American Airlines 'must be part of consolidation'
James Doran in New York

Hannes Smarason, the chief executive of FL Group, believes that American Airlines should play an active role in the current consolidation of the US airlines sector and is seeking a meeting with the carrier’s board to discuss his plans.

Mr Smarason told The Times last night that the playing field had changed significantly in the United States since the last time that American Airlines, the world’s biggest carrier, tried to strike a deal. In 2000 American attempted to merge with US Airways but competition authorities blocked the deal.

“I think enough has changed in the industry since then that American should be seen as a candidate,” Mr Smarason said. “American could and should be a part of the consolidation.”

The move comes after FL Group announced the $400 million (£205 million) acquisition of a 5.98 per cent stake in AMR, the parent company of American Airlines, to become the airline’s third-largest shareholder.

He added that he had asked for a meeting with the airline’s board but would not divulge the precise nature of the discussions that he planned to have. “All I will say is I would like to see them and I would like to meet them to discuss my views, and you know what they are,” Mr Smarason said. “For the most part, as any big investor, we would like to sit down and have a chat.”

Speculation surrounding possible deals in the American airline sector has increased since last month, when US Airways launched a hostile takeover bid for Delta Air Lines. Delta has rebuffed the approach. UAL, the parent of United Airlines, America’s second-largest carrier behind American, is in early stages of talks with Continental Airlines.

The merger speculation comes as US airlines are set to record their first profitable year since 2000 and are enjoying surging share prices. Shares in AMR have gained more than 35 per cent this year. Continental’s shares are up 95 per cent.

FL Group, which is 18 per cent owned by Baugur, the Icelandic investment firm that owns several British high street retailers, including Oasis, Karen Millen and Hamleys, has made millions through buying and selling stakes in airlines and other businesses. This week FL Group sold Stirling, a Danish low-cost airline, for about £142 million to Northern Travel, another Icelandic consortium, of which FL Group owns 34 per cent. Northern Travel will also own Iceland Express, the low-price Icelandic carrier, 51 per cent of the British-based charter airline Astraeus and 29 per cent of the listed Swedish travel agent Ticket.

FL Group bought Stirling in October for $240 million after making a £98 million profit on the sale of a 17 per cent stake in easyJet, the British no-frills airline, in April.

The deal, which came after 18 months of speculation about a bid for easyJet from FL Group, shot the firm into the spotlight in Britain, alongside fellow Icelandic firms such as Kaupthing and Baugur.

FL Group also owns 23 per cent of the Finnish flag carrier Finnair but sold its stake in Icelandair for a profit of 26 billion Icelandic kronur in October when the airline floated on the Icelandic stock exchange.

This month, FL Group signed a three-year equity finance facility with Barclays Capital for up to €400 million (£270 million).

FL Group is a partner in Unity, an investment vehicle co-owned with Baugur and Kevin Stanford, the retail entrepreneur, which holds stakes in Moss Bros, French Connection and Woolworths, the high street retailers, and was a partner in the buyout of House of Fraser, the department store chain, that was completed last month.