American Airlines Group (AAL.O) will start looking for other carriers to operate new regional jets from Embraer (EMBR3.SA) after labor leaders at its American Eagle Airlines subsidiary's pilots' union rejected a concessionary labor contract, the unit's president said in a note to staff on Thursday.
Pedro Fabregas, president of American Eagle Airlines, also said in the note that he has "no reason to believe American will offer us new, large regional jet flying after these unsuccessful negotiations."
Still, he said American Eagle had a strong ground handling business and was not planning to shut down.
American declined to comment beyond American Eagle's statement.
Leaders of the Air Line Pilots Association union at American Eagle voted on Wednesday to reject a tentative labor agreement, declining to send it to rank-and-file pilots for a ratification vote. The agreement included concessions in exchange for American placing the new, larger Embraer 175 jets it recently ordered in service at American Eagle Airlines.
In a statement, union leaders said the sought-for concessions were too much for pilots who had also agreed to givebacks when the former AMR Corp was in bankruptcy in 2012.
AMR and US Airways merged in December to form American Airlines Group, the world's largest carrier.
"Our pilots decided they were not willing to work for less than the company is already paying our peers," William Sprague, chairman of the ALPA's executive council at American Eagle, said in a statement emailed to Reuters on Thursday. "We will now begin the process of assisting our pilots in identifying alternative career options within the industry."
The union said company representatives had made clear during contract talks that should an agreement be rejected, American would seek to put regional planes in operation with other carriers.
American Eagle's Fabregas said in his note that American "has informed us they have no choice but to begin looking for another regional carrier or carriers to operate their E175s."
American Eagle, which plans to change its name to Envoy in the spring, is one of a number of carriers that operate regional flights for American. It started flying in 1984 and has more than 12,000 employees.
(Reporting by Karen Jacobs in Atlanta, editing by G Crosse)