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View Full Version : AMR Selling EAGLE


tone
11-28-2007, 11:47 AM
So,
Will the scope clause hold up? As a businessman it seems like a good thing for AMR, as a pilot, I'm not sure?? I think our scope will still protect any Regional Junk (RJ) feeder whether its Eagle or not.?:confused:


flaps 9
11-28-2007, 12:21 PM
So,
Will the scope clause hold up? As a businessman it seems like a good thing for AMR, as a pilot, I'm not sure?? I think our scope will still protect any Regional Junk (RJ) feeder whether its Eagle or not.?:confused:

Every Tom, Dick, and Harry will be bidding to get their piece of the "American" pie. :eek:


For those who don't understand the reference:

That's RAH, PNC,XJT,AirWhiskey,TSH, Sky West, Mesa, and even Eagle. :(

glasspilot
11-28-2007, 12:24 PM
I can already hear the stampede as the flowthroughs with AA numbers run for the exit!


RJ Pilot
11-28-2007, 12:39 PM
So,
Will the scope clause hold up? As a businessman it seems like a good thing for AMR, as a pilot, I'm not sure?? I think our scope will still protect any Regional Junk (RJ) feeder whether its Eagle or not.?:confused:

If this were to happen;Buh-Bye scope.

757Driver
11-28-2007, 12:56 PM
If this were to happen;Buh-Bye scope.

Don't think so. Check out when CAL sold off Express.

HSLD
11-28-2007, 01:24 PM
In the case of a merger or acquisition there is typically a seller and buyer. In the AMR announcement all I hear is that they are ready to divest Eagle.

Any speculation about who would want to buy? Hedge funds, other airlines?

This seems far from a done deal although I'm sure they wouldn't announce anything unless they had a plan (oh wait, we're talking about airlines :) )

meritflyer
11-28-2007, 01:41 PM
I have a very credible source from the "inside" that Skywest is looking very hard at buying Eagle.

Mark those words.

jsled
11-28-2007, 01:47 PM
In the case of a merger or acquisition there is typically a seller and buyer. In the AMR announcement all I hear is that they are ready to divest Eagle.

Any speculation about who would want to buy? Hedge funds, other airlines?

This seems far from a done deal although I'm sure they wouldn't announce anything unless they had a plan (oh wait, we're talking about airlines :) )

HSLD,
They could simply spin it off in the open market like NWA did with Pinnacle.

jsled
11-28-2007, 01:49 PM
If this were to happen;Buh-Bye scope.

Negative. Still limited to those 25 700's.:D Who cares about the mosquito jets.

WEACLRS
11-28-2007, 01:51 PM
In a press release, AA parent AMR says: "The divestiture of American Eagle is intended to provide it with the structure, incentives and opportunities to win new business and provide new opportunities for American Eagle's employees. AMR also believes that the divestiture will enable American to focus on its mainline business, while ensuring American's continued access to cost-competitive regional feed. Once the two airlines are separated, it is expected that they will operate pursuant to a mutually beneficial air services agreement under which American Eagle will continue to provide American with regional flying of a scope and quality comparable to that provided prior to the separation and on terms that reflect today's market for those services."

AMR is trying to lower their regional seat costs by requiring Eagle to compete for their business with the other large regionals, as CAL is doing with ExpressJet. This will also generate cash and stock value which will hold the shareholders at bay for a while, as no mergers between the big seven majors are going to happen anytime soon.

HSLD
11-28-2007, 01:52 PM
HSLD,
They could simply spin it off in the open market like NWA did with Pinnacle.


Not sure what you mean by that. Divest, Spin-off, sell, all seem to be the same thing. Where does the money come from?

WEACLRS
11-28-2007, 02:01 PM
Not sure what you mean by that. Divest, Spin-off, sell, all seem to be the same thing. Where does the money come from?

If they sell it to the public through an IPO (spin off or divest), then through the stock market to whom ever wants a share or two. If it's a public or private company, then through what ever means they have to raise the money, ie, cash in their bank, assets they can encumber and borrow money against, and/or selling additional shares of their own company to raise cash, whether from the market or private investors. Raising a half billion (if it would even be that much) or so to buy Eagle would not be too much trouble.

jsled
11-28-2007, 02:02 PM
Not sure what you mean by that. Divest, Spin-off, sell, all seem to be the same thing. Where does the money come from?

Think IPO of Eagle shares. THe money comes from individual and institutional investors.

jsled
11-28-2007, 02:08 PM
AMR is trying to lower their regional seat costs by requiring Eagle to compete for their business with the other large regionals, as CAL is doing with ExpressJet. This will also generate cash and stock value which will hold the shareholders at bay for a while, as no mergers between the big seven majors are going to happen anytime soon.

Could be a bad deal for Eagle pilots in the long run. If you believe Boyd, he claims there will be a lot of RJs in the desert in the not so distant future. AMR could decide they don't need all those EMBs flying Eagle colors. THen Eagle would have to find another parent to feed or else start flying "Eagle Express" a la Express Jet. That didn't work out so well for ACA (Independence Air).

WEACLRS
11-28-2007, 02:21 PM
Could be a bad deal for Eagle pilots in the long run. If you believe Boyd, he claims there will be a lot of RJs in the desert in the not so distant future. AMR could decide they don't need all those EMBs flying Eagle colors. THen Eagle would have to find another parent to feed or else start flying "Eagle Express" a la Express Jet. That didn't work out so well for ACA (Independence Air).

I agree. I think AMR needs the RJ's in the near term. But clearly the costs of operating them, along with the desire to increase share holder value, are a concern. Hence the desire by AMR to get into a position to be able to put competitive pressure on those costs. It's very hard to turn equipment over quickly. There's not a lot of production of regional aircraft in the 34 to 69 seat class available, specifically turboprops, to replace all the 50 seat RJ's. CAL is moving them out of Newark, more in response to delay pressures there than anything else, and replacing them with incoming 737's (remove four RJ's or 200 seats per day and replace with two 737's and 280 seats per day and you've reduced the number of operations while increasing available seats, ie, more seats per blip, which is the only real short term solution to delays in the NY area). But CAL can do this because they have the aircraft on order and coming in the near term. AMR, NWA, UAL, and others don't. In fact, I believe United doesn't have one new aircraft on order.

jsled
11-28-2007, 02:28 PM
I agree. I think AMR needs the RJ's in the near term. But clearly the costs of operating them, along with the desire to increase share holder value, are a concern. Hence the desire by AMR to get into a position to be able to put competitive pressure on those costs. It's very hard to turn equipment over quickly. There's not a lot of production of regional aircraft in the 34 to 69 seat class available, specifically turboprops, to replace all the 50 seat RJ's. CAL is moving them out of Newark, more in response to delay pressures there than anything else, and replacing them with incoming 737's (remove four RJ's or 200 seats per day and replace with two 737's and 280 seats per day and you've reduced the number of operations while increasing available seats, ie, more seats per blip, which is the only real short term solution to delays in the NY area). But CAL can do this because they have the aircraft on order and coming in the near term. AMR, NWA, UAL, and others don't. In fact, I believe United doesn't have one new aircraft on order.

That is the point Boyd is trying to make. Less rj's and more 737's. I believe AMR has some firm orders for the 800. As for UAL, you are correct. No new aircraft, just some A-320 orders that were deferred during the bankruptcy.

HSLD
11-28-2007, 02:57 PM
If they sell it to the public through an IPO (spin off or divest)

I'd see an IPO of a divested business unit highly unlikely, then again, I'm not a Wall Street banker. I understand how potential finance models can work in M&A but the one thing missing from the discussion that I touched on earlier is: Who.

Whichever method is used to finance a divestiture, there will be a corporate structure tied to it's management. In simple terms, AMR is the seller - who is the buyer?

If capacity reform is legislated, one potential natural market evolution would be to upgauge equipment (if further slot restrictions are part of the equation) or the "prime-time" departure/arrival premium is levied.

If AMR is trying to divest this business unit there have to be some assumptions. One is this: fully allocated, Eagle is losing more money than it would on a fee per departure basis (otherwise why sell). AMR clearly isn't going to abandon feed, so this is about the cost of feed.

I don't see a long line of investors willing to invest in a new stand alone airline that competes in the fee for departure space. Considering an over-capacity market marked by high costs and thin margins a more likely suitor is an existing airline looking to add market share.

WEACLRS
11-28-2007, 03:39 PM
Two thoughts. AMR would sell Eagle, even if Eagle was making money (fully allocated) if there was a need for new cash or if there was the ability to generate share holder value. After several years of depressed share values, new investors have bought shares or increased positions sensing rising values. They have seen that return, but are now concerned with share price growth stagnating. All airlines are coming under increasing pressure from Wall Street to do something about their share value, whether through mergers (the recent talk), or through divesting a portion of their business. Hence the talk of selling off frequent-flyer mile programs, maintenance operations, ect.

However, I think you hit the nail on the head. This is really about cost, and following the last of the trend which is to sell off your regional feed to get a more competitive cost for that feed. AMR still needs feed of the size that Eagle provides or perhaps greater. They just don't want to pay anymore for it than they have too. And with all the other network majors pursuing the same strategy, they are pretty much forced to do the same to remain competitive.

The combination of the two makes a pretty compelling argument for management. Reduce your costs, generate cash, and increase share holder value.

As for who, I agree the line may be short, but it only takes one or two. There are several private capital firms that have been in the market of buying airlines for several years. Spirit and now notably Midwest are owned (or about to be owned) by such companies. I'm sure there are others. There always seems to be someone around who wants to get into the game. So I don't think it necessarily needs to be an existing airline to make that purchase, although several have shown the willingness to do so (SkyWest buying ASA for example).

jsled
11-28-2007, 04:25 PM
I'd see an IPO of a divested business unit highly unlikely, then again, I'm not a Wall Street banker. I understand how potential finance models can work in M&A but the one thing missing from the discussion that I touched on earlier is: Who.

Whichever method is used to finance a divestiture, there will be a corporate structure tied to it's management. In simple terms, AMR is the seller - who is the buyer?

If capacity reform is legislated, one potential natural market evolution would be to upgauge equipment (if further slot restrictions are part of the equation) or the "prime-time" departure/arrival premium is levied.

If AMR is trying to divest this business unit there have to be some assumptions. One is this: fully allocated, Eagle is losing more money than it would on a fee per departure basis (otherwise why sell). AMR clearly isn't going to abandon feed, so this is about the cost of feed.

I don't see a long line of investors willing to invest in a new stand alone airline that competes in the fee for departure space. Considering an over-capacity market marked by high costs and thin margins a more likely suitor is an existing airline looking to add market share.

Hsld,
Again....Think IPO of Eagle shares. THe money comes from individual and institutional investors. The public is the "who". I don't know why you find it highly unlikely. An IPO is exactly what Continental did with Express Jet in 2002 and what Northwest did with Pinnacle in 2003. Eagle already has a corporate structure independent of AMR in place. Then again, the buyer could be an existing airline or even AMR shareholders. I don't know. But an IPO is certainly not out of the question.

HSLD
11-28-2007, 05:34 PM
Hsld,
Again....Think IPO of Eagle shares. THe money comes from individual and institutional investors.

I remember the Pinnacle IPO and that Citigroup and Morgan Stanley were the lead underwriters on that one. I understand how the financing works, but the point I guess I'm not making is that credit markets are extremely tight right now and the cost of debt will be high. Too high to underwrite an IPO? I guess we'll see.

I believe that the basis for the Eagle divestiture is to reduce the cost of feed. AMR is broadcasting that Eagle operates on the cost side of the balance sheet and not the revenue side. So the big question is can a potential suitor find value (shareholder value) in a stand alone operation?

I'm not a Wall Street banker, so my 2 cents don't amount to a thing. I am concerned about every pilot who may be affected though, and hope that an engaged pilot group at Eagle can mitigate any negative effect of this announcement.

Swedish Blender
11-28-2007, 06:20 PM
Notice AMR didn't say they were selling Executive. Got to hold on to the islands.

jsled
11-28-2007, 06:30 PM
Notice AMR didn't say they were selling Executive. Got to hold on to the islands.

"The planned divestiture would include both American Eagle Airlines, Inc., which feeds American Airlines hubs throughout North America, and its affiliate, Executive Airlines, Inc., which carries the American Eagle name throughout the Bahamas and the Caribbean from bases in Miami and San Juan, Puerto Rico."

HSLD
12-07-2007, 01:35 PM
New article on the divestiture: http://www.aviationweek.com/aw/generic/story_channel.jsp?channel=comm&id=news/AMEA12037.xml

Apollo
12-09-2007, 04:56 AM
Good Morning,

Does anyone have the number of AA pilots at AE waiting to flow back? Also, what is the timeframe to have the flow back complete.

Thanks in advance.

johnso29
12-09-2007, 07:19 AM
I have a very credible source from the "inside" that Skywest is looking very hard at buying Eagle.

Mark those words.

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA HAH!
I hear this every month, just insert a different airline every time.

Deez340
12-09-2007, 07:26 AM
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA HAH!
I hear this every month, just insert a different airline every time.

Yea, cause' there's no precedent for SkyWest buying large regional airlines.:rolleyes:

johnso29
12-09-2007, 07:32 AM
Yea, cause' there's no precedent for SkyWest buying large regional airlines.:rolleyes:

Who cares if they bought ASA. Thats when it all started. They bought ASA, and now they are going to buy every regional that gets spun off or perhaps put up for sale by their respective owner?

Deez340
12-09-2007, 07:38 AM
Who cares if they bought ASA. Thats when it all started. They bought ASA, and now they are going to buy every regional that gets spun off or perhaps put up for sale by their respective owner?

Not at all. I just think the possibility is nowhere near as laughable as your original post suggests. There is no more aggregate growth in the regional sector. Thus the only way to grow is to buy competitors in an attempt to control a larger piece of an ever-shrinking pie.

johnso29
12-09-2007, 07:45 AM
Not at all. I just think the possibility is nowhere near as laughable as your original post suggests. There is no more aggregate growth in the regional sector. Thus the only way to grow is to buy competitors in an attempt to control a larger piece of an ever-shrinking pie.


O.K. I agree. I am now walking away with my tail between my legs. :D

Flyby1206
12-09-2007, 08:24 AM
Good Morning,

Does anyone have the number of AA pilots at AE waiting to flow back? Also, what is the timeframe to have the flow back complete.

Thanks in advance.

We have a little over 200 AA flowbacks left at AE. The flowthrough/flowback agreement expires May08. Nobody knows what will happen to any flowthroughs or flowbacks after then.

SharkyBN584
12-09-2007, 11:49 AM
So,
Will the scope clause hold up? As a businessman it seems like a good thing for AMR, as a pilot, I'm not sure?? I think our scope will still protect any Regional Junk (RJ) feeder whether its Eagle or not.?:confused:

Gee...I wonder why that regional junk isn't being flown by mainline guys in the first place...

Oh, wait a second...

Deez340
12-09-2007, 12:44 PM
O.K. I agree. I am now walking away with my tail between my legs. :D

Mission accomplished!:D

swaayze
12-10-2007, 05:19 AM
Actually down to about 120 Flowbacks still remaining at Eagle. Expect all gone by summer's end if recalls continue at pace.

captjns
12-10-2007, 05:20 AM
Actually down to about 120 Flowbacks still remaining at Eagle. Expect all gone by summer's end if recalls continue at pace.


Just out of curiosity about those who are still on flowback. Will they be able to come back to main line if they are still with eagle after the sale?

NoWake200
12-10-2007, 06:16 AM
Actually down to about 120 Flowbacks still remaining at Eagle. Expect all gone by summer's end if recalls continue at pace.

Flow-Through or Flow-Backs?

I think they were talking about the Flow-Through.

Now I am confused. :p

tone
12-10-2007, 06:38 AM
Gee...I wonder why that regional junk isn't being flown by mainline guys in the first place...

Oh, wait a second...

.:mad:.:mad:.:mad:..

Flyby1206
12-11-2007, 09:44 AM
Just out of curiosity about those who are still on flowback. Will they be able to come back to main line if they are still with eagle after the sale?

Yep, company just put a Q&A on the webpage and one of the questions addressed that. Sale of AE wont affect flowbacks.

Flyby1206
12-11-2007, 09:44 AM
Actually down to about 120 Flowbacks still remaining at Eagle. Expect all gone by summer's end if recalls continue at pace.

I was way off, thanks for the correct # of FBs left