Eastern Airlines Inc. canceled an agreement Friday to sell its profitable Northeast shuttle operation for $225 million to another affiliate of its parent company, Texas Air Corp. of Houston.

Eastern declined further comment on its decision to drop the controversial deal, except to say it was by mutual agreement of Eastern and Texas Air.

However, a union source labeled the unexpected move as a victory for the airline's labor groups, while an analyst said the cancellation may signal a further warming of relations between management and labor.