AMR's plan to divest American Eagle fires up sector
By Laura Mandaro, MarketWatch
Last Update: 4:53 PM ET Nov 28, 2007
SAN FRANCISCO (MarketWatch) -- Airline shares rallied sharply after AMR Corp. said Wednesday afternoon it planned to divest regional carrier American Eagle next year, bolstering investors' hopes that carriers would take more actions to sweeten shareholder returns.
Helped by spikes in the shares of AMR Corp. (AMR: news) and US Airways Group Inc. (LCC: news) , the Amex Airline Index (.XAL: news) rallied 4.1% to 40.02 points, with 12 of 14 stocks in the benchmark index gaining. On Tuesday, the gauge closed 1.4% higher.
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AMR, which has been under pressure by a large investor to boost its stock price, said Wednesday it plans a sale, spin-off or another route to separating its regional carrier American Eagle next year.
Executives at the Ft. Worth, Texas airline operator, the biggest in the United States by paid miles flown, had previously said they were considering a separation but had not set a timeline. See full story.
AMR shares closed up 6.9% to $21.98. US Airways shares closed 7.5% higher at $20.97.
Among other big movers, shares in regional carrier Mesa Air Group (MESA: news) jumped over 9% to $3.45, while Delta Air Lines, Inc. (DAL: news) gained nearly 7% to $18.77.
Northwest (NWA: news) , the fifth-largest U.S. carrier, climbed almost 5%, as did regional carrier SkyWest, Inc. (SKYW: news) .
Airline stocks got help from the broader market, where the major indexes rallied on comments from a Federal Reserve official that the central bank could be "nimble" in its monetary policy, suggesting the possibility of another interest rate cut in December.
Led by the financial sector, the Dow Jones Industrial Average ($INDU: news) gained 331 points, or 2.6%, to 13,289.5, with all of the blue-chip index's 30 components ahead. The S&P 500 (SPX: news) rallied 2.9% to 1469.02 points. See more markets coverage.
Also, crude-oil futures fell for a third straight day on Wednesday, closing down nearly $4 to the lowest in two weeks. Data showed U.S. crude inventories fell less than expected, while the Organization of Petroleum Exporting Countries' president said the cartel is ready to pump more oil.
Crude-oil futures for January delivery ended down $3.8, or 4%, at $90.62 a barrel on the New York Mercantile Exchange, the lowest closing level since Nov. 14. The contract has lost $7.56 since last Friday's record close of $98.18. See full story.
Laura Mandaro is a reporter for MarketWatch in San Francisco.
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