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AMR Corp.'s American Airlines, seeking to reduce labor costs while in bankruptcy, defeated an effort by some employees to block wage and benefit cuts as they consider joining a union. Bankruptcy Judge Sean Lane yesterday denied a request from passenger service agents for an order prohibiting the airline from imposing changes to employment terms with a union-representation election set to take place. The ruling is a win for AMR as it seeks $1.25 billion in annual labor savings that it says it needs to restructure and exit bankruptcy. The Fort Worth, Texas-based airline is in court this week seeking to void labor contracts with unions representing pilots, flight attendants and mechanics.

The lead labor negotiator for AMR Corp. pilots said that a merger between AMR and competitor US Airways could save $130 million a year in cuts to bankrupt airline's pilots' union, Reuters reported yesterday. Neal Roghair testified in bankruptcy court yesterday that a merger would lower to about $240 million the projected annual cuts from the Allied Pilots' Association, which represents 10,000 pilots at American Airlines' bankrupt parent. The company, which filed for bankruptcy in November, said that it needs about $1.25 billion in annual labor concessions, and has proposed a business plan to achieve those savings that has left its unions livid.

American Airlines parent AMR Corp. will explore strategic options that include a possible sale under an agreement with the unsecured creditors committee in its bankruptcy case, Bloomberg News reported on Saturday. The panel pressed for such an accord so AMR's review of its options would include studying a merger with US Airways Group Inc., which is considering whether to mount a takeover bid. The process would begin this summer, before the September expiration of AMR's exclusive right to propose a reorganization plan. Fort Worth, Texas-based AMR said that the accord calls for assessing "potential consolidation scenarios" without committing to pursuing a deal.