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American Airlines Urge Unions To Speed Up Labor Contract Talks

2/27/2012 1:19 PM ET

American Airlines, a part of bankrupt AMR Corp. (AAMRQ.PK), has asked unions to speed up negotiations to make major changes in contracts in order to achieve the $1.25 billion in labor cost savings. The company said it needs those changes "in a matter of weeks," "not months from now" to enable restructuring in the near term.

The company has asked the unions to take a "serious and deliberate approach to negotiations" and added that it does not have "the luxury of time."

"Our challenge is clear: work quickly to restructure our contracts, achieve the targeted cost savings and begin implementing the changes so we can emerge from restructuring in the near term, or remain on our current path and jeopardize our business plan and ultimate success," the company said in an update.

American Airlines also rejected proposals of two unions that the company offer voluntary early out incentives for workers, to reduce the 13,000 planned job cuts. American Airlines said that the early out "proposals represent a significant cost to the company and could not be accepted on their terms."

In late November 2011, Fort Worth, Texas-based AMR and some of its U.S. subsidiaries including American Airlines and American Eagle, filed for bankruptcy, citing mainly cost disadvantages. The company then revealed plans to cut 13,000 jobs in a bid to return to profitability.

CEO Tom Horton's cost pruning plan targets an annual financial improvement of over $3 billion by 2017, including $2 billion in cost savings and $1 billion in revenue enhancements.

Despite the 9/11 attacks and the recession, AMR was one of the few airlines that managed to avert bankruptcy, but had to grapple with losses while its rivals turned around to profit having addressed cost problems that includes hefty pension charges

Interestingly, rivals such as United Air Lines and Delta Air Lines Inc. (DAL) had also declared bankruptcy, but found its way out. Subsequently, Delta acquired Northwest Airlines in 2008, and United Air Lines and Continental Airlines merged in October 2010 creating the world's largest airline United Continental Holdings Inc. (UAL).

AAMRQ.PK is currently trading at $0.52, up 0.68%, on a volume of 0.8 million shares.

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by RTT Staff Writer

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