Wall Street analysts have been pondering the possibility of a US Airways-American Airlines merger since the day American's parent company, AMR Corp. filed for bankruptcy in November.
Now they're weighing in on American unions' announcement that they will support a takeover bid by US Airways.
Hunter Keay of Wolfe Trahan believes US Airways learned from its failed bid to acquire Delta Air Lines when the Atlanta-based carrier was in bankruptcy and by offering to keep American's headquarters in Fort Worth will help appease local politicians.
"We continue to believe that [US Airways] is no more than six weeks away from filing its own alternative reorganization plan for AMR, and today's disclosures shows us that there is certain support within AMR's unsecured creditors' committee to terminate AMR's exclusivity in the very near term. An AMR/[US Airways] merger makes too much sense not to happen, in our view," Keay wrote in a research note published Friday.
J.P. Morgan analyst Jamie Baker points out that if a US Airways-American merger is approved then 90 percent of domestic capacity will be controlled by four carriers: the newly merged one, United Continental, Delta and Southwest Airlines.
"Four airlines with 90 percent market share represent the optimal industry structure, and should allow for consistent return generation going forward," Baker wrote in an investor note. He also evaluated the possibility that not all of AMR's unsecured creditors would view a merger favorably. "While labor was eager to embrace [US Airways] this early in the process (especially given the onerous, looming section 1113 process), we're almost positive other committee members would have preferred a scenario in which US Airways waited until later in the process to make a formal bid as an alternative to the stand-alone plan."
Bob Herbst of AirlineFinancials.com, who was one of the few to correctly predict that AMR would file for bankruptcy before Christmas, believes there are more positive benefits to a US Airways-AMR merger than negative ones.
"We believe without merging, both American and US Airways will face major challenges moving forward as they attempt to compete against Delta Air Lines and the merged United/Continental Airlines," Herbst said.