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Unions and American Airlines fret over labor cost cuts

By Bill Zeeble, KERA 90.1 reporter

Dallas, TX – Bill Zeeble, KERA 90.1 reporter: For more than a month, American Airlines' three major unions have been studying the company's books. They want to confirm what management' been saying - tat without labor' help in cutting costs, the carrier could crash. Despite a long history of mistrust between labor and management, the finance question is now no longer an issue, according to Greg Overman, with American's pilots union.

Greg Overman, spokesperson, Allied Pilots Association: We've come to the conclusion that the airline does need to achieve cost savings to be a viable airline going forward. We're not looking at specific targets, but we're going through the entire collective bargaining agreement. And looking at ways we'd consider acceptable to members and palatable to realize cost savings.

Zeeble: Neither the pilots union nor the airline have declared a deadline for successful concession talks, but Bruce Hicks, with American, says all the unions understand time's running out. He says management's been meeting nearly everyday, even weekends, with the pilots, who are negotiating a new contract, and with the transport workers union. Managers have also been talking to the flight attendants, Hicks adds, even though their contract isn't up for renegotiation.

Bruce Hicks, spokesperson, American Airlines: There are no artificial deadlines. We've said the picture gets worse all the time, that the situation is urgent, and therefore the resolution must be found urgently as well.

Zeeble: Airline analyst Jamie Baker, with J.P. Morgan, has put a deadline on the urgency.

Jamie Baker, airline analyst, J.P. Morgan: If we don't have a labor deal structured by summer, the end of summer, then a Chapter 11 filing is most probably the outcome. There's a good three months' negotiating window.

Zeeble: American's Bruce Hicks is confident of a positive outcome, but there are so many variables, like a war with Iraq and ballooning fuel costs, that survival's uncertain even with concessions. Attorney Charles Tarpley, also a major airline pilot, was at a meeting of air law attorneys where he recalled other carriers that went bankrupt.

Charles Tarpley, attorney, major airline pilot: If pilots had worked for free at Braniff and Eastern and Pan Am, those companies would still have failed, based on labor costs.

Zeeble: Tarpley and Southwest Airlines CEO James Parker say additional financial help, like government tax relief may be needed to help struggling carriers.

James Parker, CEO, Southwest Airlines: Our industry is the most overtaxed in America. You pay more for a ticket to fly than you do for cigarettes or whiskey on a proportional basis, and we don't think that's right.

Zeeble: J.P. Morgan's Jamie Baker also thinks carriers are due some tax relief, though not another bailout. While there aren't yet serious moves in Congress to cut airline taxes, Baker says cuts could improve the odds J.P. Morgan places on American's bankruptcy chances.

Baker: We believe bankruptcy is currently no higher than 25%, assuming the unions agree to that $1.8 billion package.

Zeeble: Baker is already assuming a short Iraqi war of one to two months. But any big change in that timetable, and nearly everyone says all bets are off regarding American's survival and that of the airline industry. For KERA 90.1, I'm Bill Zeeble.

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