American Air Reaches Envoy Deal, Expects Flat Traffic Numbers

NEW YORK ( TheStreet) -- American Airlines (AAL) forecast flat unit revenue in the current quarter and also said it has reached a tentative agreement with pilots at regional subsidiary Envoy Air.

In premarket trading on Monday, American shares were down 71 cents to $50.30.

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The carrier, reporting November traffic on Monday, forecast fourth-quarter passenger revenue per available seat mile (PRASM) in a range between down 1% and up 1%. Fourth-quarter pretax margin excluding special charges will be approximately 10% to 12%. The carrier also said November total revenue passenger miles (RPMs) declined 0.5% from the same month a year earlier, even as capacity increased 0.9%. 

Passenger load factor was 77.7%, down 1.1 points from a year earlier. Domestic RPMs were flat, while domestic capacity gained 0.4%. International RPMs fell 3.1%, while international capacity grew 1.2%.

In the Pacific, the primary growth area, RPMs grew 14.6% on capacity growth of 16.1%, primarily reflecting new flights to Asia. In the Atlantic, where downsizing was most pronounced, RPMs fell 7.8% while capacity fell 2.7%.

Late Sunday, American said it reached a tentative agreement with the Envoy pilots. If ratified, the agreement would apparently end the downsizing at Envoy, adding 40 new 76-seat Embraer 175s to the fleet starting in the fourth quarter of 2015.

Although details were not provided, prepared statements by the two parties appeared to reflect a difficult compromise for the pilots, who apparently traded off compensation in exchange for fleet expansion.

The master executive council of the Envoy chapter of the Air Line Pilots Association "believes this TA is the best obtainable agreement, and provides the best path forward for Envoy pilots given our circumstances," said Sam Pool, chairman of the Envoy pilots ALPA chapter, in a letter to pilots.

"To say this has been a difficult process is an understatement," Pool wrote. "Our negotiators, officers and the entire ALPA leadership have ensured that they have achieved as much as possible in return for the re-fleeting of our airline." He said a ratification vote will take place "in the near future."

"If ratified, this tentative agreement will form the foundation for a bright future for our company," Fábregas said. "It will be especially promising for our pilots, providing them new, large and modern aircraft to fly and a faster path to a career at American Airlines."

Written by Ted Reed in Charlotte, N.C.
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At the time of publication, the author held no positions in any of the stocks mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage

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