By Jon Herskovitz DALLAS, May 20 (Reuters) - The head of the world's largest air carrier, American Airlines, said on Monday he wants a radical change in a decades-old labor law, calling for mandatory arbitration when contract negotiations reach a standstill in order to avoid a strike. A union representing American Airlines pilots said there is no need to change the 1920s Railway Labor Act because it has worked well for years in hammering out contracts for airline employees, and altering the law would only favor management. Donald Carty, CEO of American Airlines and its parent company, AMR Corp. (AMR), said he wanted a change in the railway act in order to remove a cloud of uncertainty that hangs over talks with airline unions and causes concern among the public that a labor stoppage could hinder or cripple air travel. "Every time there is a possible service disruption, we pose an enormous risk to our customers, the communities they live in, and the businesses and jobs that depend on the availability of air service into and out of a given city," Carty said at a convention of airport managers in Dallas. Carty called for changing the current system spelled out by the railway act, which was revised in the 1930s to accommodate airline employees, with a system similar to the arbitration route used by Major League Baseball. Under his proposal, after the two sides negotiate to what is their last best offer and cannot come any closer, an arbitrator would be called in to decide in favor of one proposal or the other -- which is similar to baseball arbitration. "The beauty of that approach is it forces both sides to the center, and avoids a scenario in which all the bargaining leverage belongs to the party that can impose a strike that neither the company nor the traveling public can afford," he said. Carty said the current system that calls for union members to approve or reject any agreement worked out between management and union representatives creates a climate of uncertainty. Gregg Overman, a spokesman for the American pilots union, Allied Pilots Association, said the current system has worked well to cut labor disruptions over the past 25 years and should be maintained because it is fair for all parties involved, and keeps lines of transport moving. "Carty is proposing nothing less than dropping labor's leverage and tipping the field in favor of management in labor negotiations," Overman told Reuters. Last August, Allied Pilots rejected a proposal to negotiate under the arbitration system outlined by Carty. The union and American Airlines have recently rejoined contract talks that were temporarily postponed in the wake of the Sept. 11 attacks on the United States. The Railway Act outlines several stages of negotiations that are designed to avoid an interruption of commerce and operations while talks are in progress. If both sides fail to reach a settlement, the U.S. president can impose an emergency board that aims to keep both sides from interrupting commerce. In his speech, Carty also called on streamlining security screening processes at airports in a way that would ensure passenger safety but not overly inconvenience travelers. "It will indeed be a hollow victory if we build an aviation security regime that makes air travel so secure that nobody wants to fly," he said. ©2002 Reuters Limited.