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J.P. Morgan Chase & Co. analyst Jamie Baker in a research note estimated that American Eagle, which operates about 1,700 daily flights to more than 150 cities, is worth about $800 million. Baker warned that AMR could be disappointed should it do an IPO for Eagle, given the lackluster public trading success of former Continental Airlines Inc. affiliate ExpressJet Holdings Inc. and one-time Northwest Airlines Corp. subsidiary Pinnacle Airlines Corp. ExpressJet went public in April 2002, while Pinnacle was spun out in November 2003. “The IPO of [ExpressJet] is best considered as a failure having never traded more than 7% above IPO, currently residing 84% below,” Baker wrote. “While [Pinnacle] briefly touched 42% above its IPO, it has spent 70% of its time below.” Still, with industry leader SkyWest Inc. still digesting its 2005 purchase of Atlantic Southeast Airlines Inc. and other regionals lacking the means to finance a deal, a spinout seems to Baker the most likely option. Consultant Robert Mann told Bloomberg he is “betting this one flops, compared to expectations.” American Eagle, Mann said, is overly reliant on smaller and older jets and might find it difficult to make it on its own. Airlines have been squeezing their regional partners for lower rates in recent years, so the company with the most efficient planes and most favorable labor contracts have a big advantage over rivals. Credit Suisse Group analyst Daniel McKenzie meanwhile says that whatever happens to Eagle, AMR investors have reason to be happy. He believes AMR could rid itself of roughly $3 billion of debt should it transfer some of its liabilities to the independent subsidiary. The announcement is also significant, according to McKenzie, because it shows AMR is willing to listen to shareholders. AMR came under pressure from Icelandic investor FL Group hf, owner of about 8.5% of its shares, in September to divest assets as a way to boost shareholder value. “Many investors have questioned whether AMR’s management team is ‘shareholder friendly’,” McKenzie wrote. “Today’s announcement clearly lumps them into that camp.” McKenzie believes further divestitures could follow, with the company’s Beacon Advisors financial firm the likely next target. Overall the analyst said he believes AMR could fetch $5 billion via a divestiture program. — Lou Whiteman See AMR press release Categories Deal Video
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A day after American Airlines Inc. parent AMR Corp. 
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