Thursday, August 15, 2013
Delta Air Lines To Benefit From American Airlines' Weakness
The shocking suit to block the AMR Corp (AAMRQ.PK) and U.S. Airways (LCC) merger roiled the market, sending Delta Air Lines (DAL) tumbling 7%. While a big part of the incentive for buying airlines has been the benefits of industry consolidation, it doesn't appear that the Department of Justice blocking this merger will prevent the intent of reduced competition. Over the last few years, the airlines appear more cognizant that focusing on profits is paramount over increasing competition. Does blocking this merger change that incentive?
Ultimately, all of the airlines can probably be bought outside of American Airlines, whether based on the potential for further consolidation in the smaller, regional airlines or the potential that the third largest airline, American, struggles to emerge from bankruptcy. Delta could ultimately be the biggest beneficiary, as the airline won't face strong competition from the combined entity allowing it and United Airlines to maintain a duopoly on the top.
Read the full article at Seeking Alpha.
Disclosure: Long LCC. Please review the disclaimer page for more details.