Iceland Group Top Holder of AMR Shares

FL Group, an Icelandic investment company, has increased its holdings in American Airlines parent AMR Corp. to 8.6 percent, becoming the No. 1 shareholder in the world's largest carrier.

FL Group is "very excited about this investment," CEO Hannes Smarason said Thursday in a statement that did not specify the number of shares.

Based on 237.2 million shares outstanding and Wednesday's closing price, the stake is about 20.5 million shares, or about $788 million. That gives Reykjavik-based FL Group the largest holding by dollar value in a top-five U.S. airline, according to data compiled by Bloomberg.

AMR's shares have surged 24 percent since Dec. 26, when FL Group said it held a 5.98 percent stake.

"It makes sense for guys like them to double down on their investment," said Ray Neidl, a New York-based Calyon Securities Inc. analyst. AMR's "fundamentals are still strong," said Neidl, who rates the shares as "buy."

FL Group disclosed its initial stake in Fort Worth-based AMR amid industry speculation about airline mergers driven by US Airways Group Inc.'s bid for Delta Air Lines Inc. At the time, FL Group asked to meet with AMR management to discuss possible tie-ups.

The expansion of FL Group's holdings came as merger talk subsided with US Airways' scrapping of its Delta offer on Jan. 31.

Jeffrey Gendell, manager of hedge fund Tontine Management LLC in Greenwich, Conn., had been AMR's biggest investor with a 7.6 percent stake as of Dec. 31, according to Bloomberg data.

FL Group's current holdings include a 22.4 percent stake in Finnair Oyj, Finland's state-controlled airline. It sold its last wholly owned carrier, Sterling Airlines of Denmark, on Dec. 27 and previously owned Icelandair.

In April, it sold a 17 percent stake in EasyJet PLC, Europe's second-largest low-cost carrier, for a profit of 140 million euros ($183.8 million).

AMR spokesman Andy Backover said his company would not comment on the FL Group stake or on whether American executives met with FL Group officials.

FL Group spokeswoman Anita Scott said she had no comment.

U.S. law limits foreign investors to 25 percent of a U.S. airline's voting equity.

Shares of AMR Corp. fell 51 cents Thursday to $38.02 on the New York Stock Exchange. They have gained 26 percent this year.

FL Group's shares rose 0.2 krona to 33.2 kronur in Reykjavik.

AMR posted a $231 million profit for 2006 to end five consecutive years of losses.

It is the world's biggest carrier by traffic and is the only major U.S. airline with a traditional hub-and-spoke network that hasn't sought bankruptcy protection.

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