Originally Posted by
satpak77
Could you expand on this? Side question to the audience, will this merger "benefit" LCC and thus result in a rise in stock price or will it hurt the stock because (maybe this reason...) LLC is being "saddled" with various AMR issues.
Legit questions, I am working on my MBA and just finished a project on the airline industry and thus I am interested to hear the opinions.
Cactusmike nailed it with the "APA coming out on top" sentiments. The sheer size of the group will ensure they are pandered to.
Originally Posted by
cactusmike
The APA has a majority of the group 4 and group 3 jets (the wide bodies). In every seniority integration that has gone down in the past 30 years that has been taken into account by the arbitrators or negotiators. The APA will get a majority of the slots for those jets because of the ratio of LCC wide bodies to AA wide bodies. Group 2, the 737/a320 series and the Mad Dog will most likely have a closer ratio of LCC pilots to AA pilots, but the sheer numbers of AA pilots will ensure that they have a majority in that category as well.
As far as the outcome, I think it will benefit LCC in the sense that it will no longer have the economy of scale issues, but it will have issues that it doesnt have today.
LCCs CASM is super low for a legacy carrier, and they benefit greatly from that, making their less than ideal hubs work well for them. Add in AMR's mass and the anticipated labor cost increases (Parker's term sheets) and I dont think some of the US hubs will be able to sustain the traffic they do today. I could easily see PHX disappearing, and PHL cut in half. DCA is a great business market, but I dont see a lot of expansion there. CLT will no doubt be a good fit as a domestic hub in the southeast to give ATL some competition.
As far as the stock price goes, it has gone from roughly $4/share to $11 in about 6 months. I think any merger announcement is already baked into the price. Post merger it will depend on how quickly Parker can get the ducks in a row, and grow internationally, Asia in particular. Even if all goes well I cant see the combined AA/US stock going anywhere for at least 3-4 years. Look at the 5yr chart of DAL. The stock post-BK was close to $20 and since then it struggled to stay above $10, and DAL has done an amazing job of integrating NWA/DAL and getting things organized post-BK.