American Airlines ground workers would get immediate 4.3 percent raises, if the carrier merges with US Airways under a deal negotiated by the workers' union and both airlines.
The money would be in addition to terms of contracts that mechanics, bag handlers and other workers accepted in recent months. The raises would take effect only if approved by the federal judge overseeing American's bankruptcy overhaul.
The Transportation Workers Union said Monday that the raises for about 20,000 workers would cost $260 million. American had expected to save about $1 billion per year in labor costs under contracts that were ratified last year by ground workers, pilots and flight attendants.
The union's president, James C. Little, said the ground workers "have made incredible sacrifices to keep American Airlines afloat" and deserve something for their efforts.
American spokeswoman Missy Cousino said the new agreement with ground workers would give the airline more certainty about costs and the process of combing labor forces if there is a merger with US Airways.
The two airlines have been discussing a potential deal for months. American parent AMR Corp. filed for bankruptcy protection in 2011 and is now considering whether to accept a merger pushed by US Airways Group Inc. or emerge from Chapter 11 on its own.
AMR's creditors will also have a role in the decision, which is expected in the next few weeks.