In re AMR Corp.

Decision Date15 August 2012
Docket NumberNo. 11–15463 (SHL).,11–15463 (SHL).
Citation477 B.R. 384
PartiesIn re AMR CORPORATION, et al., Debtors.
CourtU.S. Bankruptcy Court — Southern District of New York

OPINION TEXT STARTS HERE

Steptoe & Johnson LLP, By: Filiberto Agusti, Esq., Joshua Robert Taylor, Esq., Washington, D.C., for the Allied Pilots Association.

James & Hoffman, P.C., By: Edgar N. James, Esq., Kathy L. Krieger, Esq., David P. Dean, Esq., Darin M. Dalmat, Esq., Daniel M. Rosenthal, Esq., Washington, D.C., for the Allied Pilots Association.

Guerrieri, Clayman, Bartos & Parcelli, P.C., By: Robert S. Clayman, Esq., Jeffrey A. Bartos, Esq., Carmen R. Parcelli, Esq., Paul E. Knupp III, Esq., N. Skelly Harper, Esq., Washington, D.C., for the Association of Professional Flight Attendants.

Lowenstein Sandler PC, By: Sharon L. Levine, Esq., John K. Sherwood, Esq., S. Jason Teele, Esq., Paul Kizel, Esq., Tania Ingman, Esq., Roseland, NJ, for the Transport Workers Union of America, AFL–CIO.

Paul Hastings LLP, By: John J. Gallagher, Esq., Neal D. Mollen, Esq., Scott M. Flicker, Esq., Margaret H. Spurlin, Esq., Washington, D.C., Mark D. Pollack, Esq., Jon A. Geier, Esq., Kenneth W. Gage, Esq., Chicago, IL, Stephen H. Harris, Esq., Los Angeles, CA, Todd C. Duffield, Esq., New York, NY, Erika L. Leonard, Esq., Atlanta, GA, Weil, Gotshal & Manges

LLP, By: Harvey R. Miller, Esq., Stephen Karotkin, Esq., Alfredo R. Pérez, Esq., Stephen A. Youngman, Esq., Lawrence J. Baer, Esq., New York, NY, for the Debtors.

Skadden Arps Slate Meagher & Flom LLP, By: Jay M. Goffman, Esq., New York, NY, John Wm. Butler, Jr., Esq., Al Hogan, Esq., Chicago, IL, for the Official Committee of Unsecured Creditors.

Seham, Seham, Meltz & Petersen LLP, By: Lucas K. Middlebrook, Esq., White Plains, NY, Nicholas P. Granath, Esq., Minneapolis, MN, for the American Independent Cockpit Alliance, Inc. and the Supplement B Pilot Beneficiaries.

SNR Denton US, LLP, By: Carole Neville, Esq., Fruman Jacobson, Esq., Gary Meyerhoff, Esq., New York, NY, for the Pension Benefit Guaranty Corporation.

MEMORANDUM OF DECISION

SEAN H. LANE, Bankruptcy Judge.

+-------------------+
                ¦TABLE OF CONTENTS  ¦
                +-------------------+
                
+----------------------------------+
                ¦                              ¦   ¦
                +------------------------------+---¦
                ¦BACKGROUND                    ¦395¦
                +----------------------------------+
                
+----------------------------------------------------------------------------+
                ¦ ¦   ¦                                                              ¦       ¦
                +-+---+--------------------------------------------------------------+-------¦
                ¦ ¦I. ¦AMERICAN AIRLINES, INC. AND ITS OPERATIONS                    ¦395    ¦
                +-+---+--------------------------------------------------------------+-------¦
                ¦ ¦II.¦DEVELOPMENTS IN THE AIRLINE INDUSTRY                          ¦396    ¦
                +----------------------------------------------------------------------------+
                
+--------------------------------------------------------------------------+
                ¦  ¦  ¦A.  ¦Domestic Deregulation and the Entry of Low Cost Carriers¦396   ¦
                +--+--+----+--------------------------------------------------------+------¦
                ¦  ¦  ¦B.  ¦International Deregulation                              ¦397   ¦
                +--+--+----+--------------------------------------------------------+------¦
                ¦  ¦  ¦C.  ¦External Shocks to the Airline Industry                 ¦397   ¦
                +--------------------------------------------------------------------------+
                
+----------------------------------------------------------------------------+
                ¦ ¦III.¦THE DECLINE OF AMERICAN                                      ¦397    ¦
                +----------------------------------------------------------------------------+
                
+--------------------------------------------------------------------+
                ¦ ¦  ¦A. ¦Increased Price and Service Competition             ¦398   ¦
                +-+--+---+----------------------------------------------------+------¦
                ¦ ¦  ¦B. ¦American's High Labor Costs and Productivity Issues ¦399   ¦
                +-+--+---+----------------------------------------------------+------¦
                ¦ ¦  ¦C. ¦Mergers and Restructurings of Other Carriers        ¦400   ¦
                +--------------------------------------------------------------------+
                
+----------------------------------------------------------------------------+
                ¦ ¦IV.¦RECENT DEVELOPMENTS REGARDING AMERICAN                        ¦401    ¦
                +----------------------------------------------------------------------------+
                
+----------------------------------+
                ¦                              ¦   ¦
                +------------------------------+---¦
                ¦DISCUSSION                    ¦405¦
                +----------------------------------+
                
+------------------------------------------------------------------+
                ¦ ¦  ¦                                                      ¦      ¦
                +-+--+------------------------------------------------------+------¦
                ¦ ¦I.¦THE STANDARD UNDER SECTION 1113                       ¦405   ¦
                +------------------------------------------------------------------+
                
+----------------------------------------------------------------------------+
                ¦ ¦  ¦A.  ¦Necessity                                                 ¦407    ¦
                +-+--+----+----------------------------------------------------------+-------¦
                ¦ ¦  ¦B.  ¦Fair and Equitable Treatment                              ¦408    ¦
                +-+--+----+----------------------------------------------------------+-------¦
                ¦ ¦  ¦C.  ¦Complete Information and Information Necessary to Evaluate¦409    ¦
                ¦ ¦  ¦    ¦the Proposal                                              ¦       ¦
                +-+--+----+----------------------------------------------------------+-------¦
                ¦ ¦  ¦D.  ¦Good Faith/Good Cause                                     ¦409    ¦
                +-+--+----+----------------------------------------------------------+-------¦
                ¦ ¦  ¦E.  ¦Balance of the Equities                                   ¦410    ¦
                +----------------------------------------------------------------------------+
                
+----------------------------------------------------------------------------+
                ¦ ¦II.¦EVALUATION OF AMERICAN'S PROPOSAL TO THE APA                  ¦410    ¦
                +----------------------------------------------------------------------------+
                
+------------------------------------------+
                ¦ ¦ ¦A.¦Necessary for Reorganization   ¦411¦
                +------------------------------------------+
                
+---------------------------------------------------------+
                ¦ ¦  ¦   ¦1.¦Blanket Objections to American's Motion¦411  ¦
                +---------------------------------------------------------+
                
+--------------------------------------------------------------------+
                ¦ ¦  ¦   ¦   ¦a)¦Potential Merger with U.S. Airways           ¦411   ¦
                +-+--+---+---+--+---------------------------------------------+------¦
                ¦ ¦  ¦   ¦   ¦b)¦Objections to the Business Plan              ¦416   ¦
                +-+--+---+---+--+---------------------------------------------+------¦
                ¦ ¦  ¦   ¦   ¦c)¦Convergence                                  ¦422   ¦
                +--------------------------------------------------------------------+
                
+---------------------------------------------------------------------------+
                ¦  ¦  ¦    ¦2. ¦Objection to Proposed Changes in Benefits to All     ¦423   ¦
                ¦  ¦  ¦    ¦   ¦Employees                                            ¦      ¦
                +---------------------------------------------------------------------------+
                
+--------------------------------------------------------------------+
                ¦ ¦  ¦   ¦   ¦a)¦Pension Plans                                ¦423   ¦
                +-+--+---+---+--+---------------------------------------------+------¦
                ¦ ¦  ¦   ¦   ¦b)¦Medical Costs Generally                      ¦424   ¦
                +-+--+---+---+--+---------------------------------------------+------¦
                ¦ ¦  ¦   ¦   ¦c)¦Active Medical                               ¦424   ¦
                +-+--+---+---+--+---------------------------------------------+------¦
                ¦ ¦  ¦   ¦   ¦d)¦Retiree Medical                              ¦425   ¦
                +-+--+---+---+--+---------------------------------------------+------¦
                ¦ ¦  ¦   ¦   ¦e)¦Objections to Proposed Benefit Changes       ¦425   ¦
                +--------------------------------------------------------------------+
                
+---------------------------------------------------------------------------+
                ¦  ¦  ¦    ¦3. ¦Objections To Proposed Changes Relevant Only to the  ¦427   ¦
                ¦  ¦  ¦    ¦   ¦Pilots                                               ¦      ¦
                +---------------------------------------------------------------------------+
                
+--------------------------------------------------------------------+
                ¦ ¦  ¦   ¦   ¦a)¦Regional Jets                                ¦427   ¦
                +-+--+---+---+--+---------------------------------------------+------¦
                ¦ ¦  ¦   ¦   ¦b)¦Codesharing                                  ¦431   ¦
                +-+--+---+---+--+---------------------------------------------+------¦
                ¦ ¦  ¦   ¦   ¦c)¦Furlough                                     ¦434   ¦
                +-+--+---+---+--+---------------------------------------------+------¦
                ¦ ¦  ¦   ¦   ¦d)¦Schedule Maximum                             ¦435   ¦
                +-+--+---+---+--+---------------------------------------------+------¦
                ¦ ¦  ¦   ¦   ¦e)¦Sick Leave                                   ¦435   ¦
                +-+--+---+---+--+---------------------------------------------+------¦
                ¦ ¦  ¦   ¦   ¦f)¦Valuation of Proposal                        ¦436   ¦
                +--------------------------------------------------------------------+
                
+----------------------------------------------------------------------------+
                ¦ ¦  ¦B.  ¦Fair and Equitable Treatment                              ¦437    ¦
                +-+--+----+----------------------------------------------------------+-------¦
                ¦ ¦  ¦C.  ¦Complete and Reliable Information/Information Necessary to¦439    ¦
                ¦ ¦  ¦    ¦Evaluate the Proposal                                     ¦       ¦
                +-+--+----+----------------------------------------------------------+-------¦
                ¦ ¦  ¦D.  ¦Good Faith Negotiations/Good Cause to Refuse the Proposal ¦443    ¦
                +----------------------------------------------------------------------------+
                
+---------------------------------------------------------------------------+
                ¦  ¦  ¦    ¦1. ¦Criticism that American Failed to
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