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AMR Board May Be Near Decision on Eagle Sale, Union Says

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AMR Board May Be Near Decision on Eagle Sale, Union Says

Unread post by bimjim » Sat Feb 12, 2011

http://www.bloomberg.com/news/2011-02-1 ... -says.html

AMR Board May Be Near Decision on Eagle Sale, Union Says
By Mary Schlangenstein
Feb 11, 2011 3:25 PM ET

AMR Corp.’s board may be close to deciding whether to divest its American Eagle commuter carrier after two presentations on possible options from American Airlines, Eagle’s pilot union chief said.

American and Eagle executives have been negotiating an agreement on how much flying would be done for the larger airline once the regional unit becomes a stand-alone company, Tony Gutierrez, chairman of the Air Line Pilots Association chapter at Eagle, told members in a Feb. 4 letter.

Unloading Eagle would let Fort Worth, Texas-based American seek cheaper ways to fly regional routes. A spinoff, public offering, leveraged buyout and sale to a private-equity buyer were among the possibilities under review, AMR said last year after disclosing June 10 that the unit was being studied.

“The AMR board of directors has not yet authorized the divestiture of American Eagle, but it appears that they may be getting very close,” Gutierrez wrote. American outlined options for a divestiture at meetings in November and January, he said.

Ed Martelle, an American spokesman, declined to confirm the subject of the board sessions or comment on specific discussions.

“Anytime you’re looking at something as complex as what might be done with American Eagle, obviously you’re looking at a whole range of issues,” Martelle said today in an interview. “Something like this is so intensely complicated.”
‘Most Likely Scenario’

A spinoff of Eagle, with AMR shares split between the parent company and the new Eagle, “seems to be the most likely scenario” for the unit’s future, Gutierrez told pilots. That would make Eagle a publicly traded company owned by AMR shareholders who could keep or sell the stock, he said.

American doesn’t “appear to be investing any effort” toward an initial public offering for Eagle, he said. Market conditions, including higher fuel prices and industry consolidation, mean a merger with another regional carrier is not the most likely outcome, Gutierrez said.

Investment bank Evercore Partners Inc. and consultant Bain & Co. are working for AMR to examine options for Eagle, people with knowledge of the matter said in October. American was still studying alternatives in December, Chief Financial Officer Bella Goren said at an airline conference.

AMR doesn’t break out complete financial data on Eagle, such as debt or whether the unit is profitable. Revenue from regional operations rose 16 percent in 2010 to $2.33 billion. That was more than 10 percent of AMR’s $22.2 billion total. Eagle’s traffic, or miles flown by paying passengers, rose 6.7 percent last year.

For Eagle, operating as an independent company would give it the opportunity to compete for flying contracts with other airlines. American studied a divestiture on at least one other occasion before pulling the unit off the market in July 2008.

Eagle operates more than 1,500 daily flights to more than 170 cities in the U.S., Canada, Mexico and the Caribbean.

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