Employees of American Airlines worked for years on the assumption that they would receive a pension. But that legal obligation may not survive America Airlines’ bankruptcy.
Companies and cities see this as a way out. They can drive a hard bargain with unions. Who do you think unions worry about most? Existing workers or retired workers?
The unions may fight. But how can they win? Once a firm declares bankruptcy, it can tell workers, “Accept our offer or else find a new career.”
The parent of American Airlines wants to eliminate about 13,000 jobs — 15 percent of its workforce — as the nation’s third-biggest airline remakes itself under bankruptcy protection.
The company proposes to end its traditional pension plans, a move strongly opposed by the airline’s unions and the U.S. pension-insurance agency, and to stop paying for retiree health benefits.
AMR Corp. said Wednesday that it must cut labor costs by 20 percent. It will soon begin negotiations with its three major unions, but the president of the flight attendants’ union quickly rejected the company’s ideas as unacceptably harsh.
CEO Thomas W. Horton said Wednesday that the company hopes to return to profitability by cutting spending by more than $2 billion per year and raising revenue by $1 billion per year. . . .
“We are going to use the restructuring process to make the necessary changes to meet our challenges head-on and capitalize fully on the solid foundation we’ve put in place,” Horton said in a letter to employees.
AMR’s 88,000 employees have braced for bad news for weeks. AMR, American and short-haul affiliate American Eagle filed for bankruptcy protection in November. Horton said in December that the company would emerge from bankruptcy with fewer workers.
Laura Glading, president of the Association of Professional Flight Attendants, said the proposal was more drastic than she expected. She claimed that the annual reduction in employee costs, which AMR put at $1.25 billion, would be closer to $2.8 billion.
“This is an absolute outrage,” Glading said. “There’s nothing in here that’s remotely acceptable.”
Transport Workers Association President James Little declared, “We’re going to fight this.” His union represents American’s mechanics and bag handlers, who would be hit hardest — 40 percent would be laid off. . . .
If American and its three unions can’t agree on changes, the company could ask a bankruptcy judge in New York to throw out existing labor contracts and impose the company’s conditions on workers. Federal law requires the company to first make a good-faith effort to negotiate agreements with its workers. . . .
The company also wants union approval to drop its traditional pension plans, which cover 130,000 employees and retirees. It would replace them with 401(k)-type plans under which the company contributes to workers’ retirement accounts. . . .
American said the cost of traditional pensions and retiree health benefits saddled AMR with higher labor costs than its rivals. Through the first nine months of 2011, labor was 29 percent of operating costs at AMR compared with 22 percent at United and 20 percent at Delta. . . .
It gets worse. Read the full story.