American pilots reject extension, contract talks set for next summer

<b>By Katherine Yung / The Dallas Morning News</b><br><br>Pilots at American Airlines Inc. announced Wednesday that they have overwhelmingly rejected a proposed one-year contract extension that had been

Thursday, September 21st 2000, 12:00 am

By: News On 6

By Katherine Yung / The Dallas Morning News

Pilots at American Airlines Inc. announced Wednesday that they have overwhelmingly rejected a proposed one-year contract extension that had been touted as a way to increase the carrier's competitiveness and improve employee relations.

Of the 8,202 pilots who cast a ballot, 5,407 â€“ or nearly two-thirds â€“ voted against the contract extension, and 2,795 supported it, union leaders said. The ballots represented about 90 percent of the organization's 9,335 members.

"It's back to the drawing board," said Rich LaVoy, president of the Allied Pilots Association. "We are going to go forward."

Fort Worth-based American said in a written statement that it intends to work on strengthening its relationship with the pilots.

"While this was obviously not our preferred outcome, we respect our pilots' choice," Donald J. Carty, American's chairman and chief executive officer, said in the statement.

The failure of the contract extension means the airline and its pilots will return to the bargaining table next summer for negotiations on a new labor contract. The pilots' current contract becomes amendable Aug. 31, 2001.

The extension had attempted to resolve tensions over the use of regional jets, an issue that caused a brief strike by American pilots in 1997.

Pilots at mainline carriers view the small jets as a threat to their job security because only lower-paid pilots at regional carriers fly them. Airlines view the planes as an essential tool to remain competitive in the industry, because they serve communities too small for flights by big jets.

The agreement would have given American the ability to buy a greater number of regional jets with 45 seats or more. Under the pilots' current contract, the airline can only purchase 67 of these planes.

In exchange, American pilots would have received the right to fly regional jets with 51 seats or more â€“ a provision that would have covered 70-seat jets the airline had ordered. However, many pilots said, the concession was rendered meaningless when American subsequently announced it would not add such planes to its fleet if the extension was approved. Consequently, all regional jets would still be flown by lower-paid pilots at American's regional affiliate, American Eagle.

The contract extension also would have removed a $45.5 million judgment against the union and some of its top officers stemming from a February 1999 pilots' sickout at the airline. The union is appealing the fine.

Union leaders, some American pilots and Wall Street analysts said the contract extension failed to pass in large part because United Airlines Inc. reached a more favorable agreement with its pilots in late August than what American pilots would have received.

"The contract extension probably would have passed had United's contract not been so rich," said Brian Harris, an airline analyst at Salomon Smith Barney in New York.

The United pact, and a much-anticipated pilots' contract at Delta Air Lines Inc., is expected to significantly raise wage and benefit levels in the industry. Normally, wage levels at one carrier are matched by others.

If the contract extension had passed, American pilots would have received a 3 percent pay raise this year and a 2.5 percent increase in 2001. The wage increases were below those established in the United proposal, but Mr. Carty had vowed to open negotiations early on wages and other benefits for the next contract. Given the length of negotiations in past contract talks, some American pilots said this offer didn't go far enough.

The United contract also contains greater limits on how the carrier can use regional jets than what was found in American's contract extension. But some analysts say it offers more generous terms on the number of regional jets that the airline can buy.

"This is a temporary blow to American, no doubt about it," said Raymond Neidl, an airline analyst at ING Barings Inc. in New York. "On the positive side, American can now point to the United agreement and say that we have to have the same productivity improvements with regard to regional jets."

American and its pilots' union have tried to work more cooperatively after their relationship reached a low point during the sickout. The contract extension was viewed as an effort to build trust by delaying traditionally adversarial contract negotiations.

"This should be a wake-up call to the union leadership ... and to management," said Phillip Beall, chairman of American's largest pilot base, which is at Dallas/Fort Worth. "We were setting ourselves up for a vastly inferior contract."

If the contract extension had passed, American had planned to purchase a large number of 50-seat regional jets to be flown by American Eagle. But the airline has said it would consider purchasing 44-seat regional jets if the agreement failed to pass.

The failure of the contract extension is good news for American Eagle pilots, many of whom had expressed a desire to fly the 25 70-seat jets the airline had ordered.

If the tentative contract had passed, those planes would instead have gone to Seattle-based Horizon Air under a marketing agreement. However, now American is slated to take delivery of the planes during next year's second half.

Results of the vote arrived late on Wall Street, where shares of AMR Corp., American's parent company, rose 25 cents a share to close at $32.38 Wednesday.