US Airways Could Prosper Without Merger, Analyst Says
CHARLOTTE, N.C. (TheStreet) -- US Airways
JP Morgan analyst Jamie Baker upgraded both Delta
Baker ascribed a 50-50 probability to the completion of the merger between US Airways and American. He said he doesn't expect a negotiated settlement, meaning the decision on a merger rests with U.S. District Court Judge Colleen Kollar-Kotelly, who has scheduled a hearing for Nov.25.
Why 50-50? Because while nearly every single person in the airline industry believes a merger is likely, "when it comes to antitrust experts, we have yet to find any that believe the airlines face anything but a steep, uphill battle, with most citing probabilities below 40%," Baker said. "We agree with the former, but we simply cannot ignore the latter, so let's call it 50-50."
That means it is wise to consider Plan B. "While neither (airline) is likely contemplating a Plan B at this time, we can envision an outcome that -- while failing to deliver more than a fraction of the proposed benefit for shareholders, passengers and communities -- nonetheless represents an outcome better than doing nothing or reverting to AMR's original solo plan," Baker said.
Besides US Airways' move to Oneworld, the Plan B scenario envisioned by Baker includes some major changes. American senior management -- including CEO Tom Horton -- would be replaced, "satisfying labor's desire for executive changes and assuaging investor concerns over excessive growth." American and US Airways would "pursue a high degree of domestic code-sharing, with Alaska