American Airlines’ bankrtupcy judge has decided that AA can abrogate its agreement with its pilots and impose terms upon them.  Based on what I’ve read, AA could choose to impose its original Section 1113 terms or better terms, if it so chooses.  At this point, the pilots are left to the whims of American Airlines.  American Airlines has said it will announce its intentions in the near future.

On a related note, a spokesperson for the unsecured creditors committee has said that the creditors see it as absolutely necessary to have a long term pilot agreement in place to exit bankruptcy.  This makes things tricky for AA since it means that simply imposing terms and moving on isn’t satisfactory to the creditors.  A real, negotiated agreement is necessary.  AA doesn’t have much maneuvering room with its pilot union since they’ve rejected the last, best offer.

In addition, the pilots have strongly indicated that they simply do not wish to do a deal with the AA executive team at all.  Their vote on the last, best offer made that clear.  Enter US Airways.

US Airways probably can get an agreement in place in short order.   At least enough of an agreement to satisfy creditors.  Once again, US Airways is in a strong(er) position to negotiate a merger ultimately.  I think the only way the pilots will agree to something is if the company’s exit from bankruptcy doesn’t see CEO Tom Horton and his team in charge.

Why?  Because these pilots gave up 13.5% of the equity stake available in the reorganized company to make their disapproval vocally known.  That equity stake was a big deal politically and financially.  We’re also talking about a group of people who, in many respects, can afford to draw this out to AA’s disadvantage.

American Airlines can’t afford to be delayed in anything. It needs deals in place and a firm plan drawn up in order to exit bankruptcy.  It doesn’t have all the deals it needs and therefore can’t offer a firm plan either.

Filed under: Airline News by ajax