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Pilots approve latest contract with American Airlines, pave way for US Airways merger

DALLAS -- American Airlines is closer to exiting from bankruptcy and possibly merging with U.S. Airways after its pilots approved a new labor contract.

With the pilots' deal announced Friday, American has negotiated new, lower-cost contracts with all its unions since filing for bankruptcy protection just over a year ago.

Company executives insist the savings will let American compete as an independent airline. But rival U.S. Airways has been pressing to merge, arguing that both must get bigger to succeed against huge rivals United and Delta. And U.S. Airways executives want to run the combined company.

American and U.S. Airways will keep talking about a potential deal. Thomas Horton, the CEO of American parent AMR Corp., said Friday that his company could make a decision soon.

But with AMR in bankruptcy, it could be its creditors who make the call. The pilots' contract was the last big unknown in American's restructuring, and creditors are likely to turn now to whether they would make more money if American merges or remains on its own.

The Allied Pilots Association announced Friday that 74 percent of its members voted to ratify a new contract three months after they rejected a similar offer. Union leaders lobbied hard for passage the second time around. They favor a merger and believe that Friday's vote made a deal more likely.

AMR leaders have seemed to favor emerging as an independent airline before considering a merger. On Friday, they hailed the pilots' vote as a key step in AMR's turnaround after years of heavy losses.

AMR and American filed for bankruptcy protection in November 2011.

American has about 7,500 active pilots plus a few hundred others on furlough. The union said the vote to ratify the contract was 5,489 to 1,951.

The six-year contract will raise pilots' pay by 4 percent on signing and 2 percent per year after that, with an adjustment in the third year to bring pay in line with that at other big airlines. The union will get 13.5 percent of the stock in the new AMR when it emerges from bankruptcy, which analysts estimate would amount to at least US$100,000 per pilot.

In exchange pilots will fly more hours and American will get more flexibility to outsource flying to other airlines.

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