This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

AMR to Spin Off American Eagle

American Airlines parent AMR (AMR) says it will shed its regional carrier American Eagle, but the specifics of the transaction haven't yet been worked out.

The divestiture could take the form of a spinoff to shareholders, a sale to a third party or "some other form of separation from AMR," the company said Wednesday.

The move, AMR said, reflects an effort to create shareholder value following a review of its operations, and it should be completed in 2008. Analyst Mike Derchin of FTN Midwest Securities estimated the deal could bring AMR more than $1 billion.

AMR's decision to split with American Eagle comes as Wall Street is pushing for the legacy carriers to shake up their businesses via mergers or spinoffs, partially because airline stocks have tumbled this year due to rising fuel costs. In September, Iceland-based FL Group, which holds 9.1% of AMR shares, called for a spinoff of the carrier's frequent-flier program.

Shares in AMR were trading Wednesday at $22.17, up $1.61. Its 8% gain led most airline stocks. For the year, AMR shares are down about 28%.

American Eagle, which has annual revenue of about $2.3 billion, operates around 300 aircraft and 1,700 daily flights.

"We have worked hard over the years to build a regional airline that is fully capable of standing on its own and is well-positioned to pursue growth opportunities outside of the AMR corporate structure," said CEO Gerard Arpey in a prepared statement. He said American Eagle has independent management and operations and has produced independently audited financial results for several years.

Earlier this year, American and American Eagle entered into a regional flying agreement that reflects market-based rates and assures a continued regional feed for American. An independent American Eagle could also support other carriers, Arpey said. Additionally, it would "enable American to focus on its mainline business," the company said.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
DAL $46.16 -0.62%
AAPL $132.91 0.20%
FB $81.42 -0.60%
GOOG $555.10 -0.05%
TSLA $232.90 0.58%

Markets

DOW 18,096.52 +58.55 0.32%
S&P 500 2,112.25 +3.33 0.16%
NASDAQ 5,064.5860 +4.34 0.09%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs