Street Just Sighs at Sabre Spinoff

So, what's Wall Street's reaction to

AMR's

(AMR)

long-awaited and much-lobbied-for spinoff of

Sabre

(TSG) - Get Report

?

Underwhelming, to say the least.

And no wonder. The way AMR structured the spinoff, it's "akin to kissing one's sister," in the words of one money manager who holds a sizable block of AMR.

The deal -- which essentially distributes AMR's remaining 83% ownership of Sabre to AMR shareholders, and pays AMR shareholders $675 million in a special one-time "dividend" -- is not exactly what the Street was looking for.

Much like the

Travelocity.com

back-door acquisition of

Preview Travel

(PTVL)

, this deal, while accomplishing something that should have been done a long time ago, lacks the "big-bang" appeal and hoped-for gains.

Shares of AMR ticked up only 8% on the news, or roughly 5 points. Sure, 5 points is nice, but it could have been more if the deal had been structured differently. Today, in midafternoon trading, shares were down about a half-point.

Shares of Sabre picked up 2 3/4 points on the news Tuesday, closing at 54 5/8. But they, too, are trading lower today.

For a couple of reasons, this isn't the best AMR could have done for its shareholders.

First, the deal does not fairly value Sabre. Of course, Sabre is probably worth more in parts than it is as a whole. Also, both AMR and Sabre shareholders lost out when Sabre did not spin off Travelocity in an IPO the way

Microsoft

(MSFT) - Get Report

did with

Expedia

(EXPE) - Get Report

.

Second, since it is not clear what AMR plans to do with the cash it's going to get from the deal, it is hard to gauge accurately whether this is a good thing for the airline right now. AMR Chairman Donald Carty & Co. should probably get their internal airline house in order before running out with the AMR corporate card, Christmas shopping list in hand.

However, lately those in Dallas seem to be more intent on failed attempts at worldwide expansion and questionable airline acquisitions. We hear that the AMR Board of Directors is not very happy. Why is that not surprising? American has underperformed rivals

UAL's

(UAL) - Get Report

United Airlines

and

Delta Air Lines

(DAL) - Get Report

for more than four quarters now, and will probably underwhelm again this quarter.

AMR just lost its Oneworld alliance partner,

Canadian Airlines

(CA:Toronto) -- along with millions of dollars and years of investment and strategic maneuvering -- after having aligned itself with an ill-conceived

Onex

(OCX.M:Montreal)

hostile takeover bid for the carrier.

My guess is that AMR will take its Sabre spinoff cash and go buy something. If that is the case, I don't think it was such a hot idea to shed a component that has been a fairly reliable source of income to AMR's bottom line. Anyone run the return on investment numbers on the

Reno Air

deal lately?

Why the spinoff now? Pressure was building on AMR management from more than one source, including several major institutional investors, to do something with Sabre. As we have said, Sabre couldn't reach its potential as a full-fledged information technology contender as long as it was attached to AMR's apron strings. The longer this situation dragged on, the less value Sabre could command.

But was this the best deal AMR could do? From this vantage point, the deal announced yesterday lacks creativity. Or to put it in the language of the Street: It doesn't maximize shareholder value.

Holly Hegeman, based in Barrington, R.I., pilots the Wing Tips column for TheStreet.com. At time of publication, Hegeman held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. You can usually find Hegeman, publisher of PlaneBusiness Banter, buzzing around her airline industry Web site at

www.planebusiness.com. While she cannot provide investment advice or recommendations, she welcomes your feedback at

hhegeman@planebusiness.com.