With all of the attention to the new aircraft order for American, the decision to divest American Eagle is flying under the radar today. Look for an IPO for American Eagle later this year, with the intention to expand the scope of the carrier to serve carriers other than American as an independent player in the market. This should provide benefits to both AA, through cash, and Eagle, which will have an opportunity to compete for regional flights of other carriers as the regional industry consolidates to a few players.
As the economics of regional jets continue to face pressures, scale economics are increasingly important to keep seat-mile costs as low as possible. The question is can Eagle, once on its own, capture some of the market from Delta, United and others to more effectively compete. Time will tell, but it appears a sound move as “critical mass” for regional carriers seems to be growing rapidly to include multiple operations with lean management. The consolidation trend will continue, and Eagle wants to continue to be a player. The timing of this divestiture is sound for AA.