Market Likes US Airways-Delta Chatter

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Delta (DAL) is considering making a bid for US Airways (LCC), the Wall Street Journal reported over the weekend. It’s just the latest chatter about consolidation in the airline industry since AMR (AMR), the owner of America Airlines, filed for bankruptcy last year. Delta, the second biggest airline in the country, is also reportedly considering a bid for AMR, as is US Airways. Private equity firm TPG Capital has also reportedly been mulling an AMR deal.

Both Delta and US Airways shares were up about 3% after the merger news.

Any AMR deal could take awhile (maybe more than a year). That said, US Airways could be a better fit to join with AMR, at least from an antitrust perspective, one analyst argued.

“An AMR with the right cost structure would be an attractive merger partner but we have serious doubts that regulators would allow either of the two large U.S. legacy carriers (Delta and UAL-Buy) to acquire AMR,” wrote Maxim analyst Ray Neidl. “We also believe that regulators would have a problem with a Delta acquisition of LCC due to the extensive overlap in their systems. On the other hand we believe that a US Airways acquisition of AMR could get regulatory approval and the combined airline would have enough market mass to be competitive with Delta and UAL.”



Original Article Source by Barrons.com