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AMR Flight Attendants Expected To Okay New Contract
By Ann Keeton, Of DOW JONES NEWSWIRES
CHICAGO (Dow Jones)--Flight attendants at American Airlines are expected to ratify a new contract late Wednesday, reversing a vote Tuesday that likely would have forced the world's largest airline into bankruptcy.
In reports early Wednesday, analysts wrote that the flight attendants will probably join American's other two major unions, representing pilots and groundworkers, including mechanics, in approving cuts in wages and benefits. American has said it needs to save $1.8 billion in annual labor costs in order to avoid a certain Chapter 11 filing.
The company has said even if it gets labor costs down, it could still go bankrupt.
Tuesday, the 26,000-member Association of Professional Flight Attendants turned down the contract, which included a 15% pay cut, by about 500 hundred votes. After meeting with the company, union officials said they would vote again. During the voting process, some changes had been made in the contract, adding bonuses for employees if the airline' business turns around. Flight attendants, unlike the other labor groups, had not been permitted to change their votes during the voting period.
Voting Wednesday will end at 6:00 p.m. EDT.
Analyst James Higgins at Credit Suisse First Boston wrote in a report early Wednesday that he believes the flight attendants will ratify the contract. We have moved slightly toward a position that expects AMR to avoid a Chapter 11 filing. For months now, we had viewed the outcome as too close to call.
He said the new contracts would reduce American's labor costs by 21%, paving the way for the airline to renegotiate loan covenants for payments due June 30.
If AMR is to avoid a Chapter 11 filing, we believe the shares could jump into the $5 to $6 range. But he said if the flight attendants vote down the new contract and bankruptcy is inevitable, shares would likely drop to $1, Higgins said.
The analyst doesn't own the stock, but CS First Boston has a financial relationship with the airline.
Analyst Michael Linenberg at Merrill Lynch said he believes the flight attendants will vote for the new contract. Bankruptcy, he said, would be a far worse alternative than the concessions. Also, we believe the flight attendants will face tremendous pressure from the other employee groups to 'get on board.' As such, we expect AMR to narrowly avert bankruptcy, at least, for now.
The analyst, who doesn't own AMR stock, said shares could rise $1 on a favorable vote.
By Ann Keeton, Of DOW JONES NEWSWIRES
CHICAGO (Dow Jones)--Flight attendants at American Airlines are expected to ratify a new contract late Wednesday, reversing a vote Tuesday that likely would have forced the world's largest airline into bankruptcy.
In reports early Wednesday, analysts wrote that the flight attendants will probably join American's other two major unions, representing pilots and groundworkers, including mechanics, in approving cuts in wages and benefits. American has said it needs to save $1.8 billion in annual labor costs in order to avoid a certain Chapter 11 filing.
The company has said even if it gets labor costs down, it could still go bankrupt.
Tuesday, the 26,000-member Association of Professional Flight Attendants turned down the contract, which included a 15% pay cut, by about 500 hundred votes. After meeting with the company, union officials said they would vote again. During the voting process, some changes had been made in the contract, adding bonuses for employees if the airline' business turns around. Flight attendants, unlike the other labor groups, had not been permitted to change their votes during the voting period.
Voting Wednesday will end at 6:00 p.m. EDT.
Analyst James Higgins at Credit Suisse First Boston wrote in a report early Wednesday that he believes the flight attendants will ratify the contract. We have moved slightly toward a position that expects AMR to avoid a Chapter 11 filing. For months now, we had viewed the outcome as too close to call.
He said the new contracts would reduce American's labor costs by 21%, paving the way for the airline to renegotiate loan covenants for payments due June 30.
If AMR is to avoid a Chapter 11 filing, we believe the shares could jump into the $5 to $6 range. But he said if the flight attendants vote down the new contract and bankruptcy is inevitable, shares would likely drop to $1, Higgins said.
The analyst doesn't own the stock, but CS First Boston has a financial relationship with the airline.
Analyst Michael Linenberg at Merrill Lynch said he believes the flight attendants will vote for the new contract. Bankruptcy, he said, would be a far worse alternative than the concessions. Also, we believe the flight attendants will face tremendous pressure from the other employee groups to 'get on board.' As such, we expect AMR to narrowly avert bankruptcy, at least, for now.
The analyst, who doesn't own AMR stock, said shares could rise $1 on a favorable vote.
