February 27, 2021

AMR Says It May Initiate Spinoff of American Eagle

The proposal would help AMR win competitive rates for regional flying and allow American Eagle to increase its business by competing for contracts with other airlines, AMR said in a regulatory filing.

“This industry is intensely competitive and it will not be easy to transform Eagle from a wholly owned subsidiary into an independent company overnight,” Dan Garton, the chief executive of American Eagle, said in a letter to employees. “I’m sure we will have growing pains along the way.”

The company did not say when it would initiate the spinoff, in which 100 percent of the outstanding shares of American Eagle would be distributed tax-free to shareholders.

A review of the plan by the Securities and Exchange Commission could take up to three months. AMR also said an outright sale of the regional airline was possible, but not likely.

The company said that though all aircraft would remain on Eagle’s operating certificates, it expected to transfer to all of its jet aircraft and the associated indebtedness to American.

The proposal also would give American Eagle an eight-year contract to provide some of American Airlines’ ground operations, including baggage handling.

AMR said in July that it planned to divest itself of Eagle, which provides about 90 percent of the regional flying for American Airlines. Eagle has more than 1,700 daily flights to destinations throughout the United States, Canada, the Bahamas, the Caribbean and Mexico.

Ray Neidl, senior aerospace sector analyst with Maxim Group, said the regional airline’s biggest asset would be its contract with American Airlines. He noted the challenges facing regional carriers as major airlines adjust their routes and attempt to trim the cost of their operations.

“Basically, the regional sector is changing dramatically,” Mr. Neidl said. “Those that cannot adapt their fleets and cost structure will eventually perish. American Eagle has a lot of work ahead of it. And it would have been very difficult, in my opinion, to find a buyer.”

Stock in AMR, which is based in Fort Worth, rose 18 cents, to $3.69 a share.

Article source: http://feeds.nytimes.com/click.phdo?i=7892949cef10fbf4daaef50329bac8b5

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