Mary Schlangenstein at Bloomberg has a pretty good wrap piece on the American Eagle news from today.
As I have shared with a number of you privately this afternoon, I tend to agree with Bob Mann’s comments in this piece. While this may make the “activist” shareholders happy — I’m not so sure that American Eagle is that great a prize, nor will it garner much of a high price.
In the piece, Bob says, “I’m betting this one flops, compared to expectations. Investors may not want a stable of 37-, 44-, 50-seat jets and older Saab aircraft.”
He added, “Investors will want to diversify away from American Airlines-only flying, while AMR will want an exclusive, or protection from competitors.”
The regional sector is growth-constrained, Eagle’s aircraft are older, smaller, and more expensive to fly, there is the pilot issue (the contract here is going to be tied to the mainline negotiations to an extent it appears now) and let’s face it — the gung-ho environment that Continental spun ExpressJet into simply does not exist today. Nor is it going to exist in 2008.
So while Craig Hall, who is the airline’s fifth largest shareholder tells Mary, “This is a good first step. We certainly hope that they are still looking at spinning off the mileage program, as we believe the biggest opportunity is there,” and we can be sure that the FL Group, the largest AMR shareholder is happy with the news, remember that all they are looking for is a bump in the stock price. Meanwhile, AMR is looking for more cost stability.
But neither of those two necessarily go hand in hand with an overly generous price being paid for Eagle. Not in this environment. And not with the equipment Eagle is flying.