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"American Airlines has a revenue problem that's much bigger than their cost problem," Shankland says. He says the company needs to grow through a merger with US Airways. That way it can compete with bigger United and Delta for valuable business travelers, who demand huge route networks to get them where they need to go. AMR CEO Thomas Horton says the company can do just fine on its own, thanks to new revenue from international flying, a planned expansion at five big U.S. hubs, and orders for 460 new planes that will be more fuel-efficient and comfortable. To make the turnaround work, American says, it needs relief from union work rules that limit its flexibility and drive up costs. American wants to outsource more flying to other airlines, something that is currently prohibited by the pilot-union contract. It wants to eliminate a slew of work rules, such as one that lets crews fix seats while a plane is outside but not while it's in the hangar. Bruce Hicks, a spokesman for American, say the company still would prefer to negotiate concessions with unions rather than hope that the judge will let the company throw out the union contracts. Hicks says even if American voids the contracts, it would immediately offer to start negotiations with unions on new agreements. And if the judge rules against American and upholds the union contracts? "We keep talking" with the unions, Hicks says. The depth of labor's distrust of American's management was underscored when the unions threw their support to a merger with US Airways, which American opposes at least until it gets out of bankruptcy. "It illustrates the incredibly toxic state of labor relations at AMR, which seem to hit a new nadir with every negotiations," says Robert Mann, an aviation consultant in Port Washington, N.Y., who once held finance jobs at American. Severin Borenstein, a University of California economist who has written often about the airline business, says airlines once would have been hesitant to take such a strong stand against their own unions. They were afraid of strikes. The financial pressures on the industry from high fuel prices and lingering economic weakness are changing the airlines' approach. "When you go into bankruptcy," Borenstein says, "your back is to the wall and you can much more credibly say, `We're going to have to make some changes.'"
[Associated
Press;
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