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Wednesday, October 30, 2002

AMR Funds on the Block

by: Ki Kim

There may be a bargain in the offing. American Airlines is shopping its AMR Investment Services arm to raise cash as it turns its focus to core operations and assets and as airliners continue to labor under dismal conditions. AMR, the parent of American Airlines, posted a loss of $924 million for the third quarter.

Indeed, a spokesperson told the MFWire.com that the airline has hired Salomon Smith Barney to estimate the value of its investment-services business, as it looks to unload some successful, non-core business units. The investment arm, which was founded in 1987, manages about $27 billion in assets, roughly half of which consists of company cash and retirement funds. It also employs some 60 workers.

The fund unit was initially formed when the airline converted its internal pension management abilities into a for-profit unit under the direction of William R. Quinn, president of AMR Investment Services. The firm has since marketed its sub-advised family of funds to other Fortune 1000 companies. Some $9 billion comprises AMR's AAdvantage Funds' assets under management, while the remaining $5 billion include assets managed for outside corporations, cities and credit unions.

AMR has also marketed its funds to the investment advisor market. No representives of the firm exhibited at this week's Schwab Impact 2002 conference in Washington, D.C.

The spokesman noted that the company expects Saloman to provide an estimate as quickly and comprehensively as possible, so that AMR can also follow up with a relatively fast decision. He confirmed that reports estimating the unit's price tag in the $140 to $190 million range were a "reasonable" assessment from the company's viewpoint.

In the meantime, Gary Chase, an analyst for Lehman Brothers, questioned the move. The analyst told The Dallas Morning News that other assets could be sold to raise more cash, citing the American Eagle commuter airline, unmortgaged aircraft, AMR's stake in a computer reservation system and real estate holdings.  

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