American Eagle airline to be sold or fly free

DALLAS -- The parent of American Airlines said Wednesday it plans to sell or spin off its American Eagle regional carrier next year. Its shares rose 6.9 percent.

Investors have been pressing AMR Corp. to sell the regional airline and other assets, moves they say could raise money and lift AMR's stock price.

American Airlines is the nation's biggest airline. The industry has been under pressure from record fuel prices. But AMR has posted six straight profitable quarters as planes were more full and passengers paid higher average fares.

Analysts said it was too early to put a price on American Eagle but high fuel costs could make it hard to get top dollar.

American Eagle operates regional jets that connect American Airlines hubs such as Dallas-Fort Worth with smaller cities. It has about 300 planes and operates about 1,700 daily flights to more than 150 cities in the U.S., Canada, Mexico and the Caribbean. It generates annual revenue of about $2.3 billion.

Fort Worth-based AMR said in a statement it is still studying whether to spin off Eagle to AMR shareholders, sell to a third party or divest the carrier in some other way. Although planned for 2008, the timing of the divestiture could be affected by economic, industry and financial-market conditions, the company said.

AMR said divesting Eagle "is in the best interests of AMR and its shareholders." AMR said the move would also give Eagle the chance to win new business and provide new opportunities for its employees.

Shares of AMR jumped $1.42 to $21.98 Wednesday after peaking at $22.66.

Chief Financial Officer Thomas Horton said American Airlines expects to continue using Eagle as a feeder airline "for many years to come." He said a sale or spin-off could reduce Eagle's labor costs, making it a cheaper supplier of connecting passengers for American.

An independent Eagle could grow by seeking connecting business from other airlines. As it grows and adds entry-level employees, "it also begins to average down the average seniority of the work force and can thus make Eagle that much more cost-competitive," Horton said.

The American Eagle pilots' union didn't take a position on the announced divestiture.

The divestiture would also include Eagle's Executive Airlines Inc. affiliate, which operates American Eagle flights in the Bahamas and the Caribbean from bases in Miami and San Juan, Puerto Rico.