Unions Gearing up for Fight Over American Airlines Stock
Source: Dow Jones News
By Peg Brickley
Trouble is brewing again in the bankruptcy case of an American Airlines Group Inc. predecessor. Unions representing the company's workers say they are in danger of being shortchanged, while shareholders of the old AMR Corp. get another generous payoff.
Hundreds of millions of dollars of valuable stock is still stored up in bankruptcy reserve accounts, waiting for a final reckoning of the accounts from the 2011 bankruptcy of AMR, parent of American Airlines.
AMR is paying off its bankruptcy debts with shares of new American Airline stock. The shares have soared in value since December 2013, when AMR emerged from bankruptcy protection and merged with US Airways Group Inc.
AMR's bankruptcy was a rare case that produced value to spare for shareholders. According to court papers, investors in the old equity received more than $9.5 billion of new American shares in the four months following AMR's bankruptcy exit.
Unions representing pilots, flight attendants and other workers of AMR Corp. say they are being asked to take a haircut when the remaining stock is handed out while investors in the old equity get more than their fair share.
American spokesman Casey Norton said the company will respond with a court filing and is reviewing a bankruptcy-court motion the unions filed Tuesday, criticizing the company's distribution plan. "We are confident that, under the court's supervision, we have properly managed the distribution under the plan of reorganization," Mr. Norton said.
The Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union of America AFL-CIO are getting ready to wrestle American over the stock on behalf of employees. The unions say they are being asked to take less now than they received in earlier rounds of distributions, while "professional investors" that gambled on AMR's stock and won get even richer.
Investors in the old equity have reaped "substantial proper gains" and don't need "unwarranted additional gains taken from the pockets of America's workers," union lawyers wrote in a court filing.
Stock of the old company purchased for 20 cents a share at AMR's low point translated into $41.81 in value as of Jan. 26, 2015, the labor lawyers reckon. The price has since dropped back.
The price appreciation that made old AMR one of the best investments of recent years is contributing to the dispute. There will be taxes to pay, and the unions say shareholders should be stuck with the bill, rather than AMR's employees and other unsecured creditors.
In March, American estimated it had a cushion of nearly $390 million in a reserve account that the company felt it wouldn't need. That is in addition to nearly $140 million American wanted to keep on hand in case it lost disputes over bankruptcy claims, and a separate reserve for special airplane claims.
That estimate was filed in connection with a failed bid for court permission to start handing out what is still stored in chapter 11 coffers. American hasn't yet filed papers renewing that motion, but union lawyers think such a move is imminent.
American has been swatting down bankruptcy claims. On Dec. 7, American won a $632 million bankruptcy claims fight that had made it all the way to a federal appeals court. Once those claims are classified as disallowed, American will have excess funds in the reserve, lawyers for the unions say.
A January hearing has been set in the U.S. Bankruptcy Court for the Southern District of New York on the union motion, which seeks a court order to force the company to honor its obligations under the chapter 11 plan.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
December 18, 2015 12:15 ET (17:15 GMT)
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