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How a Deal Could Be Made to Save American Eagle

Stocks in this article: AAL

DALLAS (TheStreet) -- In covering airline labor talks for the past 25 years, I have always believed that a deal is always possible. Moreover, in the case of American Airlines (AAL) regional partner American Eagle, no one benefits from its demise except for its competitors.

So despite the talk about letting the airline shut down and letting American Airlines put its E175s somewhere else and letting the ground services division run the thing, which in terms of revenue it pretty much already does, this horse has not left the barn.

On Wednesday night, leaders of the Eagle chapter of the Air Line Pilots Association rejected a proposed agreement, choosing not to send it out to members for a vote. The rejected agreement would have frozen pay rates until 2018 and then provided 1% annual raises for six years. The master executive council said it anticipated management would make good on a plan to shut the company down.

American Eagle President Pedro Fabregas on Thursday said the company won't shut down but will reduce flying over time. "Our ground handling operation continues to thrive and we have added new business and employees there at a rapid pace," Fabregas wrote, in a letter to pilots.

I am reminded of nothing so much as Bob Crandall's 1993 promise, made during some intense labor negotiations, to shut down American Airlines so that AMR could focus on other things, such as ground handling.

Bridget O'Brien, a colleague from The Wall Street Journal, wrote a memorable lead that went something like this: "What would AMR Corp. be without American Airlines? Profitable."

Nevertheless, when Crandall retired as perhaps the greatest airline CEO ever, AMR was still in the airline business. Funny how that happens.

Bill Sprague, chairman of the Eagle pilots, told me Thursday that pilots have no reason to doubt Fabregas' threat. "Every indication from them is that the company is not going to come back." he said. "I was advised they were moving on to Plan B. That's the only information I have in front of me right now."

Still, Sprague also said a few other things that caught my attention. First, he made sure to mention that "negotiations were amicable." Earlier, Sprague told Terry Maxon of The Dallas Morning News that Fabregas "appreciated me calling him directly and giving him the news" after pilots rejected the Eagle offer on Wednesday. This shows that Sprague and Fabregas have maintained a cordial relationship. Good to have in cases like this one, because it means one guy can always pick up the phone and call the other guy.

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