American to spin off Eagle

photo by caribb

American Airlines announced today that it will be spinning off its regional carrier American Eagle. In a press release earlier today, parent company AMR said that the spin off, which is expected to be completed by 2008, "is in the best interests of AMR and its shareholders". American Eagle could be spun off to AMR shareholders or to a third party (or in yet another way).

AMR went on to say that the spin off will allow American to focus on its mainline operations but still have access to a "cost-competitive regional feed". However, this depends upon how the spin off proceeds - if Eagle gets sold in parts (i.e., if one airline were to take its operations at Miami, and another airline were to take its operations at Chicago), then this might be a bit problematic.

A possible explanation for the spin off (besides the official corporate explanation) that I've seen comes down to finances. American Eagle uses a capacity purchase agreement with American Airlines. Eagle only makes money if it can operate for less than American Airlines pays it. But if Eagle's costs go up compared to other, similar carriers, the cut that American Airlines gives Eagle might have to go up to. It might be that AMR is looking for lower-cost regional feed in the future.

Since the event was only announced today, there are certainly going to be a lot more details announced in the future - stay tuned.

8 comments:

trs80 said...

I hope this spin off create help to finish the AA monopoly in the Caribbean region.

Everybody know that AA use his position in the market to set abusive fares.

A 45 minutes trip between two destination in the Caribbean can cost up $500. When you can travel to USA for less even to Europe if you find a good deal.

Maybe if AA and AE compete in the same routes we can get access to low fares.

AA STOP THE ABUSE

The Airline Blog said...

While AA does have a significant presence in the Caribbean area, it's not the only key player - Delta has a rather large (and growing) presence there too.

It's too soon to say if AA and Eagle would compete on the same routes, but if they did, prices would almost certainly go down a bit.

Offers said...
This comment has been removed by the author.
trs80 said...
This comment has been removed by the author.
trs80 said...

Well many big players fly between the Caribbean region and USA. Like Jetblue, Spirit, Delta, continental and more.

But only AA/AE provide service into the region destinations.
Another small players compete there like CAPEair and Liat. But they avoid to compete in some AA routes ie. Puerto Rico - Dominican Republic

Anonymous said...

Anyone who has flown Eagle knows that this is truly a 'low budget' operation.
AA dumped may routes they deemed as unprofitable onto Eagle.
Eagle's aircraft are old, tired, and show the wear and tear of an operation sqweezing every single dime.
Try spending close to three hours jammed into a RJ140 and then working a full business day.
AA abandoned many cities.
Those cities are populated with travelers who are choosing other airlines because of Eagles many shortcomings.
I'm not surprised that after abandoning all of those travelers, that now, those travelers are abandoning Eagle.
I expect the new operation to be next on the Chapter 11 hit parade.
This is a sad commentary on commercial aviation operations.

Vicky said...

I got a nice McNabb jersey from sport-jerseys.biz.

Anonymous said...

^^Thanks!!

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