Advertisement
 
YOU ARE HERE: LAT HomeCollectionsAmr Corp

American Airlines parent to let Eagle fly on its own

AMR says it will sell or spin off the regional carrier, fulfilling the wishes of shareholders.

November 29, 2007|From the Associated Press

DALLAS — The parent of American Airlines said Wednesday that it planned to sell or spin off its American Eagle regional carrier next year. Its shares rose 6.9%.

Investors have been pressing AMR Corp. to sell the regional airline and other assets, moves they say could raise money and lift AMR's stock price.

American Airlines is the nation's largest airline. The industry has been under pressure from record fuel prices. But AMR has posted six straight profitable quarters as planes were more full and passengers paid higher average fares.

Analysts said it was too early to put a price on American Eagle, but that high fuel costs could make it hard to get top dollar.

American Eagle operates regional jets that connect American Airlines hubs such as Dallas-Fort Worth with smaller cities. It has about 300 planes and operates about 1,700 daily flights to more than 150 cities in the U.S., Canada, Mexico and the Caribbean. It generates annual revenue of about $2.3 billion.

Fort Worth-based AMR said it was still studying whether to spin off Eagle to AMR shareholders, sell to a third party or divest the carrier in some other way. Although planned for 2008, the timing of the divestiture could be affected by economic, industry and financial market conditions, the company said.

AMR said divesting American Eagle was "in the best interests of AMR and its shareholders." The company said the move would also give the regional carrier the chance to win new business and provide new opportunities for its employees.

Shares of AMR jumped $1.42 to $21.98.

Chief Financial Officer Thomas Horton told the Associated Press that American Airlines expected to continue using Eagle as a feeder airline "for many years to come." He said a sale or spin-off could reduce Eagle's labor costs, making it a cheaper supplier of connecting passengers for American.

The American Eagle pilots union didn't take a position on the divestiture. But union Chairman Herb Mark said relations with AMR had been strained by the company's requiring pilots to fly more hours in a day.

Ray Neidl, an analyst with Calyon Securities, said the divestiture would help AMR shareholders.

"This is one asset that probably should be spun off," Neidl said. "It can be operated more cost-effectively as an independent business."

Shareholders have been pressing AMR to sell assets such as American Eagle, the AAdvantage frequent-flier program and the company's investment-management arm. They have said the stock market undervalues those businesses and AMR would be better off selling them.

Advertisement
Los Angeles Times Articles
|
|
|