AMR Corporation (NYSE:AMR) is carrying a lot of hidden value, according to many analysts. The American Airlines parent has a low price/earnings multiple, improving balance sheet, developed route network and many valuable non-airline assets that could eventually be spun-off.

AMR is trading well off of its 52-week highs around $41/share due to higher fuel costs and an all-around tough year for airlines. These non-company specific factors have led to a stock that is trading at just 11x its 2007 earnings and 7x its projected 2008 earnings. After dropping over 50% since January, many are starting to look at this stock as a bargain stock.

FL Group, a $6 billion Icelandic hedge fund, is one of these investors and requested last month that the company consider spinning off some of its assets to unlock value for shareholders. Specifically, the hedge fund urged the company to spin off its AAdvantage frequent-flier program.
 
The move would follow similar actions by Air Canada parent ACE along with others considering the option like Australia's Quantas and United parent UAL. FL Group believes that segment is worth close to $6 billion - nearly as much as the company's $7.5 billion market capitalization. AMR also has other assets that could be spun off including its American Eagle regional airline and its investment arm American Beacon.

"It's a no-brainer," said Hannes Smarason, chief executive of FL. "It's a tough environment for the airlines now, and it's incumbent on the management and the board to find avenues where value can be created."

In the end, the company announced that it was considering such moves but has not made a decision yet. In the meantime, this stock is definitely one worth watching closely as this situation unfolds!

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