American Airlines Reaches Agreement With Pilots Union Over New Contract

American Airlines and its pilots union have reached an agreement in principle over a new contract, which could ultimately pave the way for the airline to exit bankruptcy.

The union's board must still sign off on the deal and present it to pilots for a ratification vote. That could happen as soon as three weeks from now.

AMR Corp., the parent of American Airlines, filed for Chapter 11 protection last November. It has reached labor agreements with all of its unions except for the pilots. The airline has about 7,500 active pilots.

10/25/2012 Related Story: CEO: American Airlines Plans To Hire 2,500 New Pilots

The pilots rejected a prior contract proposal this summer designed to save American more than $300 million per year. It would have given the pilots pay raises and a 13.5 per cent stake in the company after it emerges from bankruptcy protection. But there were also concessions outsourcing some flying to other airlines that many pilots couldn't stomach.

The contract was rejected by 61 percent of the Allied Pilots Association members. American's management then won permission in September from the bankruptcy court to impose new pay, benefit and work rules.

Almost immediately, delays started to pile up as some pilots called in sick or wrote up more maintenance problems.

Only 59 percent of American's flights arrived on time in September, according to flight-tracking service FlightStats.com. Delta, Southwest, United and US Airways all had on-time percentages above 80 percent. American also canceled 1,391 flights in September, more than any other airline.

The airline's on-time performance improved in October as negotiations progressed and after the company threatened to take the union to court for what it called an illegal job action.

In a message to its members Friday, the union said its board of directors will now vote to on whether or not to pass on the agreement to the membership for ratification. That is likely to happen since the board has already shown support for the latest proposal by voting 13-to-2 on a related matter.

The board's next vote could happen within a week. The members then get two weeks to review the contract language before voting.

The union said it will provide details shortly.

American, based in Fort Worth, Texas, said it is pleased to have the agreement in principle and worked hard "to structure an agreement that addresses the priorities identified as most important to our pilots, while staying within the economic framework" it faces in its bankruptcy.

American Airlines: Turbulent Times