American Airlines: Flying high in Iceland

Haven't heard of FL Group? No, it's not from Florida. Actually, FL Group is a fund based in Iceland.

It's a fairly big fund apparent by this week's announcement it bought a 5.98% stake in AMR Corp. (NYSE:AMR), the parent company of American Airlines.

Despite a rally in AMR's stock in 2006, FL Group thinks there's much upside left. That is, with capacity shrinking, there should be a pick-up in pricing and profits.

In fact, other savvy investors, such as the Texas Pacific Group -- which recently was part of the buyout of Qantas -- think the same.

FL Group is far from a novice in the airline industry. The fund has made a variety of investments in European airlines. About a quarter of its assets are in airline issues.

As for AMR, FL Group thinks the airline is well-positioned for the uptrend because of its lucrative routes. Actually, the airline did something this year that is not very common with legacy carriers -- it posted a profit.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates DealProfiles.com.