* American says will alter, resubmit motion
* Judge cites unfettered ability to furlough pilots,
* Flight attendants still to vote on last offer
(Adds comments from AMR creditors' committee lawyer and
By Nick Brown and Karen Jacobs
NEW YORK, Aug 15 A U.S. judge on Wednesday
denied a request by American Airlines parent AMR Corp
to abandon collective bargaining agreements with its pilots'
union, an unexpected decision and setback for bankrupt AMR in
its quest to save more than $1 billion a year in labor costs.
In a lengthy written ruling in U.S. bankruptcy court in
Manhattan, Judge Sean Lane, who is overseeing AMR's Chapter 11
bankruptcy restructuring, turned down American's motion in part
because it would give the carrier unrestricted ability to
temporarily lay off pilots and engage in code-sharing.
Lane said AMR failed to show that such "unfettered
discretion" was necessary for its own operations or that it was
common in competitors.
AMR said in a statement it would alter its motion and
resubmit the request to terminate its agreements with the Allied
Pilots Association by Friday.
However, Kevin Starke, a bankruptcy analyst at CRT Capital
Group, said he is not convinced AMR would be able to resubmit
its motion as swiftly as it would like.
"I've watched this movie before," Starke said. "The problem
with failing on a motion of this magnitude is that it allows
objections to creep in on the second go-round, and so you don't
often get back to the ruling stage as fast as you would hope."
Meanwhile, the pilots union saw the ruling as a victory.
"Clearly management went well beyond what is the industry
standard for bankruptcy contracts, and the judge recognized this
in his decision today," union President Keith Wilson, named to
head the Allied Pilots Association last week after his
predecessor resigned, said in a statement.
AMR's creditors' committee, which supported the airline's
bid to abrogate its contracts, downplayed the severity of the
ruling in a statement on Wednesday, saying AMR will not be
hard-pressed to make the adjustments Judge Lane is seeking.
In fact, the company already made those changes in its last
contract offer -- which the pilots rejected, Jack Butler, the
committee's attorney, said in the statement.
"We expect that AMR's revised positions will be sustained by
the bankruptcy court," Butler said.
He added that the creditors' committee's labor subcommittee
is slated to meet on Thursday to further discuss the effects of
Had Lane granted the motion, AMR would have had been able to
implement more dramatic cuts that would have governed in the
interim, including hundreds of pilot layoffs, and the
elimination of equity stake, 401(k) retirement fund
contributions and raises. Instead, the union's current
collective bargaining deal will remain in place for now.
Lane acknowledged that serious concessions are needed from
AMR's unions, and rejected the unions' arguments that AMR had an
obligation to consider a merger with US Airways while still in
AMR management said it was concerned the ruling would
confuse flight attendants at the company, who are scheduled to
wrap up voting on a last and best offer from American management
"We just want to make sure the flight attendants don't
misinterpret Judge Lane's ruling on the pilot agreement in
relation to how they choose to vote this week," Denise Lynn,
American senior vice president for people, told reporters.
AMR has already reached consensual labor terms with its
ground workers' union, while its flight attendants' union has
until Sunday to vote on AMR's latest offer.
The case is In re AMR Corp et al, U.S. Bankruptcy Court,
Southern District of New York, No. 11-15463.
(Additional reporting by Sakthi Prasad; Editing by Bernard Orr
and Eric Meijer)