American eyes Eagle spin-off

American eyes Eagle spin-off

American Airlines is close to spinning off its regional subsidiary, American Eagle, as part of a cost-cutting programme.

“It would be good for American in terms of competitive feed, and it would be good for them in terms of being able to be competitive and generate other business,” said Gerard Arpey, CEO of American Airlines and parent company AMR.

But opposition from its pilots threatens to disrupt the process.

American has been trying to offload Eagle since 2007 but shelved the plans due to the global downturn.

However insides say that selling Eagle would prove difficult because there is little market appetite for regional airlines – airlines pay fixed rates to feed short-haul passengers to more lucrative long-haul routes. A split could also face disruption from pilots.

ADVERTISEMENT

Historically, the AMR board has been reluctant to allocate capital that would enable American Eagle to feed another airline, Arpey said.

“You can imagine that it can create some cognitive dissonance, whether it’s right or not, if Eagle were to come to the AMR board or our executive committee table and say, ‘We have a great idea: We want to invest a couple hundred million dollars in airplanes so we can feed United Airlines,’” he said.

American hopes that having an independent Eagle compete for work will reduce the cost of its regional flying.

Still, the union says it will remain involved in the process. A spokesperson said a spin-off could allow Eagle to gain business for other airlines, but said the union is reviewing its options. The union thinks American could make a decision at its May board meeting.