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THE MIAMI HERALD
AMR In Deal To Sell Back Airline To Joaquín Bolívar
Executive to keep ties to American
By INA PAIVA CORDLE
November 7, 2002
Executive Airlines' founder has agreed to buy back the carrier, which operates American Eagle's Miami and San Juan flights, AMR Corp. said Wednesday.
Joaquín Bolívar, a San Juan businessman and hotelier who founded the airline 23 years ago, has signed a letter of intent to buy Executive under a marketing partnership with American Eagle, the regional airline affiliate of American Airlines.
AMR did not disclose financial terms of the purchase, which is expected to be completed by the end of the first quarter of 2003.
Executive operates 246 daily departures, serving 40 destinations in Florida, the Bahamas and the Caribbean. The airline employs 727 in Miami and 1,230 in San Juan.
American spokeswoman Martha Pantin said American Eagle is selling Executive to ensure that American Airlines complies with its contract with the Allied Pilots Association, the union for American Airlines pilots. The contract limits the amount of flying that can be done while American pilots are on furlough.
Pantin said the spinoff will preserve jobs at Executive and American Eagle by avoiding the need to ground additional turboprop or regional jet aircraft, which would have been the only alternative, to meet the contractual limitations.
At the same time, by selling to Bolívar, Executive will continue to provide American with valuable and profitable feed traffic, she said.
''AMR was pleased to be able to sell back to the man who founded the airline 23 years ago,'' Pantin said. ``He's a prominent Puerto Rico businessman who has an excellent reputation for integrity and a keen business sense.''
Bolívar is chairman and chief executive of two San Juan hotels: the Water Club and the Excelsior. He founded Executive Air Charter in 1979 and owned Puerto Rico's largest chain of travel agencies, Bithorn Travel, from 1990 to 1999.
''He has a good stature in the community and is well known in the travel and hotel markets,'' said Rick Newman, president of the Puerto Rico Hotel and Tourism Association.
Bolívar also has certain political ties to Miami. Campaign records show that in 1994 he donated $500 to Larry Hawkins' failed Miami-Dade Commission campaign and another $500 to Arthur Teele Jr.'s failed mayoral campaign in 1996. Bolívar did not return calls placed to his San Juan hotels Wednesday, but instead referred calls to AMR.
Aviation analyst Ray Neidl, with Blaylock and Partners, praised the sale.
''I think it's good,'' he said. ``The reason American is doing it is, one, to raise money, and two, it gives them more flexibility and use of [regional jets].''
Neidl said he could not yet estimate the value of the deal.
The sale comes as AMR is trying to reinvent itself, cutting $4 billion in costs, while laying off employees, reducing capacity and delaying aircraft deliveries.
AMR Chief Financial Officer Jeff Campbell told analysts last month, when the company reported a $924 million third-quarter loss, that it would consider selling its noncore assets, including American Eagle.
But American Eagle pilots, members of the Air Line Pilots Association, vehemently oppose the sale.
''Apparently AMR's plan is to sell off, downsize and outsource the most profitable portion of its operations, American Eagle, in order to sustain its least profitable subsidiary, American Airlines,'' Herb Mark, chairman of the American Eagle unit of ALPA, said in a statement.
The union said that in 1997 American Eagle pilots and management reached an agreement that eliminated the possibility of strikes for 16 years. In exchange, a merger of the four then-separate American Eagle carriers with a single pilot seniority list was negotiated.
''The sale of Executive repudiates the basic promise made by American Eagle at the heart of that agreement -- a single carrier, a single contract and a long-term commitment to the development and growth of the American Eagle system,'' Mark said.
American Eagle spokeswoman Lisa Bailey disputes that.
''Eagle never agreed to combine carriers. Our agreement was to combine seniority lists, not airlines,'' she said. ``If the intention was to combine the airlines, then we wouldn't have a specific provision in the contract allowing the company to sell a portion.''
American Eagle has shrunk its Miami International Airport operations since Sept. 11, and now ranks as the airport's fourth-largest carrier. Year-to-date, American Eagle has flown 880,936 passengers through MIA, representing 3.9 percent of the airport's passenger volume, said airport spokeswoman Inson Kim.
The flights from Miami and San Juan will be operated using the AmericanConnection name, which is licensed by American to independent regionals that provide American with feed traffic. Passengers will continue to earn American frequent-flier miles.
Gary Ellmer, Executive Airline's current president, will remain at Executive after the sale, American Eagle said.
Executive Airlines has 727 employees on its Miami workforce and 1,230 in San Juan.
Among the 246 daily departures, 43 are from Miami and 83 from San Juan. Destinations from Miami include Orlando; Jacksonville; Fort Myers; Key West; and Freeport, George Town, Marsh Harbour and Nassau, Bahamas.