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Originally published Wednesday, August 8, 2012 at 10:56 AM

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Pilots reject contract with American Airlines

Pilots for American Airlines have strongly rejected a contract offer that would have helped the company cut labor costs, dashing American's hopes of winning voluntary concessions from all its labor unions.

AP Airlines Writer

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DALLAS —

Pilots for American Airlines have strongly rejected a contract offer that would have helped the company cut labor costs, dashing American's hopes of winning voluntary concessions from all its labor unions.

American said that it was disappointed by the vote. The company will ask a federal bankruptcy judge to let it impose terms on pilots that would be harsher than the rejected deal.

Mechanics and maintenance-stock clerks ratified new contracts, their union said Wednesday. Flight attendants are voting through Aug. 19.

In the most closely watched contest, the Allied Pilots Association said 61 percent of its 7,500 members who cast ballots voted to reject American's final offer. American had offered pay raises and a 13.5 percent stake in the new company in exchange for more flexibility to shift flying to partner airlines.

"We are disappointed with the outcome of today's APA voting results, as ratification of the pilot tentative agreement would have been an important step forward in our restructuring," said Bruce Hicks, a spokesman for American parent AMR Corp.

The union has fought against management for years, and many pilots hope that American will be forced into a merger with US Airways. Some believed that ratifying the final offer from American would have strengthened the position of American's management and made a merger less likely.

Union spokesman Gregg Overman said pilots were concerned about the long term of the contract - six years - and a potential two-tier pay scale with lower pay for pilots of new Airbus A319 aircraft that the company is expected to add to its fleet.

But the overarching theme of Wednesday's vote was more visceral: "It's a decade's worth of accumulated frustration with management," Overman said.

Anger against management runs deep at American, the nation's third-largest airline. Workers have not forgotten that several years ago, hundreds of management employees got stock-based bonuses - a few high-ranking executives got millions - after the unions had accepted deep pay cuts to keep the company going.

Still, most leaders at the unions for pilots, flight attendants and ground workers favored ratification. They said that the deals, while painful, were better than terms that American would impose with the bankruptcy judge's approval.

Mechanics were barely persuaded; they ratified a contract by a vote of 50.25 percent to 49.75 percent. American has about 11,000 mechanics, who will get 3 percent raises upfront and unspecified raises again in three years. A smaller group of stock clerks voted 71 to 29 percent for ratification.

"Nobody is happy with a concessionary agreement, and our members are still waiting to see a business plan (from American) that instills confidence," said James C. Little, president of the Transport Workers, which represents the mechanics and stock clerks. "But this result is a lot better than what our members would have faced with a court-imposed solution."

The bankruptcy judge is expected to rule by Aug. 15 on American's request to throw out any contracts with unions that have not ratified new deals. The judge could delay ruling for a few days until flight attendants finish voting. Five groups of ground workers represented by the Transport Workers Union ratified concessionary contracts in May.

Some industry experts suggested that the pilots' vote would have little effect on US Airways' bid to force American into a merger, while others said it might make a merger more difficult.

"Mergers are more likely when somebody is on their knees, when they're desperate," said Adam Pilarski of airline consulting firm Avitas. "American is not in that state. I'm not sure this is a setback."

Robert Mann, an airline-industry consultant in Port Washington, N.Y., said that by going to the bankruptcy judge, American can get lower pilot costs and more flexibility to partner with other airlines than it would have gotten under the deal that the pilots rejected. That will boost AMR's profit margins and make it more valuable - and harder to acquire - he said.

US Airways had urged the unions to ratify contracts, believing that it would speed up the merger process by settling American's labor issues. US Airways declined to comment on the pilots' vote but praised the decision by other American employees to approve new contracts.

In April US Airways took the unusual move of signing agreements with all three American unions on terms for new contracts if it succeeds in merging with American while AMR is still in bankruptcy.

AMR CEO Thomas Horton said for months that he wanted AMR to emerge from bankruptcy as a stand-alone company. But at the urging of creditors, AMR has begun exploring merger options.

American hopes to cut its annual labor costs by 17 percent, or nearly $1.1 billion, and boost revenue through new partnerships with other airlines that it believes will increase ticket sales.

American said in March that it wanted to eliminate 13,000 union jobs, but it has reduced that number in negotiations to about 7,800, a spokesman said. It also wants to cut 1,200 nonunion jobs.

AMR and American filed for bankruptcy protection in November after losing more than $10 billion since 2001.

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