First Take on American/Eagle News


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.

Ticker: (NYSE:AMR)

Technorati Tags: ,

2 thoughts on “First Take on American/Eagle News

  1. superatr

    This was the press release sent out by ALPA today. Mary missed it.
    Release #EGL 071128
    November 28, 2007
    Pilots’ Union Responds to Announcement that AMR will Sell American Eagle
    Euless, TX – Captain Herb Mark, chairman of the American Eagle pilots union, a unit of the Air Line Pilots Association, Int’l (ALPA), released the following statement in response to today’s announcement that AMR Holdings (NYSE: AMR) will explore the sale of its wholly owned subsidiary American Eagle.
    “This afternoon, American Eagle management and AMR Holdings have announced their intention to sell American Eagle, the nation’s largest regional airline. At this time we are awaiting a meeting between ALPA and management at which time they can explain the business rationale for this decision. We fully expect management to keep us informed every step of the way and welcome our participation. This will ensure that any transaction results in a viable airline that honors the commitment of union pilots.
    “Any new ownership would be subject to our existing collective bargaining agreement, which contains protections for our pilots in the event of a sale or merger.
    “Regardless of who owns American Eagle, nothing is more important to ALPA than resolving the issues that have created strained labor relations between the pilots and management. For several years pilots have been forced to fly more hours in a day because of understaffing. The staffing shortage has led to exhausting flight schedules, causing our pilots to sacrifice needed rest in order to meet the company’s bottom line.
    “ALPA wants our management, potential buyers, and the flying public to know that the American Eagle pilots are largely responsible for the continued success of this airline. We fully expect that our sacrifices will be respected and rewarded as we become a partner in whatever lies ahead.
    “We welcome this kind of cultural change. We will keep a close eye on the developments concerning the sale of American Eagle, and will carefully evaluate the details as they become available.”
    Founded in 1931, ALPA is the world’s largest pilot union representing more than 60,000 pilots at 42 airlines in the U.S. and Canada. American Eagle is a wholly owned subsidiary of AMR (NYSE: AMR) and provides feed to American Airlines as well as point-to-point service in North and Central America and the Caribbean

  2. Holly Hegeman

    Thanks! I had not seen it either.
    Actually, the phone has been a bit busy late today with some of our usual folks checking in with their comments on the announcement.
    One thing some folks might not be aware of also is, unlike the situation at United, American has been working for a couple of years to separate the management and P/L of Eagle from the mainline. So this is not a “knee-jerk” reaction to the recent FL Group letter. This process has been going on for awhile.
    I’ll have more on this in this week’s PBB.

Comments are closed.