The bankruptcy court approved a new contract between American Airlines and its pilots today, removing the last major roadblock to the carrier exiting bankruptcy.
"[The collective bargaining agreement] achieves significant cost savings and work rule flexibility necessary for [American's] long-term viability," says US Bankruptcy Court for the Southern District of New York judge Sean Lane at a hearing today.
He adds that the compromise agreement reached between American and the Allied Pilots Association (APA) is significantly better alternative than a contract imposed by the airline and the court.
Pilots at American approved the contract on 7 December, with 73.7% voting for the agreement and 26.3% voting against.
The contract allows for an increase in the number of large regional aircraft as well as unlimited domestic codeshares, that American has said are critical to it emerging from bankruptcy as a competitive carrier.
The agreement is seen by many as the last hurdle to the airline filing a restructuring - or merger - plan and exiting bankruptcy protection in the first half of 2013.
Two pilot groups, including former TWA pilots, opposed the agreement citing the fact that it threw out previously agreed to solutions to grievances with American.
Judge Lane said that his ruling in September approving the airline's section 1113 motion to reject its existing agreement with the pilots ended any rights of these groups to oppose the new contract.
In addition, judge Lane also approved a motion by American to eliminate the lump sum pension payment option for pilots. "The court finds that elimination of the lump sum... necessary to avoid a distressed termination of the plan."