Unions grab a stronghold in American restructuring


American Airlines has made reduction of costs the cornerstone of its bankruptcy reorganization plans. From the very beginning they’ve made it clear that they expect to cut costs pretty much across the board. This includes returning some aircraft to lessors and getting out of some real estate deals and also, hopefully, renegotiating labor contracts. That last part likely just got a lot harder.

A nine-member panel was appointed to represent unsecured creditors of the company and three of those seats are held by representatives of the company’s unionized workforce. The pilots, flight attendants and ground workers each received a seat on the panel, along with Boeing and other creditors. Having that strong a union voice in the courts as recommendations are heard is going to make it much more difficult for the company to pull a fast one on the employees, but that also seems to be their only plan for getting out of the bankruptcy so that could hinder those efforts.

In other bankruptcy news, some analysts are suggesting that American should scale back operations at Chicago, Los Angeles and New York City and focus on their fortress hubs in Miami and Dallas-Ft. Worth. Fortress hubs are great, I suppose, for the business. But when that’s all you have you’re horribly susceptible to competitors showing up and fighting. And that sort of fight isn’t what an already struggling company needs to be faced with.

Always interesting to see what’s next…

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, and LinkedIn.

7 Comments

  1. AA’s fortress strategy has never made much sense to me. They have a very strong and profitable operation out of DFW and MIA, so that seems fine. But Chicago, NYC, and LAX are extremely competitive, and AA doesn’t have the product or the cost structure to compete against other carriers. So I really don’t understand where they’re going with this.

  2. three seats of nine does probably does not give them as much leverage as you think. The administrative judge will have the the largest influence on the proceeding. They will most likely be at odds with the other 6 on the panel, and will have to tread lightely and be very nimble to not take a beating. The judge and the other creditors are going to look at them and say “Your new contract is going to be somewhere inbetween US Air and the other legacies for pay and workrules.

  3. Following airlines and related aerospace pretty closely, there is a field day of analyst opinion on AMR.

    Unions stand to lose a great deal, as its likely AA will at least be on par with Union pay at peer airlines post C11. (except LCC)

    Once the seats on the National Labor Relations Board changed, (Union to Corp) it made conditions more friendly for corporations overall. Most notably Boeing.

    1. Agreed that the analysts are all over the place on this one (just like me – one more random voice without necessarily too much data to back it up, but this armchair sure is comfy). The unions have the most to lose. They’re going to either have to come up with a reasonable compromise or ride the sinking ship all the way down. And I know that the three seats doesn’t give them a platform to dictate demands from, but getting all three unions as seats on the committee is still impressive.

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