean
Lane would then be expected to issue a ruling in June.
The dispute involves AMR's three primary unions representing
its pilots, flight attendants and ground workers.
Brundage testified that AMR's cost savings plan would
minimize cuts to employee base pay rates and would include
annual raises and profit-sharing programs if AMR can return to
It would also outsource certain services. AMR has said it
needs to cut 13,000 union jobs.
Unions, meanwhile, have declared support for a potential
merger with US Airways Group Inc, which they say could
save more than 6,000 jobs.
AMR said interest from US Airways will not deter it from
pursuing a standalone restructuring plan. Its financial adviser
testified on Wednesday that the company needs a standalone plan
to be able to compare alternatives such as merger offers.
The case is In re AMR Corp et al, U.S. Bankruptcy Court,
Southern District of New York, No. 11-15463.