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.
CFO Tom Horton hinted at an American Eagle spinoff on the carrier's third-quarter conference call. "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." By contrast, Horton said the frequent-flier program "is the cornerstone for how we interact with our best customers," and questioned whether shedding it would benefit the airline. All of the legacy carriers have said they are evaluating spinoffs. Furthest along is United, a unit of UAL ( UAUA), which says it has identified a potential buyer for its maintenance operations and will brief union officials on the plan in the first quarter. Additionally, Northwest ( NWA) has indicated it's looking favorably at the possibility of spinning off its frequent-flier program, while Delta ( DAL) is studying whether to unload its regional carrier Comair.