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Originally published Friday, November 9, 2012 at 10:00 PM

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American Airlines reaches tentative deal with its pilots

AMR, the parent of American Airlines, filed for Chapter 11 protection last November. It has reached labor agreements with all of its unions except for the pilots. The airline has about 7,500 active pilots.

The Associated Press

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NEW YORK — American Airlines and its pilots union have reached an agreement in principle over a new contract, which could ultimately pave the way for the airline to exit bankruptcy.

The Allied Pilots Association board said in an emailed statement that it will send the agreement in principle to its 8,000 members for a ratification vote. The APA agreed in April to a conditional contract with suitor US Airways should the carriers merge.

The union designed its proposal “to provide our pilots with an industry-standard contract for enabling American Airlines to complete a successful restructuring and compete on a level playing field with its network-carrier peers,” according to the statement.

AMR, the parent of American Airlines, filed for Chapter 11 protection last November. It has reached labor agreements with all of its unions except for the pilots. The airline has about 7,500 active pilots.

The pilots rejected a prior contract proposal this summer designed to save American more than $300 million per year. It would have given the pilots pay raises and a 13.5 percent stake in the company after it emerges from bankruptcy protection. But there were also concessions outsourcing some flying to other airlines that many pilots couldn’t stomach.

The contract was rejected by 61 percent of the Allied Pilots Association (APA) members. American’s management then won permission in September from the bankruptcy court to impose new pay and work rules.

Almost immediately, delays started to pile up as some pilots called in sick or wrote up more maintenance problems.

Only 59 percent of American’s flights arrived on time in September, according to flight-tracking service FlightStats.com. Delta, Southwest, United and US Airways all had on-time percentages above 80 percent. American also canceled 1,391 flights in September, more than any other airline. The airline’s on-time performance improved in October as negotiations progressed and after the company threatened to sue for what it called an illegal job action.

Pilots, who turned down a previous proposal in August, are the lone labor group to reject concessions negotiated with American to reduce labor costs the carrier said helped push it into Chapter 11. American wants a new pilot contract before leaving court protection to assure creditors about future labor costs as it operates on a stand-alone basis.

While a pilot contract isn’t required before American presents its reorganization plan to creditors and the bankruptcy court, the airline said it preferred to reach one.

The APA agreed in April to a conditional contract with suitor US Airways should those carriers merge. AMR said it wants to emerge from bankruptcy protection first.

Material from Bloomberg News is used in this report.

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