Stranded passengers in Dallas, Texas wait in line as American Airlines tries to reschedule canceled flights

NEW YORK (CNN) -- Talks between American Airlines and its pilots are to continue Wednesday in Fort Worth, Texas. New negotiations started Tuesday, the fourth day of a work slowdown by pilots that has forced the cancellation of hundreds of flights at American's busiest airports.

The airline canceled 730 flights Tuesday, nearly a third of the more than 2,200 that were scheduled. Nearly 90 percent of American's Tuesday morning flights out of Kennedy airport in New York were canceled, said Richard Lanigan, who works at American's information center.

The slowdown has disrupted travel plans for thousands of fliers and cost American -- the nation's second-largest airline -- more than $5 million and perhaps as much as $10 million, according to Wall Street analysts.

The Allied Pilots Association is concerned about salaries paid to pilots at Reno Air, a small airline recently purchased by American. The American pilots say the purchase violates their contract and may cause them to lose assignments and jobs to lower-paid Reno Air pilots.

Rich LaVoy, president of the Allied Pilots Association, said American's contract with the union "is crystal clear with respect to carriers that are owned by American. That flying can only be performed by American Airlines pilots."

American's 9,200 pilots earn an average of $150,000 per year, excluding benefits. Reno captains make half that amount.

The APA, concerned that a two-tiered pilot pay scale could ultimately lead to the phasing out of the higher-paid pilots, wants the airline to eliminate the discrepancy but has offered to negotiate a transition period to integrate the Reno pilots into the system.

"Our agreement basically says that if they want to buy Reno Airlines, and if they want to operate it, that they bring the pilots under the American Airlines seniority list, and pay them benefits," said American pilot Mike Oliver.

"Outsourcing is a very big concern to the pilots of American Airlines. We don't want to see the company try and outsource the jobs to the lowest bidder," Oliver said.

But American Airlines insisted in a statement released late Tuesday that the union's concerns are unfounded.

"We have made it clear to APA that we will not operate Reno as a separate carrier, and we will pay Reno pilots 100 percent American Airlines wages as soon as the integration is complete," it said.

"We have even offered significant pay raises to Reno pilots during the integration process."

The company contends it would cost $40 million to $50 million a year to raise the Reno salaries. It purchased the airline for $124 million.

"Rather than signing a transition agreement with APA that would allow both completion of Reno's integration, as well as compliance with our basic contract, (American) has so far stonewalled APA's negotiators on this important issue," LaVoy said.

The dispute is rooted in 1992 cutbacks by the airline in which 610 American Airlines pilots, most of them serving the same Western U.S. routes now served by Reno, were laid off, a union spokesman said. Reno was formed at around the same time and American is still suffering pilot shortages.

Federal law bars American pilots from striking over the issue of pay for Reno pilots. They are, however, allowed to refuse overtime and to declare themselves "unfit to fly" -- pilot lingo for a "sick out."

Donald Carty, American's chief executive, says the airline may seek a court injunction to halt the pilots' job action.