Investment bank is advising AMR on American Eagle divestiture

[Voice Of Reason]

"Investment bank is advising AMR on American Eagle divestiture

[SIZE=-1]03:19 PM CDT on Friday, July 9, 2010[/SIZE]


[SIZE=-1]By TERRY MAXON / The Dallas Morning News[/SIZE]
[SIZE=-1][email protected][/SIZE]
AMR has signed on with an investment bank to determine AMR's options for selling or spinning off American Eagle.
In a message Friday to members, the head of American Eagle's pilot union said new president and chief executive officer Dan Garton revealed the move as he met with Air Line Pilots Association leaders.
"In our meeting he indicated that an investment bank had been engaged and would be exploring market conditions and options for divesting Eagle," said Tony Gutierrez, chairman of ALPA's master executive council at the regional carrier.
"He also stated that all options will be considered, but that it is still too early to define a direction that AMR will pursue," Gutierrez said in the message.
AMR confirmed Friday that it is using outside advisors to help it as it ponders what it should do with American Eagle.
AMR announced on June 10 that Garton would replace Peter Bowler, who is retiring. As part of that announcement, it revealed June 10 that it was considering the Eagle divestiture.
"As part of getting up to speed on the entire operation, Mr. Garton has joined AA's finance team in meetings with bankers and investment advisers," American Eagle spokeswoman Andrea Huguely said Friday.
"These discussions were aimed at educating him about earlier reviews of divestiture options and to discuss the process we might take going forward," Huguely said.
She added: "No decisions have been made about whether to sell or spin-off American Eagle, and no timeframe for that divestiture has been identified.
The company had considered splitting American Eagle off from American Airlines and parent AMR in 2008, but tabled plans after the industry sank into a deep slump.
Other airlines have either spun off their commuter partners, as Continental Airlines did with Continental Express, or sold them outright, as Delta Air Lines is doing with its Mesaba and Compass Airlines units.
Delta picked up Mesaba and Compass when it merged with Northwest Airlines in 2008. On July 1, it announced it would sell Mesaba for $62 million to Pinnacle Airlines and sell Compass for $20.5 million to Trans States Holdings. Gutierrez referenced those sales in his message.
"Although an 'overnight' transaction similar to those announced last week is not in their plans, he [Garton] did say that if an unsolicited offer was presented, they will need to consider it," the ALPA leader said.
Gutierrez said he, vice chairman Dave Ryter and negotiating committee chairman Andy Nordgren told Garton that ALPA is willing to assist and support any effort that benefits the long term health and stability of our pilot group."
"However, ALPA cannot support a divestiture that would set the stage for whipsawing pilot groups against each other. We cannot support the continued destruction of the piloting profession by airline managements who abandon common sense and clear thinking for the sake of cost savings," he said.
"The American people and the U.S. Congress don't support this line of thinking either. The flying public expects skilled and experienced pilots in the cockpit," Gutierrez said. "
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"AMR is talking to investment banks about American Eagle divestiture


1204 PM Fri, Jul 09, 2010 | Permalink (earlier, more detailed version of above also on same news site):
Terry Maxon/Reporter [/URL]
AMR is schmoozing with investment banks to determine AMR's options for selling or spinning off [URL="http://topics.dallasnews.com/topic/American_Eagle"][B][COLOR=#29375a]American Eagle[/COLOR][/B][/URL].
In a message Friday to members, the head of American Eagle's pilot union said new president and chief executive officer Dan Garton revealed the move as he met with Air Line Pilots Association leaders.
"In our meeting he indicated that an investment bank had been engaged and would be exploring market conditions and options for divesting Eagle," said Tony Gutierrez, chairman of ALPA's master executive council at the regional carrier.
"He also stated that all options will be considered, but that it is still too early to define a direction that AMR will pursue," Gutierrez said in the message.
AMR confirmed Friday that it is using outside advisors to help it as it ponders what it should do with American Eagle, but said it hasn't picked an investment bank yet to handle any divestiture.
AMR announced on June 10 that Garton would replace Peter Bowler, who is retiring. As part of that announcement, it revealed June 10 that it was considering the Eagle divestiture.
"As part of getting up to speed on the entire operation, Mr. Garton has joined AA's finance team in meetings with bankers and investment advisers," American Eagle spokeswoman Andrea Huguely said Friday.
"These discussions were aimed at educating him about earlier reviews of divestiture options and to discuss the process we might take going forward," Huguely said.
She added: "No decisions have been made about whether to sell or spin-off American Eagle, and no timeframe for that divestiture has been identified.
The company had considered splitting American Eagle off from [URL="http://topics.dallasnews.com/topic/American_Airlines"][B][COLOR=#29375a]American Airlines[/COLOR][/B][/URL] and parent AMR in 2008, but tabled plans after the industry sank into a deep slump.
Other airlines have either spun off their commuter partners, as [URL="http://topics.dallasnews.com/topic/Continental_Airlines%2C_Inc."][B][COLOR=#29375a]Continental Airlines[/COLOR][/B][/URL] did with [URL="http://topics.dallasnews.com/topic/Continental_Express"][B][COLOR=#29375a]Continental Express[/COLOR][/B][/URL], or sold them outright, as [URL="http://topics.dallasnews.com/topic/Delta_Air_Lines"][B][COLOR=#29375a]Delta Air Lines[/COLOR][/B][/URL] is doing with its Mesaba and Compass Airlines units.
Delta picked up Mesaba and Compass when it merged with [URL="http://topics.dallasnews.com/topic/Northwest_Airlines"][B][COLOR=#29375a]Northwest Airlines[/COLOR][/B][/URL] in 2008. On July 1, it announced it would sell Mesaba for $62 million to [URL="http://topics.dallasnews.com/topic/Pinnacle_Airlines_Corp."][B][COLOR=#29375a]Pinnacle Airlines[/COLOR][/B][/URL] and sell Compass for $20.5 million to Trans States Holdings. Gutierrez referenced those sales in his message.
"Although an 'overnight' transaction similar to those announced last week is not in their plans, he [Garton] did say that if an unsolicited offer was presented, they will need to consider it," the ALPA leader said.
Gutierrez said he, vice chairman Dave Ryter and negotiating committee chairman Andy Nordgren told Garton that ALPA is willing to assist and support any effort that benefits the long term health and stability of our pilot group."
"However, ALPA cannot support a divestiture that would set the stage for whipsawing pilot groups against each other. We cannot support the continued destruction of the piloting profession by airline managements who abandon common sense and clear thinking for the sake of cost savings," he said.
"The American people and the [URL="http://topics.dallasnews.com/topic/U.S._Congress"][B][COLOR=#29375a]U.S. Congress[/COLOR][/B][/URL] don't support this line of thinking either. The flying public expects skilled and experienced pilots in the cockpit," Gutierrez said.

 

[Voice Of Reason]

continued

...
"
Keep reading for Gutierrez's complete hotline message.

Fellow Eagle ALPA Pilots: This week I, along with MEC Vice Chairman Dave Ryter and Negotiating Committee Chairman Andy Nordgren met with Mr. Dan Garton, President of American Eagle Airlines. This was our first meeting with Mr. Garton and was intended to establish a relationship and welcome him to his new position. Obviously a primary topic of discussion for us was AMR's announcement to explore the divestiture of American Eagle. This idea is not new to Eagle pilots or to the MEC, as we all remember the same announcement made in 2007. However, Delta's recent sale of Mesaba and Compass airlines seems to suggest the latest trend in airline management thinking. In 2008 management kept us reasonably well informed of their actions and progress in preparing for a divestiture. We conveyed to Mr. Garton that we expect him to do the same. In our meeting he indicated that an investment bank had been engaged and would be exploring market conditions and options for divesting Eagle. He also stated that all options will be considered, but that it is still too early to define a direction that AMR will pursue. Although an "overnight" transaction similar to those announced last week is not in their plans, he did say that if an unsolicited offer was presented, they will need to consider it. As we did in 2008, we conveyed that ALPA is willing to assist and support any effort that benefits the long term health and stability of our pilot group. The MEC is tasked with evaluating initiatives that result in a viable airline, job protection and stability, and the company's continued ability to honor its commitment to its pilots. The options that will be evaluated could range from divestiture to no ownership change at all. However, ALPA cannot support a divestiture that would set the stage for whipsawing pilot groups against each other. We cannot support the continued destruction of the piloting profession by airline managements who abandon common sense and clear thinking for the sake of cost savings. The American people and the U.S. Congress don't support this line of thinking either. The flying public expects skilled and experienced pilots in the cockpit. While cheaper feed for American Airlines may be available, we firmly maintain that our pilot group is a seasoned, stable and safe option for any major airline, but especially suited to serve American Airlines. The American Eagle route network is designed with a single goal--to feed American Airlines with the right aircraft on the right route. We believe we are still the best choice for this mission. The MEC is using the resources of ALPA's Economic and Financial Analysis department to educate the MEC on current market conditions and divestiture options available to AMR. The ALPA Legal department is evaluating the scope issues related to a divestiture in both the American Eagle and the American Airlines pilot contracts. Regardless of who owns American Eagle, any transaction would be subject to our existing collective bargaining agreement, which contains protections for our pilots in the event of a sale or merger. We have been down this road before. Perhaps a divestiture will materialize this time; perhaps it won't. In any event, we are taking steps to be ready for whatever comes and are intent on and fully equipped to represent our pilots' best interests. AMR management, potential buyers, and the flying public all should 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 will keep a close eye on the developments concerning the sale of American Eagle, and will carefully evaluate the details as they become available. Fraternally, Captain Tony Gutierrez" "
​

 

[Speedtape]

American Eagle has no value. American will have to give up some lucrative long-term marketing agreements to have any chance of unloading Eagle.

 

[Yuppyguppy]

Can you say Trans States?

 

[doh]

Does Trans States have the money?

 

[outtahere]

No, but Skywest inc. does.

 

[zawillif]

I truly believe SkyWest will be top in the bidding for Eagle. They have huge contracts with DAL and UAL, adding American would make them a major feeder for all 3 of the largest airlines in the world.

 

[satpak77]

what happens to the previously agreed upon flow-thru for Eagle pilots to AA, or did that already go away

 

[Draginass]

I truly believe SkyWest will be top in the bidding for Eagle. They have huge contracts with DAL and UAL, adding American would make them a major feeder for all 3 of the largest airlines in the world.

Since Skywest has CRJ700s and CRJ900s operating for other carriers, I believe that would violate the AA pilots' scope provisions, like it did with outsourcing to TSA a few years ago.

 

[Flyby1206]

Since Skywest has CRJ700s and CRJ900s operating for other carriers, I believe that would violate the AA pilots' scope provisions, like it did with outsourcing to TSA a few years ago.

Only if the aircraft were all on the same certificate. Since Skywest keeps ASA as a separate certificate and operation I assume they would do the same with Eagle if/when they bought it (avoiding any scope issues).