AMR May Be Nearing Decision to Spin Off Eagle, Union Says

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AMR May Be Nearing Decision to Spin Off Eagle, Union Says

Unread post by bimjim » Sun Mar 13, 2011

http://www.businessweek.com/news/2011-0 ... -says.html

AMR May Be Nearing Decision to Spin Off Eagle, Union Says
By Mary Schlangenstein
March 12, 2011

March 12 (Bloomberg) -- American Airlines parent AMR Corp. may be nearing a decision to divest its American Eagle regional carrier and a spinoff remains the most likely outcome, Eagle’s pilot union said.

Leaders of the Air Line Pilots Association unit at Eagle met this week with Eagle Chief Executive Officer Dan Garton and their own financial analysts as AMR examines options for the carrier.

AMR has been studying a possible divestiture of Eagle since June as a way to reduce the cost of ferrying passengers to American’s hubs from smaller airports. A separation also would allow Eagle to seek work from other airlines.

“All signs point to American Eagle Airlines being divested through a spinoff,” 12 leaders of the Eagle pilot union told members in an e-mailed letter today.

American, which earlier hired investment bank Evercore Partners Inc. and Citigroup Inc. as advisers, has developed “detailed business plans for a separate Eagle,” the letter said. AMR also has reiterated its plan to put some of Eagle’s flying up for bid by other airlines, it said.

Tony Gutierrez, union chairman, also told Eagle pilots in a Feb. 4 message that a spinoff, with AMR shares split between the parent company and the new Eagle, seemed to be “the most likely scenario” for the unit’s future.

1,500 Daily Flights

AMR, which hasn’t indicated when it may make a decision, confirmed Garton’s meeting with the Eagle pilots. The company declined to comment on the nature of the talks, said Roger Frizzell, an AMR spokesman. AMR has a board meeting later this month.

American, which also hired consultant Bain & Co., studied an Eagle divestiture on at least one other occasion before pulling the business off the market in July 2008.

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.

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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