Airline stocks rally after merger developments

Shares of major US airlines rise after developments boost hopes for big merger

Associated Press

NEW YORK (AP) -- Airline stocks rallied Thursday amid tentative signs that the merger of American Airlines and US Airways might happen after all.

A federal bankruptcy judge in New York indicated that he was leaning toward approving American parent AMR Corp.'s plan for emerging from Chapter 11 protection. The merger is the key feature of that plan.

That development came a day after the airlines and U.S. Justice Department said in a court filing that they were open to settling the government's lawsuit aimed at blocking the merger. Without a settlement, the merger will be delayed several months and possibly scuttled as the case goes to trial in Washington, D.C. The government argues that the merger would reduce competition and drive up prices.

Neither the Justice Department nor the airlines made any promises, and they could be far apart on terms of a settlement. Some analysts are skeptical. Daniel McKenzie of The Buckingham Research Group noted that the government raised many complaints in its lawsuit to block the merger and the chances of a settlement were "not great."

Still, the filing offered investors hope that a trial might be averted and the merger salvaged. Standard & Poor's analyst Jim Corridore said that if American and US Airways give up some takeoff and landing slots at Washington's Reagan National Airport, it "will help reach a settlement."

Consolidation through mergers has helped airlines limit seats and boost prices, returning the industry to profitability after a slump caused by the recession and high fuel prices. A merger of American and US Airways would be the final move in a series of deals to reduce eight of the biggest U.S. airlines to four in just five years.

In afternoon trading, shares of US Airways Group Inc. were up 57 cents, or 3.7 percent, to $15.90; United Continental Holdings Inc. shares rose 67 cents, or 2.4 percent, to $28.60; Delta Air Lines Inc. gained 56 cents, or 2.9 percent, to $19.69; and Southwest Airlines Co. added a penny to $12.78. AMR shares no longer trade on the New York Stock Exchange, but over the counter they jumped 29 cents, or 9.5 percent, to $3.34.

View Comments (12)