Group Including BA Reportedly Interested In Carrier

It's almost unfathomable... and may be illegal, in the eyes of the Department of Transportation. But that hasn't stopped rampant speculation on the news American Airlines may soon be the target of a private buyout bid, by a group including investment firm Goldman Sachs and British Airways.

Business Week cited unnamed sources in its brief report Thursday. Several airline analysts discounted the story, stating any such acquisition of the world's largest airline in terms of passenger-miles flown would almost certainly fail to pass muster with the US government.

"While anything is possible in this high liquidity world of private equity, we're skeptical that this story has merit," Morgan Stanley analyst William Greene told the Associated Press.

According to the Business Week report, the buyout group plans to bid soon on American's parent company AMR, to the tune of between $46 and $52 per share. That translates to a total bid somewhere around $10.5 billion -- and would amount to a significant premium over AMR's closing price Thursday of a nickel over $38, said Tulsa World.

AMR spokesman Tim Smith did little to quell rumors.

"We won't speculate on what our potential role -- if any -- might be," Smith said. "If it becomes appropriate to comment further, we will do so."

A spokesman for British Airways declined to comment to the Associated Press. Goldman Sachs officials didn't return phone messages.

Doubting analysts cited several factors in downplaying the buyout reports -- including American's high debt load, and sheer size of operations. The most significant strike against such a merger, though, is the US government's attitude towards foreign ownership of domestic airlines.

As Aero-News reported, the DOT tentatively denied an application for an operating license by upstart low-cost carrier Virgin America in December. In its refusal, the DOT noted Virgin America would have to revise its ownership, corporate structure and associated agreements to be 75 percent-owned and actually controlled by US citizens before it could receive an operating certificate.

Virgin revised its ownership and resubmitted its application in January. The verdict is still out for that carrier... which is considerably smaller than American.

FMI: www.aa.com, www.britishairways.com, www.goldmansachs.com/