AMR Pilot Union Leader Resigns Suddenly

DALLAS (TheStreet) -- The president of the pilots union at bankrupt American (AAMRQ.PK) resigned suddenly, following the union's failure to ratify a tentative agreement he had backed.

In a letter to the members of the Allied Pilots Association, Bates wrote that he agreed to resign at the request of the union's executive committee.

"Although I believe that ratifying the tentative agreement would have been the best course for our pilot group, the majority of our pilots signaled their preference for taking a different path," Bates wrote. "Given these circumstances, I concluded that continuing to serve as your president was not in the interests of the pilots I have been charged with representing."

The tentative agreement would have given American's pilots a 13.5% equity stake in the restructured company. It was opposed by 61% of the pilots who voted.

The vote "throws the pilot contract back to the bankruptcy court and precedent suggests that AMR's pilots will get a worse deal when the judge rules next week," UBS analyst Kevin Crissey wrote in a report on Thursday.

Crissey said he does not think the vote reduces the chance of a merger between American and US Airways (LCC) , but it could slow the process.

US Airways "was in favor of AMR's pilots agreeing to the new contract to facilitate the standalone/merger comparison," Crissey wrote. "However, US Airways isn't importantly hurt by this vote against the contract as the vote can be seen as a vote of no confidence in AMR management by AMR pilots."

The rejection "makes it more challenging for AMR to emerge from bankruptcy standalone since creditors typically want labor under an agreed-to contract before receiving equity," he said.

-- Written by Ted Reed in Charlotte, N.C.

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