Would This Big Airline Merger Make Sense?
In the following video, Fool analyst Brendan Byrnes discusses a potential merger between AMR and US Airways.
AMR recently declared bankruptcy, but Brendan thinks there is more upside for US Airways if a merger did occur, as it could gain access to the international routes AMR already has. There have been a lot of consolidations and mergers in this industry, but Brendan thinks this merger makes sense.
Amid all the speculation, US Airways' stock has risen more than 150% this year. Still, because of the structurally flawed industry, Brendan suggests staying away from airline stocks. He points to the high fixed costs and the airlines' vulnerability to commodity pricing. Many low-cost airlines are also undercutting the legacy airlines, which gives them no pricing power.
Brendan suggests watching to see, first, whether AMR's management can get through bankruptcy as an independent airline, and then whether the merger happens.
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The article Would This Big Airline Merger Make Sense? originally appeared on Fool.com.Andrew Tonner, Brendan Byrnes, and The Motley Fool have no positions in the stocks mentioned above. Motley Fool newsletter services recommend Southwest Airlines. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.