American Air signs deal to outsource some flying

American Air signs deal to contract out some flying to SkyWest

Associated Press

DALLAS (AP) -- American Airlines has agreed to outsource some of its regional flying to SkyWest Inc., part of American's plan to cut costs while it's under bankruptcy protection.

SkyWest will handle some flying currently performed by American Eagle, American's regional affiliate, in Los Angeles and Dallas. SkyWest's shares rose almost 5 percent in Wednesday trading.

The president of the Eagle pilots' union called it "a bad day for all of us" and a betrayal by parent company AMR Corp.

Under the four-year deal announced Wednesday, SkyWest and its ExpressJet subsidiary will operate 23 50-seat Bombardier regional jets under the American Eagle banner. The changes will begin Nov. 15 and be complete by spring.

American Eagle will close its pilot and flight-attendant bases at Los Angeles International Airport, although Chicago-based crews will continue to operate some flights using larger, 65-seat jets. Eagle also flies in and out of Miami, New York and Chicago.

Eagle CEO Daniel Garton said employees in Los Angeles will be offered positions elsewhere and that he doesn't expect the moves to result in furloughs.

The changes were made possible last week, when a federal bankruptcy judge threw out the union contract of American Airlines pilots. That contract limited AMR's ability to hire other carriers for regional flying, which most other major airlines have already done.

Regional airlines use smaller planes to feed passengers from smaller cities to hub airports where they can catch flights on the big airlines. Skywest operates United Express, Delta Connection and US Airways Express flights.

Garton said hiring SkyWest would diversify American's regional feed and help it come out of bankruptcy as a stronger airline.

In short, parent AMR hopes to save money by putting American's regional service up for bid rather than using its own employees. AMR had announced earlier this year that it intended to seek bids on regional flying, so Wednesday's announcement was not a surprise, but it was still bitter news to Eagle employees.

Tony Gutierrez, president of the pilots' union at Eagle, said the SkyWest deal was bad for his members. He told them, "We are feeling the same anger that you feel today."

Leaders of the union, part of the Air Line Pilots Association, decided late Wednesday to send a contract offer from the company to pilots for a ratification vote. An AMR spokesman said the company was pleased to reach a tentative agreement and called it a significant step toward restructuring.

If Eagle pilots reject the offer, the company would ask the bankruptcy judge to throw out their contract and let the AMR set pay and work rules. That's what is happening to pilots at American.

SkyWest Inc. President Brad Rich said Wednesday's deal showed "the credibility of the people and the operational quality" of his company.

Financial details of the deal were not disclosed.

Dahlman Rose & Co. analyst Helane Becker upgraded SkyWest shares to "Hold" from "Sell." She said SkyWest still has too many 50-seat planes, which have become uneconomical at current high fuel prices, but the American deal buys it time to fix that problem.

Shares of SkyWest, which is based in St. George, Utah, rose 46 cents, or 4.8 percent, to close at $9.85.

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