American Avoids Ch. 11

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By BRAD FOSS, AP Business Writer

American Airlines reached tentative agreement with all three of its unions, avoiding bankruptcy, a source familiar with the situation said Monday.

The source, who spoke on condition of anonymity, said technicalities still needed to be worked out, but that it appeared that American, the world's largest carrier, achieved the $1.8 billion in labor concessions that it needed to avert Chapter 11. Any agreements reached between union and company negotiators would still need to be voted upon by the employees.


Negotiators for American and unions representing pilots, flight attendants and mechanics were still meeting Monday afternoon at the airline's training center.


American said in a news release Monday that it reached a tentative agreement with its mechanics. A representative for the flight attendants said the union has concluded negotiations with the airline. The pilots union would not confirm that a deal had been struck.


A spokesman for the company refused to comment.


Officials from all three unions had said company executives indicated they would file for bankruptcy protection soon unless they had tentative agreements with all major labor groups Monday.


Shares of American soared 83 cents, or 54 percent, to $2.43 on the New York Stock Exchange (news - web sites).


The Allied Pilots Association had earlier made a proposal for $660 million in savings by changing work rules and making across-the-board pay cuts. American has said $660 million is the pilots' share of necessary cost cuts.


The union said it was confident that its proposal would let American Airlines compete with United Airlines and US Airways, which have cut costs in bankruptcy, and with low-cost carriers.


Steve Blankenship, a spokesman for the pilots' union, said the union would not specify the pay cuts and possible layoffs in its proposal, which pilots would have 14 days to ratify.


Last week, talks hit a snag when American said it would not count savings from nearly 1,000 pilot layoffs and retirements expected this year toward the $660 million cost-cutting goal. The union believes the cuts will save American up to $150 million.


Blankenship said a member of the National Mediation Board was called in to help resolve the dispute.


Over the weekend, the company had reached tentative agreements with six groups of ground workers, totaling 2,500 employees. The company previously reached a tentative deal with 16,300 baggage handlers.


The Association of Professional Flight Attendants submitted its $340 million cost-cutting proposal Friday.


American's parent, Fort Worth-based AMR Corp., has lost nearly $5.3 billion in the past two years as it has struggled with a slump in travel caused by the weak economy and terrorism. The war in Iraq (news - web sites) has further weakened international travel.


American also has suffered as a result of competition from low-fare carriers on about 80 percent of its routes. That has kept fares down, reducing potential revenue.
 
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