July 14, 2008
AMR’s American Eagle Attracts Interest
By MARY SCHLANGENSTEIN
American Airlines parent AMR Corp., studying a spinoff or sale of its American Eagle regional unit, said it gave financial and other data to "interested parties."The materials were provided in early May, AMR said in a letter to the U.S. Securities and Exchange Commission released Monday, without identifying the information or those who received it. AMR said it still expects to finish a deal this year.
"The company anticipates that the form of the transaction will likely be either a spinoff to shareholders or a sale to a third- party buyer," Fort Worth-based AMR told the SEC.
The disclosure marks the first public signal of interest in Eagle since AMR said Nov. 28 it would divest the unit amid investor demands for U.S. airlines to sell assets to boost their share prices. A 58 percent jump in jet-fuel prices since then is pushing the U.S. industry to possible record losses this year.
The document was part of an exchange of letters between the company and the regulatory agency over portions of AMR's 2007 annual report.
"We've publicly stated that we are exploring several different forms of divestiture for American Eagle," Mary Sanderson, an AMR spokeswoman, said in an e-mail. "Information has been made available to interested parties as part of this evaluation process."
The carrier also said in the letter that it "has not yet determined which assets are expected to be disposed of, transferred or sold," and that AMR "will have significant continuing involvement with AMR Eagle after the divestiture." As a result, Eagle won't be classified as a discontinued operation, AMR said.
AMR most likely will have to spin off Eagle into a separate company with its own stock instead of selling it because record oil prices have hurt airline valuations, said James M. Higgins, a Soleil Securities Corp. analyst in Solebury, Pa.
To cope with rising fuel costs, Eagle would trim its flight schedule and ground some planes under a plan unveiled last month.
AMR said last week it would eliminate about 8 percent of its work force, or 6,840 jobs, when the company reduces capacity in the fourth quarter.
The carrier said earlier it plans to ground as many as 40 regional jets at Eagle and retire 35 Saab turboprop aircraft as it trims seating capacity 11 percent.
American Airlines employs about 7,000 people in Tulsa, most at its Maintenance & Engineering Center.
AMR rose 3 cents to close at $4.86 Monday in trading on the New York Stock Exchange. The stock has fallen 65 percent this year.
Originally published by MARY SCHLANGENSTEIN Bloomberg News.
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