American Eagle Pilots Talk About “The Spin”

American Eagle’s division of The Air Line Pilots Association has sent out an update from the union’s most recent meeting with American Eagle president and CEO Dan Garton. The meeting focused on the potential spinoff of American Eagle by AMR Corporation. AMR is the holding company which owns American Eagle as well as American Airlines.


Eagle

ALPA’s message to its members: Nothing has been decided, but American Eagle management is continuing to look into the idea.

“Although
we are not positive that Eagle will be divested, every indication is that a
divestiture is more real today than ever before,” wrote Tony Gutierrez,
chairman of ALPA’s master executive council at American Eagle.

Here
are some excerpts from the letter:

August 5, 2010

Fellow
American Eagle pilots:

On
Wednesday of this week, SkyWest Airlines announced that they are purchasing
ExpressJet Airlines for $133 million in an all cash deal and will merge ExpressJet Airlines with their wholly owned carrier, Atlantic Southeast Airlines
(ASA). This is the third regional consolidation in the past month. As
you know, Trans States Airlines and Pinnacle Airlines recently purchased
Compass Airlines and Mesaba Airlines from Delta.

There
is no surprise that in the wake of significant mainline consolidation over the
past few years, the regional airlines are following suit. The regional industry
now consists of four multi carrier airlines; Republic Airlines, which owns Shuttle America and Chautauqua, with a combined fleet of 206 aircraft, SkyWest Airlines, which owns
ASA and ExpressJet, with a combined fleet of 696 aircraft, Pinnacle
Holdings, which owns Pinnacle Airlines, Mesaba Airlines, and Colgan Airlines,
with a combined fleet of 297 aircraft, and Trans States Airlines, which owns
GoJet Airlines and Compass Airlines, with a combined fleet of 89 aircraft.
Additionally, there are five stand alone airlines, Air Wisconsin, which
operates 70 aircraft, Comair, which operates 120 aircraft, PSA, who operates 49
aircraft, Horizon, which operates 58 aircraft, and American Eagle, which
operates 282 aircraft.

You
are all now aware that American Airlines has announced that it is exploring the
divestiture of American Eagle. On Tuesday, August 3rd, the MEC invited Eagle’s
new President, Dan Garton to address the MEC. This resulted in a frank
discussion about the potential sale of American Eagle. Although we are not
positive that Eagle will be divested, every indication is that a divestiture is
more real today than ever before. In his presentation, Mr. Garton described
four basic ways that Eagle may be divested. The first is to be sold to a
‘strategic buyer’ such as a private equity firm. Private equity acquisitions of
regional carriers are rare since strategic buyers attempt to buy low and sell
high. In order to do this they often look for extreme revenue and price
volatility, which is not common in the regional industry due to long term
regional mainline air services agreements. The second type of divestiture would include a merger or acquisition with another carrier. Based on SkyWest’s acquisition of
ExpressJet and last month’s Mesaba and Compass purchases, the industry is
definitely ripe for this kind of activity. The third type of divestiture occurs
through an initial public offering or IPO. In an IPO, an announcement is made
that Eagle will soon be made public, followed by AA providing much fanfare and
discussion about this soon to be publically traded airline, in an attempt to
garner the highest price per share. The fourth type of divestiture is a stock
split divestiture or ‘spin.’ In a spin, AA simply distributes shares of
American Eagle to its existing shareholders and Eagle effectively becomes a
publically traded, independent company on that day.

Your
MEC is diligently investigating and pursuing all avenues to protect the
interests and rights of American Eagle pilots. In the interim, we want to
emphasize the importance of providing the highest quality product that we can
offer. It is in our best interest as pilots to continue to distinguish
ourselves and operate the safest and best airline regardless of ownership.
Please continue to fly safe, and do not allow potential distractions associated
with our future ownership structure to interfere with the safety and
reliability of our operations. We will continue to keep you updated as we learn
more about AA’s plans.

Fraternally,

Tony Gutierrez

EGL ‐ MEC Chairman