American Airlines to sell American Eagle
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American Airlines to sell American Eagle
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AMR to Divest Its Regional Airline
By DAVID KOENIG – 1 hour ago
DALLAS (AP) — The parent of American Airlines said Wednesday it plans to sell or spin off its American Eagle regional carrier next year. Its shares rose more than 7 percent.
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 biggest 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.
Ray Neidl, an analyst with Calyon Securities, said it was too early to put a price tag on American Eagle.
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 United States, Canada, Mexico and the Caribbean. It generates annual revenue of about $2.3 billion.
Fort Worth-based AMR said in a statement that it is 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 Eagle "is in the best interests of AMR and its shareholders." AMR said the move would also give Eagle the chance to win new business and provide new opportunities for its employees.
Shares of AMR jumped $1.52, or 7.4 percent, to $22.08 in afternoon trading Wednesday after briefly trading as high as $22.66. The shares had lost half their value since late January and are still near their 52-week low of $19.
"The decision comes after a careful and deliberate evaluation of the strategy that will best enable us to continue to create value for our shareholders," AMR Chairman and Chief Executive Gerard Arpey said in a statement.
Arpey said the company had built Eagle to be "fully capable of standing on its own and is well-positioned to pursue growth opportunities outside of the AMR corporate structure."
The divestiture would also include Eagle's Executive Airlines Inc. affiliate, which operates American Eagle flights in the Bahamas and the Caribbean from bases in Miami and San Juan, Puerto Rico.
Calyon Securities's Neidel 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." He said new owners might be able to reduce pilot costs.
Shareholders have been pressing the company to sell assets such as Eagle, the AAdvantage frequent-flier program, and its investment-management arm. They have said the stock market undervalues those businesses and AMR would be better off selling them.
The most vocal of these investors has been FL Group, an investment fund based in Iceland that holds about 9 percent of AMR stock. The fund argued that AMR management was moving too slowly on divestitures, and he began contacting AMR directors.
A spokesman for FL Group, Halldor Kristmannsson, said the fund couldn't give a detailed reaction to Wednesday's announcement yet but "we welcome any initiative that looks to enhance shareholder value."
As recently as July, Arpey said AMR was not convinced that selling those side businesses would help shareholders. AMR officials also noted that AAdvantage was closely intertwined with American Airlines and that selling the frequent-flier program could have unintended consequences for the core airline.
By DAVID KOENIG – 1 hour ago
DALLAS (AP) — The parent of American Airlines said Wednesday it plans to sell or spin off its American Eagle regional carrier next year. Its shares rose more than 7 percent.
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 biggest 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.
Ray Neidl, an analyst with Calyon Securities, said it was too early to put a price tag on American Eagle.
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 United States, Canada, Mexico and the Caribbean. It generates annual revenue of about $2.3 billion.
Fort Worth-based AMR said in a statement that it is 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 Eagle "is in the best interests of AMR and its shareholders." AMR said the move would also give Eagle the chance to win new business and provide new opportunities for its employees.
Shares of AMR jumped $1.52, or 7.4 percent, to $22.08 in afternoon trading Wednesday after briefly trading as high as $22.66. The shares had lost half their value since late January and are still near their 52-week low of $19.
"The decision comes after a careful and deliberate evaluation of the strategy that will best enable us to continue to create value for our shareholders," AMR Chairman and Chief Executive Gerard Arpey said in a statement.
Arpey said the company had built Eagle to be "fully capable of standing on its own and is well-positioned to pursue growth opportunities outside of the AMR corporate structure."
The divestiture would also include Eagle's Executive Airlines Inc. affiliate, which operates American Eagle flights in the Bahamas and the Caribbean from bases in Miami and San Juan, Puerto Rico.
Calyon Securities's Neidel 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." He said new owners might be able to reduce pilot costs.
Shareholders have been pressing the company to sell assets such as Eagle, the AAdvantage frequent-flier program, and its investment-management arm. They have said the stock market undervalues those businesses and AMR would be better off selling them.
The most vocal of these investors has been FL Group, an investment fund based in Iceland that holds about 9 percent of AMR stock. The fund argued that AMR management was moving too slowly on divestitures, and he began contacting AMR directors.
A spokesman for FL Group, Halldor Kristmannsson, said the fund couldn't give a detailed reaction to Wednesday's announcement yet but "we welcome any initiative that looks to enhance shareholder value."
As recently as July, Arpey said AMR was not convinced that selling those side businesses would help shareholders. AMR officials also noted that AAdvantage was closely intertwined with American Airlines and that selling the frequent-flier program could have unintended consequences for the core airline.
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AMR to divest American Eagle
By Justin Baer in London
Published: November 29 2007 02:29 | Last updated: November 29 2007 02:29
American Airlines has announced plans to shed its American Eagle regional air service, one of four divisions the carrier is reviewing amid pressure from investors.
The announcement comes a month after American revealed for the first time that it was studying options for American Eagle; its frequent-flyer programme, AAdvantage; its maintenance and repair arm; and American Beacon Advisors, an investment management firm.
AMR, American’s corporate parent, continues to weigh different ways of splitting from American Eagle, including selling the unit to another company or spinning it off to shareholders.
No matter which path American takes, the airline must reach an agreement with American Eagle that defines its relationship with the regional carrier once the two have separated.
In making that accord too one-sided, American could risk weakening its former division. ExpressJet, another regional carrier, has foundered since its spin-off from Continental Airlines .
FL Group, an Icelandic investment firm that owns 9.1 per cent of American, has urged executives to press ahead with the spin-offs.
The company’s crown jewel and the asset sure to unlock the most value, FL Group has argued, is AAdvantage.
American said in a statement it planned to complete the split from American Eagle in 2008. The division should generate about $2.3bn in revenue this year. Its 300-aircraft fleet operates 1,700 daily flights to more than 150 cities.
“The decision comes after a careful deliberate evaluation of the strategy that will best enable us to continue to create value for our shareholders,” Gerard Arpey, AMR chief executive, said.
Copyright The Financial Times Limited 2007
By Justin Baer in London
Published: November 29 2007 02:29 | Last updated: November 29 2007 02:29
American Airlines has announced plans to shed its American Eagle regional air service, one of four divisions the carrier is reviewing amid pressure from investors.
The announcement comes a month after American revealed for the first time that it was studying options for American Eagle; its frequent-flyer programme, AAdvantage; its maintenance and repair arm; and American Beacon Advisors, an investment management firm.
AMR, American’s corporate parent, continues to weigh different ways of splitting from American Eagle, including selling the unit to another company or spinning it off to shareholders.
No matter which path American takes, the airline must reach an agreement with American Eagle that defines its relationship with the regional carrier once the two have separated.
In making that accord too one-sided, American could risk weakening its former division. ExpressJet, another regional carrier, has foundered since its spin-off from Continental Airlines .
FL Group, an Icelandic investment firm that owns 9.1 per cent of American, has urged executives to press ahead with the spin-offs.
The company’s crown jewel and the asset sure to unlock the most value, FL Group has argued, is AAdvantage.
American said in a statement it planned to complete the split from American Eagle in 2008. The division should generate about $2.3bn in revenue this year. Its 300-aircraft fleet operates 1,700 daily flights to more than 150 cities.
“The decision comes after a careful deliberate evaluation of the strategy that will best enable us to continue to create value for our shareholders,” Gerard Arpey, AMR chief executive, said.
Copyright The Financial Times Limited 2007
