American Hints at Selling Eagle

April 2, 2007

American Airlines parent AMR Corp. is working to trim expenses at regional carrier American Eagle before deciding whether it should be kept, spun off or sold, Chief Financial Officer Tom Horton said Thursday.

AMR wants to ensure that Eagle's costs for ferrying passengers to American, the world's largest airline, are "competitively priced," Horton said in an interview.

Rivals, including Continental Airlines Inc., have shed regional affiliates in recent years.

Eagle is among assets AMR could choose to sell as a quick way to raise cash and potentially lower operating costs. Fort Worth-based AMR posted an annual profit last year, its first since 2000.

"It's something that we continue to evaluate," Horton said. "There are regional carriers who have lower costs than Eagle."

AMR doesn't release cost figures for Eagle, which operates 298 planes and has about 12,000 employees. American's regional affiliates, which also include three independently owned carriers operated under the American Connection brand, had $2.5 billion in revenue last year.

"They've got plenty of cash, so there's no pressure to sell it," said Ray Neidl, a Calyon Securities Inc. USA analyst in New York. "Their philosophy is different than other airlines. They feel it's a part of their system and they appear to want to hang onto it."

AMR has said it expects to end this quarter with about $6 billion in cash and short-term investments.

Shares of AMR fell 48 cents to close at $30.14 on the New York Stock Exchange.

Eagle CEO Peter Bowler is "focused on continued improvement and grinding out costs as long as it's sensible," Horton said. "We're working on it and have more work to do."

Eagle makes about 1,800 daily flights to 161 cities. Its routes range from 45 miles to 1,371 miles.

Continental spun off ExpressJet Holdings Inc. in 2002. ExpressJet still serves Continental, which has sold nearly all of its holdings in the company.

Northwest spun off its Pinnacle Airlines Corp. regional operation in 2003, while Delta sold one of its commuter partners, ASA Holdings Inc., to SkyWest Inc. in 2005 and is considering a sale of its Comair Holdings Inc. after it exits bankruptcy protection next month.

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