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updated: 5/6/2010 11:10 AM

American reaches tentative deal with mechanics

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DALLAS -- American Airlines, badly in need of a breakthrough in labor relations, reached a tentative contract agreement with union mechanics Wednesday.

Workers would get a 6 percent signing bonus, a 3 percent raise effective Wednesday, and 1.5 percent raises in May 2011 and May 2012, according to the union. They would also get more holidays and vacation time.

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In exchange, the company would get more flexibility in scheduling workers, including increased production hours. New hires wouldn't be covered by the company's traditional pension plan. Instead, the company would contribute to their 401(k) retirement accounts.

The deal would cover about 11,500 workers. Mechanics are one of several groups of ground workers at American that are represented by the Transport Workers Union.

American has been in long-running contract talks with pilots, flight attendants and ground workers.

As the talks foundered, federal mediators were called in to help. Flight attendants and ground workers asked mediators to declare the discussions at a stalemate, which would trigger a 30-day countdown until the workers could legally strike. The mediators instead ordered everyone to keep negotiating.

The unions want raises to make up for pay cuts they took in 2003. The company says its labor costs are already too high. American Airlines parent AMR Corp. has lost more than $4 billion since the start of 2008 as it has been rocked by high fuel costs and a drop in travel caused by the recession.

Last month, AMR CEO Gerard Arpey said his airline has "a pretty significant labor-cost disadvantage" compared to the other network carriers -- Delta, United, Continental and US Airways -- because it didn't cut labor costs through bankruptcy.

Arpey stopped short of saying American can reduce labor costs. But he predicted that his company's costs will come in line with other carriers over

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