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Official: AMR To Divest Eagle  
User currently offlinecommavia From United States of America, joined Apr 2005, 11752 posts, RR: 62
Posted (3 years 3 months 4 days 6 hours ago) and read 12032 times:

http://aa.mediaroom.com/index.php?s=43&item=3285

* spin-off to current AMR shareholders

* "A divestiture could provide Eagle an opportunity to vie for business of other mainline carriers and allow the carrier to grow." (emphasis is mine - found that word choice interesting)

* AMR Eagle expects August SEC registration, with spin-off to proceed thereafter

31 replies: All unread, showing first 25:
 
User currently offlineLAXintl From United States of America, joined May 2000, 25739 posts, RR: 50
Reply 1, posted (3 years 3 months 4 days 5 hours ago) and read 11912 times:

Yeah will be interesting to watch.

The plans would allow AA to diversify its regional feed which is a good thing, and indeed also let Eagle go after 3rd party flying. However I'm not sure how practical the latter is since its reported Eagle has the highest cost base in the industry, so lots of painful restructring will be needed.

Either way it seems AMR/AA will be taking a bath with the move, and imo will likely have to write-off a good portion of its investment. I'm not sure how enthuised shareholders will be to acquire an independent Eagle stock and what money AMR will be able to gain.

Will be interesting to the SEC filings when they come out to provide added clarity on Eagles finances.



From the desert to the sea, to all of Southern California
User currently offlinecommavia From United States of America, joined Apr 2005, 11752 posts, RR: 62
Reply 2, posted (3 years 3 months 4 days 5 hours ago) and read 11895 times:

Quoting LAXintl (Reply 1):
The plans would allow AA to diversify its regional feed which is a good thing, and indeed also let Eagle go after 3rd party flying.

If AA can get a deal with the pilots, and that dovetails with divesting Eagle, this would allow AMR to do what it really wants, which is get away from 50-seat RJ flying. Getting more 70-100-seat jets, and perhaps also larger props like Q400s/ATR72s, on property, would seem like the direction AMR may want to move.

Quoting LAXintl (Reply 1):
However I'm not sure how practical the latter is since its reported Eagle has the highest cost base in the industry, so lots of painful restructring will be needed.

  

Quoting LAXintl (Reply 1):
Either way it seems AMR/AA will be taking a bath with the move, and imo will likely have to write-off a good portion of its investment.

True, although I'm not sure how much AMR is really carrying from Eagle today beyond the outstanding debt for the Eagle jets, etc.

Quoting LAXintl (Reply 1):
I'm not sure how enthuised shareholders will be to acquire an independent Eagle stock and what money AMR will be able to gain.

This transaction isn't really about getting any additional money "gain" to AMR - I think this is purely about AMR wanting to get Eagle off its balance sheet. Any potential cash AMR might accrue would seem to me to just be a bonus.

Quoting LAXintl (Reply 1):
Will be interesting to the SEC filings when they come out to provide added clarity on Eagles finances.

Eagle is profitable - marginally - but will be interesting to see how this plays out, and yes, the shelf registration and prospectus will be interesting reading.


User currently offlineHiflyer From United States of America, joined Nov 2004, 2175 posts, RR: 3
Reply 3, posted (3 years 3 months 4 days 5 hours ago) and read 11778 times:

With this spinoff, and given Eagles high cost rate, could this move allow Eagle to go Chapt 11 later, without involving AA?

User currently offlineERJ170 From United States of America, joined Apr 2004, 6775 posts, RR: 17
Reply 4, posted (3 years 3 months 4 days 5 hours ago) and read 11701 times:

Quoting Hiflyer (Reply 3):
With this spinoff, and given Eagles high cost rate, could this move allow Eagle to go Chapt 11 later, without involving AA?

Could Eagle ground some of their current RJs during the spinoff (like a BR) and place an order for new aircraft (perhaps 175 and/or Q400NG)?

The AA-used Eagle would still be hubbed at DFW, MIA, LAX, and ORD.. would Eagle rehub themselves at RDU? Will they do at risk flights or could they work for DL (I'm sure DL would LOVE to have Eagle with E75s). With Eagle owned by the AMR Shareholders, mean they would still be AA's puppy.. just not on their books?



Aiming High and going far..
User currently offlinejfklganyc From United States of America, joined Jan 2004, 3540 posts, RR: 5
Reply 5, posted (3 years 3 months 4 days 4 hours ago) and read 11520 times:

" With Eagle owned by the AMR Shareholders, mean they would still be AA's puppy.. just not on their books?"

Not really. They will be a totally separate company. AA shareholders could include you and me or anyone for that matter.

What this means is that they can not sell Eagle. I don't want to call the company worthless by any means, but no one is willing to pay for it. So they will spin them out there and leave them to sink or swim based on their own moves.

Once the spinoff is complete, Eagle will be on their own to find flying, solve their high cost structure problems, and find a network carrier that will buy them aircraft for contract flying.


User currently offlineglbltrvlr From United States of America, joined Oct 2007, 744 posts, RR: 0
Reply 6, posted (3 years 3 months 4 days 4 hours ago) and read 11375 times:

Quoting jfklganyc (Reply 5):

Once the spinoff is complete, Eagle will be on their own to find flying, solve their high cost structure problems, and find a network carrier that will buy them aircraft for contract flying.

The key to this will be how much debt AMR puts on Eagle. I'm not a tax lawyer, but as I recall, the IRS rule is that the spinoff has to be a viable standalone company for at least two years or it gets treated as a taxable sale.


User currently offlineZKNCL From New Zealand, joined Oct 2010, 292 posts, RR: 0
Reply 7, posted (3 years 3 months 4 days 4 hours ago) and read 11321 times:

I think that was a great idea to do. Thus allowing other airlines and carriers to operate for AA in Connection and stop AMR from going strait to the bankruptcy court. I guess this means that Eagle and Connection will become one brand but CO still has two brands.

Z~k~N~c~L


User currently offlineJamake1 From United States of America, joined May 2004, 1016 posts, RR: 2
Reply 8, posted (3 years 3 months 4 days 3 hours ago) and read 11110 times:

"We believe that a divestiture of Eagle would be in the best interests of AMR and Eagle, as well as our shareholders, customers and employees," said AMR Chairman and CEO Gerard Arpey.

It seems to me somewhat unfortunate that both AA and CO created well-run and well-regarded express carrier affiliates that offered a seamless travel experience and products & services that mirrored that of their larger parent carrier, only to ultimately be cast off to the wolves. I am not so sure the divestiture of Eagle is in the best interests of the employees whose livelihoods come from working at American Eagle...



United's B747-400. "She's a a cruel lover."
User currently offlinejpetekYXMD80 From United States of America, joined Jul 2003, 4389 posts, RR: 27
Reply 9, posted (3 years 3 months 4 days 3 hours ago) and read 11023 times:

Quoting Jamake1 (Reply 8):

It seems to me somewhat unfortunate that both AA and CO created well-run and well-regarded express carrier affiliates that offered a seamless travel experience and products & services that mirrored that of their larger parent carrier, only to ultimately be cast off to the wolves. I am not so sure the divestiture of Eagle is in the best interests of the employees whose livelihoods come from working at American Eagle...

It is very sad, but is the nature of the beast of the race to the bottom regionals. But honestly, the performance of Eagle from the customer perspective has not been typically indicative of the difference. I do feel for the Eagle employees who will be screwed in multiple ways by this though. I can't really blame AA. It seems to me like they've tried to take the high road with things like the pensions and keeping regional in house, but all they have to show for it is the poorest financial performance of their competitors. It's a shame.

On the bright side, I guess it would be feasible for E170s to be wearing AA colors down the road a bit. That would be nice.

[Edited 2011-07-20 06:42:22]


The Best Care in the Air, 1984-2009
User currently offlinecbphoto From United States of America, joined Dec 2003, 1567 posts, RR: 6
Reply 10, posted (3 years 3 months 4 days 2 hours ago) and read 10737 times:

Quoting LAXintl (Reply 1):
However I'm not sure how practical the latter is since its reported Eagle has the highest cost base in the industry, so lots of painful restructring will be needed.

That should all change once AA recalls all of its furloughs and continues to offer the flow through for the captains already at Eagle and apart of the flow through agreement. One reason why Eagle was so expensive was because of the very senior pilot group, something that AA essentially did to Eagle when hundreds of furlough AA guys were brought to Eagle. Once these guys/gals are off of Eagles books, their seniority list (though still senior to some) should even out a bit, which in turn helps the pay scales, and profits for the company!



ETOPS: Engines Turning or Passengers Swimming
User currently offlineplanespotting From United States of America, joined Apr 2004, 3529 posts, RR: 5
Reply 11, posted (3 years 3 months 4 days 1 hour ago) and read 10465 times:

Has anyone else heard the fluff about the announcement that Eagle pilots will have a somewhat direct link to a job at AA? Here are the details as I understand them (gleaned from friends):

- Eagle pilots are guaranteed at a job at AA if one is available (works via Eagle seniority number)
- Eagle pilots will not have an AA seniority number until they are an AA pilot
- All AA new hire classes will be made up of less than 50 percent Eagle pilots (not sure the exact number)

So basically, a decent amount of Eagle pilots will go to AA, but AA will still be hiring a majority of new pilots off the street even when there are Eagle pilots available to flow up. The deal should rid Eagle of some of their most senior pilots and make way for more job security among the current lower ranks of Eagle pilots, but it's not exactly the best situation for Eagle drivers.



Do you like movies about gladiators?
User currently offlineeinsteinboricua From Puerto Rico, joined Apr 2010, 3181 posts, RR: 8
Reply 12, posted (3 years 3 months 3 days 23 hours ago) and read 9969 times:

What are the chances that Republic Airways Holdings would be interested in MQ?


"You haven't seen a tree until you've seen its shadow from the sky."
User currently offlineapodino From United States of America, joined Apr 2005, 4287 posts, RR: 6
Reply 13, posted (3 years 3 months 3 days 23 hours ago) and read 9868 times:

Quoting einsteinboricua (Reply 12):
What are the chances that Republic Airways Holdings would be interested in MQ?

RAH has been posting losses recently due to F9, and until they get that situation resolved I don't see them as a player, but there are no shortage of other companies who may want MQ.


User currently offlineAcey559 From United States of America, joined Jan 2007, 1536 posts, RR: 2
Reply 14, posted (3 years 3 months 3 days 23 hours ago) and read 9733 times:

Funny this comes out today. I just had an interview there yesterday and everyone I spoke with seemed like they had no idea when/if this would happen. I am anxious to hear how things play out!

User currently offlineLAXtoATL From United States of America, joined Oct 2009, 1603 posts, RR: 2
Reply 15, posted (3 years 3 months 3 days 23 hours ago) and read 9734 times:

Quoting einsteinboricua (Reply 12):
What are the chances that Republic Airways Holdings would be interested in MQ?

Not very high since Eagle has been up for sale for quite some time and AMR is now going with a spinoff because they couldn't find a buyer.


User currently offlinenorcal From United States of America, joined Mar 2005, 2459 posts, RR: 5
Reply 16, posted (3 years 3 months 3 days 23 hours ago) and read 9711 times:

Quoting planespotting (Reply 11):

This is the deal from a pilot forum:

1. Every American Eagle pilot who is on the American Eagle pilot seniority list as of October 11, 2011 will be offered a job as an American Airlines pilot in the future.

2. American Eagle pilots hired under this settlement agreement will not be subjected to a pre-employment interview or pre-employment medical examination prior to transferring to American Airlines.

3. American Eagle pilots will be offered a minimum of 35% of every American Airlines new-hire class. In the event that 35% of American Airlines’ new hire class is greater than 25 pilots per month, American Eagle will be required to release at least 25 Eagle pilots per month.

4. If American Eagle loses flying and such loss results in a furlough, American Airlines will increase the percentage of Eagle pilots in their new-hire classes to a minimum of 50%. The meter above will continue to apply.

5. If American Eagle loses flying and such loss might result in a furlough, American Airlines will also attempt to negotiate preferential interviews for American Eagle pilots at the carrier who has successfully bid for the flying that Eagle is losing.

6. This settlement does not impact the existing rights of American Eagle flow-through pilots who currently possess American Airlines pilot seniority numbers, or the rights of the 824 pilot positions awarded as remedy by Arbitrator Nicolau. Those provisions are in place and will remain effective without regard to this settlement agreement.

7. American Eagle has agreed to clarifying contract language regarding the scope of work that American Eagle pilots perform in the event of a divestiture.


In a nutshell what was hanging up the divestiture was the Eagle scope grievance, which if won, would require the American Eagle pilots to staff American Eagle planes no matter where they end up (Republic, SkyWest, etc.) What I've gathered from pilot forums is that Eagle ALPA decided to drop the scope grievance and allow American to outsource aircraft with out Eagle pilots in exchange for jobs with American.

Here are some point being made on pilot forums:

- AMR is going to diversify the feed, so they could simply park Eagle aircraft and bring in another regional with their planes and thus avoid scope issues with Eagle.

- No regional currently has the pilots available to bring on American Eagle plans and fly them in the immediate future

- Most importantly, AMR executives won't spin and then slash Eagle flying right afterwards because it'll destroy the stock price of the new Eagle and anger shareholders. What'll likely happen is some kind of CPA for the current fleet of Eagle for several years and then the flying will start to be outsourced.

Think ExpressJet, they were spun in 2002 but didn't lose any flying till the end of 2005 (practically 2006).

Something similar will happen with Eagle. In the end the Eagle pilots could have lost the grievance and then they would have gotten nothing. From what I gather the best case if they won is that they would have jobs waiting for them at the bottom of the seniority list of whatever regional got the Eagle aircraft in the future. Not that great, and that assumes that they would use Eagle aircraft. There is going to be a ton of 50 seat capacity coming off contract soon and all of them will be looking for homes.


User currently offlineJA From United States of America, joined Dec 2004, 574 posts, RR: 1
Reply 17, posted (3 years 3 months 3 days 22 hours ago) and read 8989 times:

NOW is the time to buy Eagle. Wait for the prospectus to come out and then make an offer before shares are offered.

User currently offlineScottB From United States of America, joined Jul 2000, 6793 posts, RR: 32
Reply 18, posted (3 years 3 months 3 days 21 hours ago) and read 8424 times:

Quoting JA (Reply 18):
NOW is the time to buy Eagle.

Oh H--- no! I wouldn't touch Eagle shares with a 100-foot pole.

Quoting norcal (Reply 16):
Most importantly, AMR executives won't spin and then slash Eagle flying right afterwards because it'll destroy the stock price of the new Eagle and anger shareholders. What'll likely happen is some kind of CPA for the current fleet of Eagle for several years and then the flying will start to be outsourced.

Think ExpressJet, they were spun in 2002 but didn't lose any flying till the end of 2005 (practically 2006).

Unfortunately for AMR, Continental did it first and managed to skillfully maximize their holding in XJT before pulling the rug out from under them by exercising the option to pull 25% of their capacity. In the end, SkyWest bought them for about four cents on the dollar when compared to what Continental received by spinning them off (IPO price of $16.00/share vs. SKYW purchase price of $0.675 adjusted for the 10-for-1 reverse split).

The strategy here is obvious: AMR is spinning Eagle off because its costs are uncompetitive, and they can't negotiate those costs down while Eagle is a subsidiary. They can't IPO it because no one would buy it given the high costs and the history of ExpressJet. The CPA is probably necessary to make it look like Eagle is a viable operation (and make it possible to dump some debt on the former subsidiary).

But in the end, once the CPA reaches its end (or any date where AMR can withdraw flying), Eagle will lose that flying unless the employees accept deep pay cuts. This is good for AMR but IMO it makes Eagle essentially worthless, since their costs for regional lift are unlikely to be competitive with SkyWest, Pinnacle or Republic.

Quoting jpetekYXMD80 (Reply 9):
I guess it would be feasible for E170s to be wearing AA colors down the road a bit.

I don't see it happening unless the AA pilots get something very valuable in exchange.


User currently offlineEricR From United States of America, joined Jul 2010, 1904 posts, RR: 1
Reply 19, posted (3 years 3 months 3 days 21 hours ago) and read 8326 times:

Quoting ScottB (Reply 19):
Quoting JA (Reply 18):
NOW is the time to buy Eagle.

Oh H--- no! I wouldn't touch Eagle shares with a 100-foot pole.

I wouldn't touch any airline's shares with a 100 foot pole.

[Edited 2011-08-05 10:31:52 by srbmod]

User currently offlineglbltrvlr From United States of America, joined Oct 2007, 744 posts, RR: 0
Reply 20, posted (3 years 3 months 3 days 21 hours ago) and read 8252 times:

Quoting ScottB (Reply 19):

The strategy here is obvious: AMR is spinning Eagle off because its costs are uncompetitive, and they can't negotiate those costs down while Eagle is a subsidiary. They can't IPO it because no one would buy it given the high costs and the history of ExpressJet. The CPA is probably necessary to make it look like Eagle is a viable operation (and make it possible to dump some debt on the former subsidiary).

Perfect analysis.


User currently offlinesteeler83 From United States of America, joined Feb 2006, 9235 posts, RR: 21
Reply 21, posted (3 years 3 months 3 days 20 hours ago) and read 7923 times:

Quoting EricR (Reply 20):

I wouldn't touch any airline's shares with a 100 foot pole.

Ditto!

Things could get rather intriguing at AMR. It's going to be strange seeing them fly for other airlines other than AA...



Do not bring stranger girt into your room. The stranger girt is dangerous, it will hurt your life.
User currently offlineglbltrvlr From United States of America, joined Oct 2007, 744 posts, RR: 0
Reply 22, posted (3 years 3 months 3 days 20 hours ago) and read 7875 times:

Quoting steeler83 (Reply 22):
Things could get rather intriguing at AMR.

AMR is the parent of both American Airlines and American Eagle. I think you meant "AE" or whatever generic name they give the spinoff.

Quoting steeler83 (Reply 22):
It's going to be strange seeing them fly for other airlines other than AA...

That's the problem. What does AE bring to the table that one of the other contract carriers doesn't have besides higher costs?


User currently offlineScottB From United States of America, joined Jul 2000, 6793 posts, RR: 32
Reply 23, posted (3 years 3 months 3 days 19 hours ago) and read 7366 times:

Quoting LAXintl (Reply 1):
Yeah will be interesting to watch.

...

Either way it seems AMR/AA will be taking a bath with the move, and imo will likely have to write-off a good portion of its investment. I'm not sure how enthuised shareholders will be to acquire an independent Eagle stock and what money AMR will be able to gain.

It will indeed be interesting to see how the independent Eagle is valued when it's divested to the shareholders; clearly some of the book value of MQ/OW will follow the subsidiary but I doubt it can be spun off for the book value. One thing is almost certain: it will be a good stock to short.


User currently offlineSplitterz From United States of America, joined Apr 2011, 204 posts, RR: 0
Reply 24, posted (3 years 3 months 3 days 13 hours ago) and read 4633 times:

Jumping in this thread kind of late but I have a question...

With AMR spinning off Eagle does that open the door for other regional carriers to operate for AA?
If so, which regional do you expect to fill the role Eagle did cheaper and if not better?


25 eastalt : I have a few questions. If American Airlines divest American Eagle, what assets does Eagle claim? For example, do they retain takeoff and landing slot
26 ORDBOSEWR : I suspect that it will be anything that AA wants to get rid of! I am betting this means all those 145's will be owned by Eagle. The 70 seaters are th
27 airbazar : I said this before when AA first signed the code-share agreement with B6 and I'll say it again: Eagle will be replaced by B6 in most if not all 100 se
28 TOLtommy : Eagle has been on the market for years. There have been a lot of tire kickers, but no bids. Why does this change now? They've got a lot of work to do
29 Post contains links commavia : Interesting (though not surprising) article out today from Bloomberg discussing the future of American Eagle, and AMR's planned divestiture. The main
30 ScottB : CAL did exactly the same thing with the spin-off of XJT; nothing keeps AMR from using the exact same tactics to squeeze an independent Eagle. It woul
31 slcdeltarumd11 : AA stock is just a bad subject from 2007 to now is just depressing for shareholders. At least their risk will be spread into two stocks and im sure A
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