American Will Look To Other Regional Carriers Instead Of Eagle

American Eagle pilots union rejects proposed 10-year contract agreement

Feb. 14--American Eagle, the regional subsidiary of Fort Worth-based American Airlines Group, may get smaller after a pilots union rejected a proposed 10-year contract agreement.

American will look for other regional carriers to fly its new aircraft on short-haul flights after the leaders of Eagle's pilots union decided late Wednesday not to send a proposed contract to members for a vote, a top executive said Thursday.

In a letter sent to all 14,000 Eagle employees, the regional carrier's president, Pedro Fabregas, said American has "no choice but to begin looking for another regional carrier."

"I have no reason to believe American will offer us new large regional jet flying after these unsuccessful negotiations," Fabregas wrote.

Tensions are running high between American Eagle's management and the Air Line Pilots Association.

The union said American has threatened to shrink and eventually liquidate Eagle, which is being renamed Envoy this spring as American expands its use of outside carriers to fly routes under the Eagle brand. As a result, the union said, it will help its pilots find other careers at a time when the industry has a shortage of qualified pilots.

Industry analysts say it's hard to separate rhetoric from reality for the regional carrier as labor talks appear to be at a standstill.

Management "is trying to extract concessions from a group that is clearly high-priced relative to others in the regional space. But at the same time, it's a sector of the industry that is suffering from the problem of finding sufficient people to do the work," said Bill Swelbar, an airline researcher at the Massachusetts Institute of Technology.

Given concerns about a shortage of regional airline pilots, he said, the union is "playing poker with face cards in their hands."

The tentative agreement rejected by union leaders would have guaranteed that 60 new Embraer 175 aircraft that American Airlines Group ordered in December would be used with Eagle. In exchange, pilot pay scales would have been frozen until 2018 and profit-sharing would have been eliminated.

"Our elected representatives agreed that this new round of concessions was asking too much of a pilot group that has already given up previously agreed-to contractual work rules and benefits in order to ensure American Eagle's solvency," union leader William Sprague said. "We can no longer stand by and watch our wages continue to be eroded when profits continue to be made."

A pilot shortage

In January, the federal government implemented enhanced flight time duty rules and commercial pilot requirements, and more pilots are reaching the mandatory retirement age of 65. That leaves the industry facing a pilot shortage, a problem that analysts expect to get worse in the coming years.

Last week, regional operator Republic Airways said it was grounding 27 jets because it didn't have enough pilots to operate them. ExpressJet told United Airlines in January that it needed to cut flying on behalf of the Chicago carrier, and United recently decided to de-hub its operations at Cleveland, where ExpressJet handles much of United's regional flying.

New government rules require commercial pilots to have at least 1,500 hours of flight time, as opposed to the old requirement of 250.

"We continue to believe the regional airlines will struggle to find pilots due to the new pilot rules," Cowen and Co. analyst Helane Becker told investors in a research note last week. "As a result of the limited pilot availability we expect to see reduced flying by the regional carriers and pilot wages increase."

And fewer people are entering the profession, compounding the shortage. Training to become a pilot costs around $90,000, said aviation consultant Robert Mann, and the typical first officer at a regional carrier makes only around $22,000.

"When you're starting off as a pilot, you don't make enough money to get off food stamps, and that doesn't give people a very great incentive to undertake pilot training," Mann said.

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