American Airlines in the Process of Filing Bankruptcy is Looking to Void Union Contracts

Today, it was announced that American Airlines while in the process of filing bankruptcy plans to try and get the bankruptcy court to retract the union employee contracts next week. They tried to negotiate with the employee unions and have failed to reach any kind of agreement. American Airlines is planning to ask the bankruptcy court for approval to void their union contracts to help them emerge from the bankruptcy filing being profitable. The bankruptcy attorney for American Airlines stated that the less there is a profound change with negotiations of the unions they will ask the bankruptcy court to void the contracts entirely.

The bankruptcy attorney, Harvey Miller told the US Bankruptcy Court Judge Sean Lane, “We must start the process if we are going to bring these cases to a successful conclusion within a reasonable period of time.”

AMR has been trying to lower labor costs by negotiating with the unions since back in 2006. Now filing bankruptcy, American believes they should be able to save $1.25 billion in annual savings of labor. Included in their labor cost reduction plan, in the bankruptcy filing, is cutting 13,000 employees.

It will be now down to the unions to make a choice of negotiating with American Airlines or rolling the dice to see what the bankruptcy judge does. The bankruptcy law allows a company in the process of filing bankruptcy to seek permission to void or rework contracts in the interest of restructuring the company.

The Fort Worth, Texas based airline intentions are to use the bankruptcy filing to win motion’s that will allow them changes in union negotiations on the employee contracts. Currently, it has caused much discord with labor-management ever since American Airlines entered into the bankruptcy filing on November 29, 2011.

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