Questions on Holding Companies, specifically AMR Eagle Holdings Corporation

Posted by 2.7182818284590... on August 28, 2009, 10:57 am

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Questions on Holding Companies, specifically AMR Eagle Holdings
Corporation

I was reading on wikipedia about holding companies. I was surprised
on a few things about holding companies.

1. AMR Eagle Holdings Corporation owns all of American Airlines. How
is this ownership different than if American Airlines were NOT owned
by a holding company?

2. What benefits does it have if ABC Corporation were a part of a
holding company VS if it were not part of a holding company?

3. What are the differences in a mutual fund and a holding company?

So why couldn't the founders of Google be a holding company that owns
only one stock (that of Google itself)?

AMR Corporation (NYSE: AMR) is a commercial aviation business and
airline holding company based in Fort Worth, Texas, United States.[1]
Formed in 1982, as part of American Airlines's reorganization, its
name derives from American Airlines's ticker symbol on the New York
Stock Exchange. In addition to American Airlines, AMR owns TWA
Airlines LLC, (formerly Trans World Airlines) and regional airlines
American Eagle Airlines, successor to Simmons Airlines, and Executive
Airlines by way of AMR Eagle Holdings Corporation. Regional Airlines
flown in conjunction with American Airlines marketing brand, known as
AmericanConnection, are independent of AMR Corporation's divisions and
subsidiaries, but do operate in conjunction with them in order to
provide seamless connections to AMRs two principal airline holdings.
AMR's and AA's Chairperson, President, and CEO is Gerard Arpey.[2]

Posted by AZDuffman on August 28, 2009, 11:37 am

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wrote:

> Questions on Holding Companies, specifically AMR Eagle Holdings

> Corporation

> I was reading on wikipedia about holding companies. =A0I was surprised

> on a few things about holding companies.

> 1. =A0AMR Eagle Holdings Corporation owns all of American Airlines. =A0Ho=

> is this ownership different than if American Airlines were NOT owned

> by a holding company?

Lots of legal reasons why and benefits to doing this. Basically
holding companies protect assets and allow them to be bought and sold
more easily. Take an example from "The West Wing" where they
portrayed an oil company making each tanker its own "holding company"
so if there were a spill punative damages would be limited. Or go
back to Texas Air in the 1980s. TA had just a few employees and small
office but owned Eastern, Continental, and other assets. When Eastern
went on strike TA had the option of "leasing" the route to Continental
and keep flying. Suggested Reading: "Grounded: How Frank Lorenzo
Destroyed Eastern Airlines."

> 2. =A0What benefits does it have if ABC Corporation were a part of a

> holding company VS if it were not part of a holding company?

Same as above, limited liability and keeping assets seperate. Lets
make another example. Say in the day GM had all five divisions as
individual holdong companies. When they closed Oldsmobile they could
just say "closed" and that was that. But as part of GM the dealers
can say, "HEY, buy out the franchise if you want to do that!" Again,
more legal things are involved to ask a lawyer about, but that is the
gist of it.

> 3. =A0What are the differences in a mutual fund and a holding company?

Mutual funds are owned by many individuals for a stated investment
goal. Holding companies are owned by very few even one entity to
operate a business. They should not be discussed together for the
most part.

> So why couldn't the founders of Google be a holding company that owns

> only one stock (that of Google itself)

Yes, and they might. Here is a good example. Many performers, say
Billy Joel or someone like him, set up as corporation. Thus "Billy
Joel, Inc" would stage all the concerts and cut the individual a
paycheck.

Posted by 2.7182818284590... on August 28, 2009, 2:16 pm

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AZDuffman,

You did a good job explaining all this to me. Regarding mutual funds
*VS* holding companies: But even a corporation like Google is owned
by hundreds of thousands of investors, and also, AMR is also owned by
thousands of investors.

Why can't GE, Ford, Microsoft all of a sudden become a holding company
of itself?

> > 3. =A0What are the differences in a mutual fund and a holding company?

> Mutual funds are owned by many individuals for a stated investment

> goal. =A0Holding companies are owned by very few even one entity to

> operate a business. =A0They should not be discussed together for the

> most part.

> > So why couldn't the founders of Google be a holding company that owns

> > only one stock (that of Google itself)

> Yes, and they might. =A0Here is a good example. =A0Many performers, say

> Billy Joel or someone like him, set up as corporation. =A0Thus "Billy

> Joel, Inc" would stage all the concerts and cut the individual a

> paycheck.

Posted by AZDuffman on August 28, 2009, 2:53 pm

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wrote:

> AZDuffman,

> You did a good job explaining all this to me. =A0Regarding mutual funds

> *VS* holding companies: =A0But even a corporation like Google is owned

> by hundreds of thousands of investors, and also, AMR is also owned by

> thousands of investors.

> Why can't GE, Ford, Microsoft all of a sudden become a holding company

> of itself?

Not sure what you mean "a holding company of itself?" There are SEC
rules about what is called circular-ownership so for example you could
not have Company A owning Company B which owns Company C which owns
Comapny A.

If I remember right, Texas Air was publically traded, but owned lots
of holding companies. They even did things like fired all the Eastern
ramp workers who made $15/hr way back, then made a holding company of
something like "Gate Services, ltd" paying $7/hr. Point of the
example that corporations can and do make holding companies, but need
a reason, business, tax, or otherwise, to do so.

Posted by Rod Speed on August 28, 2009, 3:59 pm

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2.7182818284590... wrote:

> AZDuffman,

> You did a good job explaining all this to me. Regarding mutual funds

> *VS* holding companies: But even a corporation like Google is owned

> by hundreds of thousands of investors, and also, AMR is also owned by

> thousands of investors.

Thats just with the publicly listed corps. Those that arent listed are generally
owned by far fewer.

> Why can't GE, Ford, Microsoft all of a sudden become a holding company of

itself?

Because it makes no sense to do it that way.

You dont have to do the IPO if you dont want it publicly listed etc.

In fact almost all started that way.

Its the IPO that makes those like Gates and Brin sinking
rich tho, which might just be why they go that route.

>>> 3. What are the differences in a mutual fund and a holding company?

>> Mutual funds are owned by many individuals for a stated investment

>> goal. Holding companies are owned by very few even one entity to

>> operate a business. They should not be discussed together for the

>> most part.

>>> So why couldn't the founders of Google be a holding company that

>>> owns only one stock (that of Google itself)

>> Yes, and they might. Here is a good example. Many performers, say

>> Billy Joel or someone like him, set up as corporation. Thus "Billy

>> Joel, Inc" would stage all the concerts and cut the individual a

>> paycheck.