Don’t Expect to Profit From an AMR-US Airways Group, Inc. (LCC) Merger

On the other hand, if the merger really does permit American and US Airways to boost their corporate revenue share, this would clearly come at the expense of Delta and United in particular. Together, American and US Airways have hubs or focus cities in seven of the eight largest U.S. metro areas, which could be a major selling point for business travelers. At best, it will take several years for American to capitalize on this opportunity, but if it does, Delta and United could lose high-value corporate contracts.

Conclusion
It is too late to profit from the likely US Airways-American Airlines merger by buying US Airways stock. The additional upside is minimal, whereas the downside is substantial if the merger falls through (which is still a real possibility). Even if the merger is approved by all of the relevant parties, integration costs could be $3 billion or more, based on United’s experience, and the expected revenue benefits may not materialize. The best thing to do now is to sit tight on the sidelines. If you are looking to invest in an airline stock, Delta’s strong performance run over the past two years makes it a more compelling investment candidate anyway.

The article Don’t Expect to Profit From an AMR-US Airways Merger originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg owns shares of Delta Air Lines and is short Mar 2013 $14 Calls on Delta Air Lines. Adam Levine-Weinberg is short shares of United Continental Holdings (NYSE:UAL). The Motley Fool recommends Southwest Airlines.

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