A bankruptcy judge in New York has ruled that American Airlines can throw out its contract with its pilots union – Allied Pilots Association.

A key part of the bankruptcy proceedings, the ruling clears the way for the Fort Worth, Texas-based airline to dramatically cut costs and quicken its emergence from Chapter 11 bankruptcy protection.

The airline has successfully renegotiated contracts with all its other labor unions.

Meanwhile, American and US Airways are one step closer to a potential merger.