American Airlines, facing the possibility of a future cash crunch amid soaring fuel prices, said Tuesday that it had rejected its pilot union's contract proposals after determining the cost to the nation's largest carrier would be too high if it accepted them.
The union immediately shot back, seeking to know from management if its rejection means the talks are at an impasse.
American, a unit of Fort Worth-based AMR Corp., said in an internal negotiations update that it informed Allied Pilots Assn. negotiators that the union's proposals "are not in the best long-term interests of either our company or our pilots." It said the proposals would increase American's annual pilot costs by about $3 billion in recurring expenses.
The pilots' 2003 contract with American became amendable May 1, though the two sides started talks in September 2006.
Last fall, the union asked for raises of 50% to return their pay to 1992 levels. The union says the pay restoration would increase the company's annual costs by only $750 million. The company proposed that pilots could earn more money by working longer hours.
In their negotiations update Tuesday, the airline also said that the union's pension and scope proposals were not feasible.
A proposal related to a particular pilot pension plan would require the company to immediately contribute an additional $1 billion to keep funding levels above 80% and avoid restrictions on lump sum payments, American said.
The airline said that implementing the union's proposals would have a "serious detrimental impact on the company's economic stability."
But union spokesman Scott Shankland said the company was not acting in good faith.
He said the airline rewarded top management when the airline's performance improved but hadn't given pilots back what the pilots gave up when American teetered on the verge of bankruptcy five years ago. Pilots took wage and benefit cuts in 2003. AMR earned $735 million in 2006 and 2007, raising employees' hopes of pay raises to offset the 2003 cuts. But American's parent lost $328 million in the first three months of this year primarily because of record fuel prices.
"We're concerned on multiple levels," Shankland said. "We've been trying over the last two weeks to appeal to the AMR board of directors directly, trying to convince them and enlist their help in turning this airline around."
Shankland said the union was aware that American again faces an uncertain financial future in light of soaring oil prices but argued that the company should be fair to employees who have sacrificed in the past.