Why US Airways Shares Dropped
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of US Airways were losing altitude today, falling as much as 10%, after announcing a merger with American-Airlines parent AMR (OTC: AAMRQ). Shares of AMR, meanwhile, jumped 53% on the news, as shareholders of AMR stand to get a piece of the new company.
So what: US Airways slid during most of the session, but bounced back to finish down 4.6%, as investors didn't seem to know what to make of the merger. The deal had been widely expected, so any premium was likely already priced in -- shares of the airline had been on fire over the past year, nearly quadrupling since November 2011. Shareholders may be taking profits with the uncertainty of the merger ahead.
Now what: Analysts expect cost savings from the creation of the world's biggest airline, but also a decline in flight availability, and a number of headaches as the two companies combine frequent flier program, schedules, and other operational matters typical of mergers. Because the airline industry has consolidated so much in the last 10 years, the merger seems to make success; but there is certainly no guarantee of success. Stay tuned for further updates on the combination. You can stay in touch by adding US Airways to your Watchlist here.
The article Why US Airways Shares Dropped originally appeared on Fool.com.Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.
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