Feb. 14 - AMR's $11 billion deal with U.S. Airways will likely boost the industry's profitability, but that could also mean fewer choices and higher prices for consumers. Bobbi Rebell reports.
After months of behind the scenes power struggles, the leaders of US Airways and bankrupt AMR- parent of American Airlines came out smiling like it was a love match all along, when they officially announced their $11 billion union. US Airways CEO Doug Parker will head the combined company. SOUNDBITE: DOUG PARKER, CEO, U.S. AIRWAYS (ENGLISH) SAYING: "You add at least a billion dollars a year in synergies because that is the value we are going to get from putting these two carriers together and that is enormous value and that is why we were able to get this done; because there was so much there to share for both the U.S. Airways shareholders and for the American Airlines creditors." AMR's creditors will get control of the combined company, but U.S. Air's management team will have operational control. US Airways stock is up about 70 percent in the last 12 months- though it fell on the anticipated news. Sterne Agee's Jeff Kauffman believes there is a lot of upside left: SOUNDBITE: JEFF KAUFFMAN, ANALYST, STERN AGEE (ENGLISH) SAYING: "I think there is a difference between the reaction on the deal announcement and where this valuation is ultimately going. On a longer term basis we calculate something between $22 and $25 a share for the US airways shareholder. If you hold on, the merger executes and the company is successful in the integration with the syngeries so that is an attractive return over a 2, 3 year period." For consumers- he thinks prices could come up on the lower end fares- as the field of competitors shrinks: SOUNDBITE: JEFF KAUFFMAN, ANALYST, STERN AGEE (ENGLISH) SAYING: "What it does boil down to for most American consumers though is you now have 4 airlines: Southwest Airlines, United, the new American and Delta that will control roughly 83% of the marketshare in the U.S. so you still have competing networks but you have fewer of them." The deal still has to get the ok from U.S. and European regulators and the U.S. Bankruptcy Court.