AMR seen likely to try again to spin off Eagle

Friday - 10/12/2012, 5:53pm EDT

By DAVID KOENIG
AP Airlines Writer

DALLAS (AP) - The CEO of American Eagle says he expects that the regional affiliate of American Airlines will still be sold or spun off as a separate company after American emerges from bankruptcy protection.

American's parent AMR Corp. twice tried to unload Eagle, then shelved the idea when it filed for Chapter 11 protection last November.

Eagle CEO Daniel Garton said in an interview with The Associated Press this week that AMR will revisit the issue.

"And I think the conclusion will be the same, that the divestiture will be a positive, and that (Eagle) will be stable and stronger after emerging" from a bankruptcy restructuring, he said.

American believes it can save money by getting regional airlines to bid for its connecting-flight business rather than keeping the work within the AMR family at Eagle.

In a hint of the challenges awaiting Eagle, American announced last month that it will outsource some of that flying in Los Angeles and Dallas to SkyWest Inc. Garton said Eagle will be fine. But the president of the Eagle pilots' union, Tony Gutierrez, called the SkyWest deal "a bad day for all of us" and a betrayal by AMR.

The airline scores poorly in government performance reports. In July, the latest figures available, Eagle was 13th out of 15 airlines in on-time arrivals and consumer complaints, and it ranked 14th out of 15 in mishandled bags. Garton noted that the rate of losing or damaging bags is down 20 percent, which is true _ a year ago, Eagle ranked dead last in bag-handling.

Conditions in the regional-airline business are tough. Delta Air Lines Inc. is winding down regional Comair and Pinnacle Airlines is in bankruptcy protection. In addition, US Airways Group Inc. has said it wants to merge with American but has shown no interest in Eagle.

But Garton professes not to be discouraged.

Besides operating connecting flights for American, Eagle handles bags and other ground work for American and other airlines. Garton said the ground business is growing and Eagle will hire 1,500 people for it.

Like American, Eagle has been using the bankruptcy process to renegotiate contracts with its unions, but with less disastrous results than at the big airline. American Airlines claims that massive delays and cancelations in September were caused by an illegal slowdown by disgruntled pilots. The pilots' union denies there was any organized plot.

Garton, a longtime American Airlines executive before taking over Eagle last year, said there has been labor-management tension at Eagle too _ it just doesn't get the same attention.

Eagle employees also had less to lose. Unlike union workers at American, those at Eagle weren't faced with losing retiree medical coverage and pension plans _ they didn't have those things anyway. And Eagle never proposed the kind of sweeping layoffs that American did.

This week, Eagle pilots voted 3-to-1 to accept a contract that, according to the company, didn't cut pilots' pay. The airline's last few union groups, including mechanics, are now voting on contract offers. If they reject the offers, Garton said, Eagle will ask a federal bankruptcy judge in New York to let the company set pay and work terms, as American did with its pilots.


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