(Reuters) - Five out of seven work groups represented by the largest labor union at AMR Corp’s American Airlines voted to accept contract terms offered by the bankrupt airline that will cut thousands of jobs, the Transport Workers Union (TWU) said on Tuesday.
The vote ends a court battle between the groups and AMR over the airline’s bid to void its current collective bargaining agreements as it seeks to save $1.25 billion a year in labor costs, including $990 million from its unions.
Had that request been successful, AMR might have been allowed to unilaterally impose even more stringent labor terms.
That same court battle continues this week, however, for the TWU groups that turned down the deal, as well as two other unions representing AMR pilots and flight attendants who elected not to vote on the deal.
Those groups are taking a higher-risk path, accepting the specter of deeper cuts on the hope Judge Sean Lane, in U.S. Bankruptcy Court in Manhattan, will deny AMR’s bid.
The TWU groups’ vote does not alter the union’s overall support for a proposed merger between US Airways and AMR, the union said in a statement on Tuesday.
All three of AMR’s primary unions support a merger, saying it could save 6,000 jobs that would be doomed if AMR restructures on a standalone basis. AMR, initially resistant to a merger, said last week it was willing to explore its M&A options.
The five TWU groups that accepted the deal — fleet service clerks, dispatchers, ground school instructors, maintenance control technicians and simulator technicians — will sustain about 7,300 job cuts, according to Bruce Hicks, a spokesman for AMR.
But Hicks said the deal saves 1,300 fleet service jobs that would have been cut under earlier AMR proposals. He added that another 1,960 jobs could have been saved if two other work groups — aircraft maintenance workers and stores clerks — had accepted the plan.
AMR filed for bankruptcy in November, citing an untenable labor structure. The $990 million it has targeted in annual union savings has left its unionized labor force livid.
Unions including TWU rallied last month outside Manhattan Bankruptcy Court, accusing the company of “blaming labor again” for lack of profitability. TWU President James Little at the time dubbed the court a “crime scene” for AMR’s perceived unfair position on labor talks.
But Little on Tuesday said in a statement that some of his union’s work groups “found the company’s last offer to be a safer bet than waiting on the court to make a decision.”
“The members in bargaining units that voted ‘no’ thought the proposals were not in their best interests,” Little said.
The flight attendants’ and pilots’ unions this week are arguing fervently in court that AMR has not considered alternatives to its proposed cuts, and is seeking deeper-than-necessary cuts to gain a competitive advantage on the backs of labor.
But some analysts feel AMR has the edge in that fight, which could mean the successful abrogation of union deals and even tighter, potentially unilateral work terms for unions.
“AMR’S motion is moving full steam ahead, and I don’t see it as going that well for the unions,” bankruptcy analyst Kevin Starke, of CRT Capital Group, said on Tuesday.
Starke, who has been following the weeks-long court hearing, said work groups that did not ratify AMR’s offer may “get to an outcome potentially worse than they might have gotten had they just said yes.”
“Those who voted ‘no’ are just choosing to take their chances in court first,” he said.
Ray Neidl, an airline analyst at Maxim Group, said the votes reflect an overall understanding by workers that the latest AMR proposals are better than potential alternatives.
“The thing is sometimes emotion gets ahead,” Neidl said. “I think there’s been enough time for people to think about it and think of what’s best for their future.”
The proposal had been sent directly by union leaders to the workers, an unusual step because unions frequently bless an offer as a tentative agreement before submitting it for a vote.
The deal still needs bankruptcy court approval.
“We realize this was a very difficult decision for our TWU-represented employees,” AMR said in a statement. The carrier said it would still try to win deals with the two TWU groups that rejected the offers even as it seeks court permission to void its existing contracts with those units.
Labor structures are typically key factors in profitability in the airline industry. AMR was the last large carrier to declare bankruptcy. Other airlines used bankruptcy to save hundreds of millions of dollars in union costs.
On Tuesday, Delta Air Lines, which emerged from bankruptcy in 2007, announced it had reached a tentative new labor deal with its pilots.
Delta said in a statement that it reached the deal late on Monday, and still needed to send it to its pilots’ union’s governing body for deliberation.
AMR’s bankruptcy is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.
Reporting By Kyle Peterson in Chicago and Nick Brown in New York. Editing by Gerald E. McCormick, Jeffrey Benkoe and Leslie Gevirtz