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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

DealBook: Citadel Assails E*Trade and Calls for Sale

One E*Trade commercial features a baby who does well enough investing with the firm that he can afford a tailor.

A few years ago, Citadel saved E*Trade with a $2.5 billion cash infusion. Now, the giant hedge fund manager is slamming the online brokerage company and pushing for a sale.

In a letter on Wednesday to Steven J. Freiberg, E*Trade’s chief executive and interim chairman, Citadel said the board had “squandered” a “phenomenal franchise.” The hedge fund, which owns 9.8 percent of E*Trade’s stock, highlighted a numbers of problems, including a “still weak capital position,” poor-performing stock and “inaction” by the directors.

“Since November of 2007, the board has continually failed to act in the best interest of E*Trade shareholders,” Citadel said in the letter. “Having endured nearly four years of value destruction and lost opportunity, we believe it is time for change.”

The hedge fund, which is run by Kenneth Griffin, is pressuring E*Trade to pursue a possible sale in the hope of unlocking shareholder value. Since late 2007, shares of the online brokerage have fallen to less than $13 from about $50.

Jonathan Alcorn/Bloomberg NewsKenneth Griffin, chief of Citadel.

“We believe a sale of the company could be achieved promptly and generate significantly higher shareholder value, avoiding the risks of operating as an independent company lacking leadership and financial capabilities,” Citadel wrote in the letter.

Citadel is also looking to shake up the board. It wants fill the empty board seats with independent directors “who are not tainted by the company’s past and ongoing management failures.”

The hedge fund also wants to change corporate governance measures by eliminating the staggered board structure, which prevents activist shareholders from nominating a full slate of directors in a single year. As Citadel wrote, the current system “encourages entrenchment and shields poorly performing directors from accountability.”

“E*Trade has reached a pivotal moment where decisive action can be taken to generate value for all shareholders,” Citadel said in the letter.

Article source: http://feeds.nytimes.com/click.phdo?i=e17f4f0b67b2945f1f3adf57686f3336

AMR Says It May Initiate Spinoff of American Eagle

DealBook: Citadel Assails E*Trade and Calls for Sale

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