UPDATE 1-American Eagle to shrink after pilots reject labor pact

Fri Mar 28, 2014 10:07pm IST

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(Adds details throughout, quote from union leader, company comment paragraphs 5 and 9-10)

March 28 (Reuters) - American Eagle Airlines will shrink its fleet and will lose the opportunity to fly larger regional jets that its parent American Airlines Group has ordered after its pilots rejected a concessionary labor contract, the subsidiary said on Friday.

The move means that other regional carriers that fly under the American Eagle brand, such as Republic Airways Holdings , could get more work from the world's largest airline.

The Air Line Pilots Association union, which represents more than 2,700 pilots at American Eagle, said 92 percent of eligible pilots cast ballots and that 70 percent voted against ratification. Voting on the contract ended on Friday.

The union said concessions that included pay freezes and increased healthcare costs were too much for pilots who had already made givebacks when American was in bankruptcy last year.

"Despite threats from AAG management that they would seek other express carriers to conduct our flying, today's vote demonstrates that the demands for contract concessions were not acceptable," Capt. Bill Sprague, chairman of ALPA Master Executive Council at American Eagle, said in a statement. "Today's vote clearly shows that pilots can, and will, vote against any agreement that is not in their best interests."

The union's statement said American Eagle pilots had worked under a 16-year contract that ended when former parent AMR Corp filed for bankruptcy in late 2011, and it added that pilots had not had "meaningful contractual gains" since 2004.

American Airlines, which became the world's largest carrier when it merged with US Airways in December, had agreed to put 60 new Embraer 175 jets it ordered last year in service with American Eagle Airlines in exchange for the pilots approving the 10-year labor contract that had concessions. The airline had warned that should pilots reject the labor accord, the new aircraft would be placed with other regional airlines.

The pilot union's leaders had declined to send a tentative agreement to the membership for a vote in mid-February, but later had a change of heart after more talks with the company.

After the vote on Friday, American Eagle President Pedro Fabregas said the carrier, which plans to change its name to Envoy, would shrink its fleet and "will need to make appropriate changes" to bring down costs.

"American has informed us it will award the flying of the Embraer 175s to another regional carrier or several other carriers in the near future," Fabregas said in a letter to staff.

American Eagle, which has more than 14,000 workers, is one of a number of carriers that operate regional flights for American. Other carriers that operate regional flights under the American Eagle and US Airways Express brands include Republic, Chautauqua, ExpressJet, SkyWest, Mesa, Air Wisconsin and Trans States.

American Airlines shares were up 2 percent to $36.49 in Nasdaq trading on Friday.

(Reporting by Karen Jacobs in Atlanta; Editing by Sophie Hares and Tom Brown)

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