AMR Flight Attendants: Court Ruling Proves Value of Contract Deal

DALLAS ( TheStreet) -- Perhaps some pilots at bankrupt AMR ( AAMRQ.PK) see Wednesday's bankruptcy court ruling as a victory, but the flight attendants union is reading it differently.

In a hotline message to members, the Association of Professional Flight Attendants calls Judge Sean Lane's ruling "a blistering indictment of the labor unions on American Airlines' property" because the ruling rejected the majority of the arguments made by the Allied Pilots Association.

In his surprising ruling, Lane rejected AMR's bid to reject its existing contract on two points: AMR wants unrestricted ability to furlough pilots and to engage in code-sharing. The APA says this is a victory. AMR says it will rewrite its motion and resubmit it on Friday.

Except for the two points, "the remainder of the court's 100-plus page decision validated each of American's arguments for its business plan and dismantled each of the unions' cases against it," APFA said, in its hotline message. "In short, (Wednesday's) ruling postpones the inevitable abrogation of the pilots' contract."

APFA said it does not expect a favorable abrogation ruling if its tentative contract agreement is rejected, in voting that concludes Saturday. "It is more clear today than ever before that the best path for our membership is to accept the last, best, final offer and continue to work towards achieving a merger with US Airways ( LCC)."

"We can now say with certainty that the (abrogation) process will leave flight attendants worse off than the last, best, final offer," the union said. "There is little doubt that the end result, should we reject, will be 2,000 furloughed flight attendants and many, many more on reserve."

For now, AMR pilots are subject to whatever contract the court imposes because last week they rejected a tentative contract agreement by a 61% margin. Former APA president Dave Bates resigned afterwards. The tentative agreement "was bad, (but) it had significant improvements over American's last term sheet," Bates said, in an interview with TheStreet.

In a note issued Thursday, analyst Kevin Starke of CRT Capital Group said "the thrust of the (court's) opinion was aimed at the Allied Pilots Association, who just a few days ago voted against a revised management proposal.

"The linchpin of their arguments against the (abrogation) motion was that AMR should inevitably base its reorganization around a merger with US Airways," Starke wrote. "In the 105-page opinion, Judge Lane rejected this line of thinking." Lane wrote that while a merger is possible, the topic is not currently before the court.

Lane also wrote that other network carriers did not, in bankruptcy, achieve the cash flow goals they had targeted, and that American has lower targets. "This makes us suspect that Judge Lane could indeed allow AMR to put in place cost saving measures that exceed its competition on several counts," Starke wrote. "He also very clearly thinks that AMR must emerge competitive not only with the other network carriers, but with the low-cost carriers as well -- something the unions disputed heavily in the hearings."

-- Written by Ted Reed in Charlotte, N.C.

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