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AMR to Consider Spinoff

Third-quarter net income was $175 million, or 61 cents a share, including a 13-cent charge.

Updated from 1:21 p.m. EDT



says it's reviewing whether to spin off assets, with American Eagle apparently a leading candidate.

"If you look around the rest of the industry, most of the other airlines have the vast majority of their regional feed provided by independent regional carriers," said CFO Tom Horton, on a conference call after the parent of American Airlines reported a sixth consecutive quarterly profit.

He said American recently developed a market-based formula to buy services from American Eagle, which has annual revenue of $2.4 billion.

Just Tuesday,


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said it was reviewing a spinoff of its regional carrier Comair, adding that it will decide in the next few months whether to part ways with the operation.

With spinoffs the popular topic these days in the airline industry, Horton discussed various possibilities in his remarks. He said potential candidates include American Eagle, investment adviser subsidiary Beacon Advisors, a maintenance and repair business and the Advantage frequent-flier program.

"The objective is to enhance shareholder value," he said, but there is no timetable for reaching a decision.

While FL Group, which holds 9.1% of American shares, has called for a quick Advantage spinoff, Horton said the program "is the cornerstone for how we interact with our best customers," and questioned whether shedding the business would benefit the airline. He also said American, like Delta, will provide investors with more information about its businesses going forward.

Earlier, AMR said third-quarter net income was $175 million, or 61 cents a share, including a 13-cent charge, in the most recent quarter. Before the charge, AMR would have earned 74 cents, a penny better than analysts surveyed by Thomson Financial had expected.

Revenue rose 1.7% to $5.9 billion and was slightly below estimates.

High load factors induced by capacity discipline helped to limit the impact of high fuel costs. "It's fair to say we are alarmed at the level of oil prices as we see them today," said CEO Gerard Arpey.

During the quarter, mainline passenger revenue per available seat mile increased by 5%, while capacity fell 2.8%. Mainline load factor was a record 83.9%, and yields rose 2.3%.

Surprisingly, domestic RASM grew by 4.8%, exceeding Atlantic RASM growth of 2.7% and Latin American RASM growth of 3.5%. Pacific RASM jumped 21%. Horton said intense competition has weakened pricing on U.S. to London routes. About half of American's Atlantic revenue involves London, compared with 20% at most other U.S. carriers.

Looking ahead, the carrier has 40% of its fourth-quarter fuel consumption capped at $69 a barrel, or $2.01 a gallon for jet fuel. Full-year capacity is expected to decrease by 2.1%, including mainline declines of 2.4% domestically and 1.9% internationally.