American Airlines Takes A Big Step Towards Voiding Union Contracts

I’m a bit late posting this, so I’ll summarize and include some links from a few bloggers who’ve done a great job outlining the decision yesterday by the bankruptcy judge in American Airlines’ restructuring.

The judge ruled that American could not terminate it’s pilot’s contracts per the request they had submitted.  

But, as View From the Wing notes, this is really a win for AA.

I’ve skimmed through the decision and the judge makes it very clear he’s in favor of tossing out the contracts.  But, he does a very good job (I think) of pointing out a few areas where AA reached too far.  I actually think that AA really did reach too far here and there.  For example, they asked for the right to furlough an unlimited number of pilots as opposed to the current limit of 2000.  That just strikes me as reaching too far.

But, as quoted by others, the judge says, “It is clear that rejection of the agreement is necessary for American to successfully reorganize.”

I think that quote pretty much sums it up.  AA will re-file in the next few days and most likely be able to terminate those contracts shortly thereafter, though I’m not sure how long the court will take to rule on the amended filing.

Wandering Aramean also has some great quotes from the filing and his two cents.

This doesn’t affect the mechanics and store clerks who agreed to new contracts very recently.  The flight attendants are currently voting on a new contract.

I anticipate the judge will fast-track this to some degree, having acknowledged there are serious financial ramifications for AA in delaying the decision.

I also think that this changes the tenor of the AA/US merger discussions.  I don’t necessarily think it kills a merger, but it’s likely that AA gains significant strength in the negotiations by rounding things out with union contracts.  The less they’re in a negative profitability situation the less motivation they have to do a crappy deal.