American Airlines share price up, reaches agreement with pilot union

The Allied Pilots Association union approved American Airlines final offer late Saturday and paved the way for an immediate 23% pilot wage hike.

After the unions board agreed to the five-year deal, which also include an annual increase, the accord is now set to be voted later this month by the unions 10 000 American pilots.

The union was under a lot of pressure to accept the agreement as it was American Airlines final offer and if it was rejected, contract negotiations would have gone straight to arbitration in late February, including known and less favorable terms.

American, which merged with US Airways in December 2013 to become the worlds largest airline by passenger traffic, is facing difficulties in its attempts to change the company’s culture. Management and pilots dont co-operates well and American is hoping to fix that by offering higher wages.

The carrier is also aiming to improve efficiency, providing its employees with common pay scales and work rules for each labor group. Last month the companys flight attendants got a new contract by arbitration and American is working towards resolving agreement issues with its other work groups, including ticketing agents.

The final deal offered by American was refused by the flight attendants and its was $81 million a year higher than the arbitrated agreement. However, the company scratched the decrease five days later.

American is trying to achieve joint contract agreements with its major unions, partly due to efforts to complete the integration process and party because it wants to avoid contract delays.

“We are pleased our pilots will have a chance to vote on a contract that provides an immediate 23% pay increase and recognizes their contributions at American,” company spokesman Casey Norton said in an emailed statement.

However, if a simple majority of pilots vote against the offer the arbitration will proceed. Last month American suspended negotiations after it rejected a union offer and said it was too high. Despite the move, the company left on the table its 23% offer, which is also 4% higher that its previous one, and agreed to give more voting time to the pilots.

American Airlines Group Inc gained 0.52% on Friday and closed at $53.91 on NASDAQ, marking a one-year increase of 112.58%. The company is valued at $38.67 billion. According to CNN Money, the 18 analysts offering 12-month price forecasts for American Airlines have a median target of $60.00, with a high estimate of $80.50 and a low estimate of $54.00. The median estimate represents a 11.30% increase from the last price of $53.91.