The New American Airlines and How it Will Fit In: US Airways Group, Inc. (LCC)

Now What?

As the American/US Airways integration proceeds, its actions should indicate the strategy pursued by the new carrier. Efficiency is key to a major airline’s turnaround at this juncture, and the revamped cost structure ought to help American to meet this goal. Also, the carrier has 600 aircraft on order and might decide to increase the fleet size. We know already that it plans to connect the 31 cities flown to by US Airways with the 56 American destinations. Keeping earnings healthy will be important while the likes of Southwest, JetBlue, and Alaska further build their domestic footprints.

A new era of airlines with nine or 10 hubs has been embarked upon. Because these airlines will accommodate passengers to a much wider array of destinations, they are better equipped to attract corporate contracts, a flight path to higher average airfares and earnings strength.

Assuming a 2013 third-quarter close, the upcoming merger should be accretive to profits in 2014. If the economy and jet fuel prices cooperate, American, along with DAL and UAL could be poised for improved results for years to come. This after a decade of suffering under high oil prices, inflated debt balances, and upstart competitors. I reiterate that the major airlines are worth looking into by more risk-tolerant investors when those aforementioned external conditions are present.

The article The New American Airlines and How it Will Fit In originally appeared on Fool.com and is written by Damon Churchwell.

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