AMR Corporation subsidiary AMR Eagle Holding Corporation has filed a Form 10 Registration Statement with the U.S. Securities and Exchange Commission. The Form 10...

The parent company of American Airlines and sister regional carrier American Eagle, AMR Corporation, has taken another step in preparing Eagle for a potential spin-off as an independent, publicly traded company.

AMR Corporation subsidiary AMR Eagle Holding Corporation has filed a Form 10 Registration Statement with the U.S. Securities and Exchange Commission. The Form 10 filing marks the next step in a potential spin-off of American Eagle.

The filing 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. In the spin-off, AMR Corporation would distribute to its stockholders 100 per cent of the outstanding shares of Eagle on a pro rata basis, and AMR Corporation would not retain any ownership interest in Eagle.

On a pro forma basis, in 2010, Eagle generated $1.2 billion in revenue, with more than $250 million from ground-handling services.

This is the official logo of American Eagle, under its ownership by American Airlines' parent company AMR Corporation. AMR has taken preparatory steps to spin off American Eagle as an independent, publicly traded company. If the spin-off happens, it is possible American Eagle might have to change its logo

As an independent company American Eagle would operate the third-largest regional airline in the United States. American Eagle provides the vast majority of American’s regional flight operations.

Under a nine-year air services agreement with American, Eagle would initially operate 281 aircraft on behalf of American.  American could withdraw from Eagle and re-bid up to 12 turboprop aircraft per year beginning in 2012 and a specified number of jet aircraft up to 40 per year beginning in 2014. The agreement would also include a provision to reset rates to reflect any change in market levels for regional traffic-feed operations after four years.

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. Under a ground-handling agreement, Eagle would provide ground handling services to American at 106 airport locations.  The agreement would have an eight-year term, but would provide American the right to re-bid ground handling services at a specified number of airports each year.

American Eagle is the sister regional airline of American Airlines and operates a large fleet of Embraer and Bombardier regional jets as well as ATR 72 turboprops throughout American's domestic and Caribbean network

AMR Corporation and American Eagle say they believe a spin-off of Eagle as a separate, publicly traded company would offer a number of benefits. According to AMR, these benefits would enable:

● American to diversify the source of its regional feed over time;

● American Eagle to grow its business by better competing to offer regional flight services to other mainline carriers;

● Market forces to ensure American has continued access to the most competitive regional flight and ground-handling rates and service;

● Each company to allocate resources and deploy capital in a manner consistent with its strategic priorities in order to optimize total returns to shareholders; and

● Investors to value the two companies based on their particular operational and financial characteristics.

This photograph shows an American Eagle Embraer ERJ-135 taxiing out to the runway at New York LaGuardia

“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,” says Gerard Arpey, AMR Corporation’s chairman and CEO. “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.”

“We’re excited to take this important step toward becoming an independent airline,” says Dan Garton, American Eagle’s president and CEO. “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.”

American Eagle operates 64-seat ATR 72-200 and ATR 72-500 turboprops through its Executive Airlines unit. The ATR 727-200s operate Florida and Caribbean routes from Miami and San Juan in Puerto Rico. The ATR 72-500s operate routes of under 500 miles from American Airlines' hub at Dallas/Fort Worth International Airport. This photograph shows an American Eagle ATR 72-212 landing at Princess Juliana International Airport, St. Maarten on a flight from San Juan

If Eagle were spun off from AMR, all its aircraft will remain on Eagle’s operating certificates, However, prior to any divestiture, the company would expect to transfer to American Airlines all of its jet aircraft and the associated indebtedness, on which AMR is already a guarantor. Ownership of the jet aircraft would provide American control over the regional aircraft, which AMR says are pivotal to American’s network, and would protect AMR’s position as guarantor of the debt.

The spin-off of Eagle would be subject to certain conditions. These would include U.S. Securities and Exchange Commission (SEC) clearance; receipt of regulatory approvals; an opinion from tax counsel and a favorable ruling from the Internal Revenue Service regarding the tax-free status of the spin-off to AMR shareholders; execution of inter-company agreements; and approval by AMR’s board of directors. AMR stockholder approval of the spin-off is not required.

AMR Corporation notes that, while it has taken another step toward a spin-off of American Eagle, it could yet decide to retain Eagle – or the divestiture of Eagle could take another form, such as its sale to another company.