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December 09, 2013

What Wall Street says about the new American, stock closes up on first day of trading

Wall Street investors bid shares of the new American Airlines Group up slightly on its first day of trading on the NASDAQ exchange.

Shares opened at $23.95 and by the end of the day closed up 2.7 percent to $24.60.

Wall Street analysts appeared bullish on American’s prospects now that the merger has closed.

“Management knows from its personal experience of integrating US Airways and America West and from observation of recent industry successes and failures, how to get it right, in our view,” CRT Capital analyst Michael Derchin told investors in a research note, placing a buy rating and a $31 price target on the stock. “A focus on completion factor, on-time performance, and service metrics will be an important early indication of how the merger is working.”

On its first day of trading, US Airways shareholders received 28 percent of the equity in the new company with a one-for-one stock transfer. AMR creditors and stakeholders received 72 percent of the equity in the new company. Shareholders of AMR common stock received 0.0665 shares of AAL common stock but could receive more equity in the new company based on the stock price during the next 120 days.

Cowen and Company analyst Helane Becker said she expects the newly formed carrier to have $42 billion in revenue in 2014.

“We expect it will take about five years to reach total completion, but obviously there will be significant improvements over the next two years,” Becker wrote in a research note.

Gimme Credit analyst Vicki Bryan was optimistic that American's integration will be closer to the smooth transition of the Delta Air Lines-Northwest Airlines merger instead of the rocky integration of the United Airlines-Continental Airlines merger.

"The fact that [Parker] actually seemed to learn so much from his mistakes--and change accordingly to ensure success with consensus and collaboration--already sets him worlds apart from AMR's former management, a very good omen that this time will actually be different for AMR's beleaguered employees," Bryan wrote.

-Andrea Ahles


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