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American Airlines Pilots Ratify Labor Contract

12/8/2012 1:58 PM ET

Pilots at American Airlines, a part of AMR Corp. (AAMRQ.PK), have ratified a new union labor contract that may help it emerge from bankruptcy and facilitate US Airways Group Inc.'s (LCC: Quote) reported bid for a merger with the airline.

As per the contract agreement on Friday, American Airlines will increase the pay for pilots and provide them a 13.5 percent stake in the company, while it will have the leeway to outsource more of its flying operations.

The contract agreement with AMR was approved by 74 percent of Allied Pilots Association members and 86 percent of Chicago-based pilots.

The labor dispute took an acerbic turn recently, when between the end of September and early October, American Airlines was forced to cancel flights and resort to delays, throwing into disarray travel plans of thousands of passengers.

Meanwhile, media reports said that the ratification of the new labor contract between pilots and American Airlines management has given a new thrust to United Airways' bid for a merger between the two carriers.

As per the reports, United Airways sent a all-stock merger proposal in mid-November to AMR and its creditors. As per that proposal, American's creditors would own 70 percent of the new airline and US Airways shareholders 30 percent. That implies the combined company could be valued at up to $8.3 billion.

AMR filed for bankruptcy in November 2011, citing uncompetitive costs. Under some pressure from creditors, American at the end of August started discussing a possible merger with rival US Airways. The two airlines last September signed a nondisclosure deal that allows them to share confidential information and evaluate a possible deal.

AMR stock closed Friday at $0.57, up 12.55%, on a volume of 6.9 million shares.

US Airways closed at $12.77, up 1.27%, on a volume of 9.2 million shares.

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by RTT Staff Writer

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