(Reuters) - The lead labor negotiator for AMR Corp pilots said a merger between AMR AAMRQ.PK and competitor US Airways LCC.N could save $130 million a year in cuts to bankrupt airline’s pilots’ union.
Neal Roghair, testifying in U.S. Bankruptcy Court in Manhattan, said a merger would lower to about $240 million the projected annual cuts from the Allied Pilots’ Association, which represents 10,000 pilots at American Airlines’ bankrupt parent.
Roghair took the stand to kick off the second leg of a weeks-long hearing on AMR’s effort to scrap its collective bargaining agreements and implement temporary unilateral work terms.
The company, which filed for bankruptcy in November, said it needs about $1.25 billion in annual labor concessions, and has proposed a business plan to achieve those savings that has left its unions livid.
AMR argued its case last month, saying its three primary unions had rejected consensual contract offers in bad faith.
The sides took a two-week break designed to foster further negotiations, a hiatus that proved f utile. The airline’s unions now have their chance to argue against the proposed contract abrogation.
The allied pilots said AMR’s plan demands an average of $370 million a year in cuts from their union. Merging with US Airways -- a plan supported by US Airways and by AMR’s three unions -- would cut that number to about $240 million, Roghair said.
AMR attorney Neal Mollen countered during cross-examination that the pilots’ union offered concessions to US Airways it was not willing to offer AMR, including a six-year contract term and more flexibility for the airline to send certain flights through regional partners.
But Roghair said US Airways representatives took a cooperative approach, while AMR focused narrowly on dollars-and-cents issue of cost-savings targets.
“It was very clear in <US Airways> negotiations that we were in a whole different environment,” Roghair said. “Things moved quickly as opposed to going on for months and months.”
“While American’s proposal is specific and detailed so that we know the real values, the so-called agreement with US Airways is based on a term sheet that does not include specifics” of how savings would be reached, Bruce Hicks, an American Airlines spokesman, said after the hearing.
AMR is looking to utilize a bankruptcy rule that allows debtors to scrap union contracts if they can show a clear financial need, and can demonstrate that unions unreasonably shunned attempts at consensual work-outs. If successful, AMR would impose temporary unilateral work terms as it continues to negotiate long-term cooperative deals.
Unions say the move should be allowed only after AMR has explored a possible deal with US Airways.
“There may come a time when we have to take our medicine, and I think we’re prepared for that,” Edgar James, a lawyer for the pilots’ union, said at the hearing.
AMR, which had resolved to pursue a standalone restructuring plan, on Friday bowed to pressure from unions, saying it would consider the idea of a merger while it is still in bankruptcy.
Along with the Allied Pilots, two unions are slated to call witnesses over the next several days: the Transport Workers Union, representing ground workers and other officials, and the Association of Professional Flight Attendants.
The TWU has sent AMR’s business plan to its members for five days of voting that was slated to end on Monday.
The bankruptcy is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.
Reporting by Nick Brown; editing by Carol Bishopric