American Airlines Asks Court To Cancel Contracts

The American Airlines bankruptcy has stayed in the headlines ever since their filing last November. After several rounds of job cuts, backing out of several jet purchases and terminal leases, the company has had to defend its debt restructuring efforts to critics.

In The Hot Seat

After more serious indications that a buyout or merger could be in the future, American is desperately seeking to successfully exit Chapter 11 more quickly than before. However, much of the success of the airline’s filing depends on its union contracts. American’s parent company, AMR, is asking the court to allow the cancellation, or voiding, of several labor contracts in order to speed up negotiations.

Estimated to cost AMR around $8 billion a year in benefits, the labor contracts currently held by American Airlines employees are the most expensive in the industry. Having already made close to $4 billion in concessions back in 2004, employee union leaders are not willing to negotiate further decreases in benefits. However, Bruce Hicks, spokesman for American Airlines reports the voiding of labor contracts “will help that process move along.” AMR continues to hold to the fact that they will not be able to survive the bankruptcy if they do not renegotiate the labor contracts soon.

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