Bloomberg News

American Eagle CEO Sees Spinoff After AMR Bankruptcy Completed

October 09, 2012

AMR Corp. (AAMRQ:US) may revive plans to spin off its American Eagle regional airline after emerging from bankruptcy, according to the unit’s chief executive officer.

“That would certainly be my hope and my anticipation,” American Eagle CEO Dan Garton said today in a telephone interview. “When we again evaluate this, I believe we’ll again determine that it’s the right thing to do.”

AMR shelved its effort to separate Eagle after filing for bankruptcy protection in November. No decision on the carrier’s future will be made until after the conclusion of Chapter 11 proceedings involving Fort Worth, Texas-based AMR, Garton said.

Eagle’s fate hinges on how AMR’s American Airlines exits bankruptcy. While American CEO Tom Horton seeks to ensure that the third-largest U.S. carrier stays independent, Tempe, Arizona-based US Airways Group Inc. (LCC:US) has been positioning itself for a takeover.

Garton declined to comment on US Airways, citing a nondisclosure agreement signed as part of American’s accord with creditors to review merger options as part of its strategy for leaving court protection.

The regional unit supplies most of American’s passenger feed to hub airports from smaller cities. Spinning off Eagle would allow American to try to find cheaper options for those flights while allowing the commuter airline to grow through agreements to fly under contract for other carriers.

Labor Agreements

Eagle pilots voted yesterday to approve a new labor contract, according to their union. Flight attendants and baggage handlers have also accepted new contracts, and a tentative agreement with mechanics was reached on Oct. 4.

The new labor accords will give Eagle a cost structure that is competitive with other regional airlines, Garton said. The bankruptcy court will hold a hearing on Oct. 23 on a motion filed by AMR to abrogate any contracts that haven’t been renegotiated.

“We have tentative agreements that now have to be put out for a vote and we are hopeful the members will vote to approve those,” Garton said. “We owe it to everyone in the company that if we can’t come to an agreement consensually, we have to plow on” with the request to void existing contracts, he said.

AMR ended a review of Eagle’s future in 2008 by deciding to keep the regional carrier. In July 2011, AMR’s board decided after more than a year of study to separate the unit.

Eagle flies a mix of regional jets from Bombardier Inc. (BBD/B) and Embraer SA (ERJ:US), along with turboprops from ATR, the joint venture between Finmeccanica SpA (FNC) and European Aeronautic, Defence & Space Co. (EAD), according to American’s website. The carrier had 262 planes in operation as of June 30, an AMR filing shows.

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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