This week some important decisions were made in the American Airlines bankruptcy case. After tense contract negotiations with union members and talks of a buyout, the presiding judge handed down a game-changing decision.
A federal bankruptcy judge has handed down a decision that is the first of its kind in history. Having blocked American Airlines parent company from throwing out contractual obligations with union pilots as efforts to lower labor costs, this is the first time in any airline bankruptcy case that the judge sided with a union. However, this block is only temporary and AMR may still be able to get out from under such contracts as part of their debt restructuring process if they meet two conditions.
The bankruptcy court said that American failed to prove that two parts of its debt restructuring proposal were necessary to rebuild the company and successfully exit Chapter 11 bankruptcy. The issue of employee furlough and the outsourcing of flying to other airlines are the two issues still on the table. If American can resolve these two elements of the bankruptcy plan, the court is likely to approve it and allow AMR to move forward. For employees, whether they will suffer in attempt to reduce American’s debt by $2 billion annually is still uncertain.