Merger talks in the ailing airline industry are nothing new, but what is new is today’s news of renewed merger talks between United Airlines parent company, UAL Corporation (UAUA), and US Airways Group (LCC). These renewed talks mark the third time in the past 10 years that the two airlines have contemplated a union, so it remains to be seen whether the third time will be a charm.
Apparently, Wall Street has confidence about the talks this time around, as shares of UAL and LCC took flight midway through Thursday trade, with UAUA rising 9.4% and LCC soaring 13.5%.
In the past, issues such as pilot union opposition and antitrust clearance provided strong headwinds on the consummation of a deal between the two carriers, and those problems will likely have to be worked out thoroughly before any deal can be completed this time around. Certainly, the deal between UAL and US Airways would be a good one for both companies, as it would accelerate proposed fleet reductions and save on labor costs.
If the UAL/US Airways deal goes through it would mean one less airline in the industry, and that means fewer options for air travelers. But it could also mean improved bottom lines for the remaining carriers, and we already are seeing signs that Wall Street thinks this is indeed the case.
Shares of the biggest airlines traded higher on news of the merger talks, including AMR Corporation (AMR), Continental Airlines (CAL), Delta Air Lines (DAL) and Southwest Airlines (LUV). We’ll have to see how the talks progress this time around before any concrete determination can be made about whether this deal will be a potential game changer for the airline sector. However, if today’s buying in the space is any harbinger of things to come we could see airline stocks continue flying high.
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