March 21, 2012 / 5:40 PM / in 6 years

UPDATE 3-AMR regional carrier seeks $75 mln in cost cuts

* American Eagle says savings from labor imperative

* 5 percent workforce reduction expected - Eagle CEO

* AMR could chose other regional partners - Eagle CEO

By Nick Brown and John Crawley

March 21 (Reuters) - American Eagle, a unit of bankrupt AMR Corp said on Wednesday it was seeking $75 million in labor cost savings as part of its restructuring.

The company said in a letter to employees that the cost reduction would be necessary to justify AMR’s investment in new aircraft for Eagle, the primary feeder carrier for AMR’s American Airlines unit.

“If we miss this opportunity to demonstrate that Eagle has fully competitive costs, it would provide American and AMR another reason to select other regional carriers to ... provide the feed we might otherwise provide,” Eagle Chief Executive Dan Garton said in the letter.

Eagle entered bankruptcy last year along with American Airlines, which is separately seeking $2 billion in cost reductions.

AMR has wanted to sell or spin off Eagle, but those plans were put on hold when the two sought court protection from creditors. Divestiture is still a possibility for Eagle, Garton said on a conference call with reporters.

He said he envisions a headcount reduction of about 500 -- about 5 percent of Eagle’s workforce. But that does not necessarily mean layoffs, as attrition or furloughs are also possibilities, Garton said.

“There are a number of work rule changes that should increase our productivity, so I think at the end of the day that would result in our being able to operate the same airline with less employees,” Garton said.

Overall, he said, roughly half of the labor savings will come from changes to employee compensation.

The Association of Flight Attendants, which represents about 1,800 American Eagle flight attendants, called the savings plan “outrageous.”

“Flight attendants are facing an attack on their contract simply because the cloak of bankruptcy allows for it,” union President Robert Barrow said in a statement. “It is shameful that flight attendants, who are an instrumental part of a successful operation, are being handed a list of concessions as a result of bad management decisions.”

Garton said Eagle was meeting with employees throughout the day on Wednesday.

In his letter, Garton said Eagle must emerge financially strong to take advantage of “any opportunity that presents itself during or after our emergence from bankruptcy.”

Eagle handles 90 percent of American’s regional business, carrying more than 15 million passengers annually. It operates more than 260 planes and 1,500 flights daily.

AMR’s bankruptcy is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.

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