American to Shrink Regional Unit After Pilots Reject Contract

American Airlines Group Inc. said it will begin shrinking its American Eagle regional unit and moving planes to other commuter carriers after pilots rejected a cost-cutting labor agreement.

American will “immediately” begin seeking another regional partner to fly 60 new 76-seat regional jets from Embraer SA that it had committed to Eagle if the contract were approved, Pedro Fabregas, the unit’s president, told employees in a letter today. Some smaller planes will be retired, he said.

American sought givebacks at Eagle in exchange for adding the larger regional jets and improving chances to move to the larger airline. Eagle pilots earlier agreed to concessions while former American parent AMR Corp. reorganized in bankruptcy before its December merger with US Airways Group Inc.

“American Eagle Airlines will continue to work toward making our flying operation as competitive as possible while addressing the downsizing of our fleet and related staffing in the coming years,” Fabregas said.

The company doesn’t plan to shut the airline and will “aggressively seek” new contract business and workers for Eagle’s aircraft ground handling operations, he said.

Leaders of the Air Line Pilots Association unit at Eagle decided yesterday not to have members vote on the agreement in principle with the regional airline.

‘Career Options’

“Our pilots decided they were not willing to work for less than the company is already paying our peers,” union Chairman William Sprague said in a message to members. “We will now begin the process of assisting our pilots in identifying alternative career options within the industry.”

American has “made it clear” that it wouldn’t negotiate further if the contract were rejected and that it would shrink Eagle “until it is small enough to liquidate,” the union said. Other commuter carriers also fly regional routes for American under the Eagle name.

AMR’s contract with American’s pilots limited most of Eagle’s flying to jets with 50 or fewer seats, which are costly to operate at current fuel prices and disliked by passengers. Plans to divest Eagle were disrupted when Fort Worth, Texas-based AMR sought court protection in 2011.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE