AMR Corporation took the next step Thursday in the process of spinning off its regional carrier American Eagle by filing the required paperwork with the U.S. Securities and Exchange Commission.
The document describes the potential spin-off, provides an overview of Eagle’s business, management and its ongoing relationship with American Airlines, and provides historical and pro forma consolidated financial statements of Eagle, the Texas-based carrier said.
“The Form 10 filing marks the next step in a potential spin-off of Eagle and in the spin-off, AMR Corporation would distribute to its stockholders 100 percent of the outstanding shares of Eagle on a pro rata basis, and AMR Corporation would not retain any ownership interest in Eagle,” the company said in a statement posted on its website.
Last year, Eagle generated $1.2 billion in revenue with more than $250 million from ground handling services. AMR announced plans to divest its regional carrier a little over a month ago.
“We’re excited to take this important step toward becoming an independent airline,” said Eagle President and CEO Dan Garton. “Eagle has more than 25 years of experience providing regional air service to American Airlines and we look forward to continuing that relationship for many years to come. Likewise, we are eager to compete for new business and new customers, offering growth opportunities for Eagle and our employees.”
Upon completion of the planned spin-off, Eagle would operate the third largest regional airline in the United States as it provides the vast majority of American’s regional flight operations. Furthermore, under a nine-year air services agreement with American, Eagle would initially operate 281 aircraft on behalf of American.
But the agreement also states that American has the choice to withdraw from Eagle and re-bid up to 12 turbo prop aircraft per year beginning in 2012 and a specified number of jet aircraft up to 40 per year beginning in 2014.
“AMR and Eagle believe a spin-off of Eagle as a separate, publicly-traded company would offer a number of benefits that would enable American to diversify the source of its regional feed over time and Eagle to grow its business by better competing to offer regional flight services to other mainline carriers,” the company told the SEC.
Eagle would also operate one of the largest ground handling operations in the U.S., serving American Airlines and other passenger airlines at more than 100 airports in the U.S., the Bahamas, the Caribbean and Canada, including the Luis Muñoz Marín International Airport in Carolina.
The spin-off agreement also commits Eagle to providing ground handling services to American at 106 airport locations, for eight years. However, American has the right to seek other ground handling services at specified airports each year.
“The filing of Eagle’s Form 10 is an important milestone in a potential spin-off that we expect would provide significant benefits for both companies and maximize value for our shareholders,” said AMR Chairman and CEO Gerard Arpey. “The spin-off would enable American over time to diversify its regional feed and to continue to procure the most competitive rates and service, while also enabling Eagle to more effectively compete for new business. We look forward to taking the next steps toward completing this process.”
Even though AMR filed documents with the SEC, it could still decide to retain Eagle, or the divestiture of Eagle could take another form, such as a sale, company officials said.
Citi and Evercore Partners are acting as financial advisors to AMR Corporation.