Negotiators for union mechanics and bag handlers at American Airlines have rejected a contract proposal from American Airlines that called for lump-sum payments instead of wage increases.The union's top leaders recommended that rank-and-file employees be allowed to vote on the proposal, but the negotiating committee for the Transport Workers union rejected the package. American, the nation's largest carrier, said the union rejected a comprehensive proposal that included additional vacation and sick leave while recognizing "the economic realities facing the industry and our company."

American's parent, Fort Worth-based AMR Corp., lost $328 million in the first quarter, due largely to record prices for jet fuel.

"In addition, American's labor costs are the highest in the industry," the company said on the Web site. "While we could not address structural increases at this time, the tentative agreement did include improvements in pay and paid time off for TWU-represented employees."



James C. Little, the TWU's international president, said Saturday that he and the international organization recommended that the company's proposal be submitted to members for a vote. Little, however, didn't endorse the package, which fell short of the union's goal of restoring wages and benefits that were lost in 2003 and only covered two years.

"It doesn't meet all our needs, but there is an upside to this," Little said. "The recommendation from international was to let the members decide because of the uncertainty of the industry" and workers' own financial concerns.

Little said the union might next ask for help from federal mediators.

American's proposal called for lump sum payments upon signing of 5 percent of a worker's pay excluding overtime earnings, and 3.5 percent of such pay a year later. The airline also indicated it would explore "variable" pay tied to corporate and local business results.

The company would have added one holiday this year and two next year and increased holiday pay to double-time pay from time-and-a-half. Sick leave would have risen to six days this year and eight next year, from five.

It also would have adopted a new profit-sharing plan. Unlike counterparts at Continental Airlines Inc., American's union employees haven't received profit sharing the past two years because profits were too small to trigger awards.

American is also negotiating over a new contract with pilots — talks have made little progress so far, according to the union — and soon with flight attendants. Union employees are working under wage and benefit concessions that were approved in 2003, when the company was close to bankruptcy.

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