There has been much discussion in the financial and popular press about a potential merger between American Airlines (AMR) and US Airways (LCC). We at Ionosphere Capital firmly believe such a combination would maximize value creation for all stakeholders in the two carriers, improve industry fundamentals (and the outlook for other individual airlines) by further reducing capacity fragmentation, yet not diminish competition by enough to produce meaningful regulatory pushback. All of that said, however, there has been little discussion of the impact of an AMR/LCC merger on other airlines.
Our analysis of network effects and needs of that combination suggest that JetBlue (JBLU) would likely be the biggest other-airline beneficiary of an AMR/LCC merger.
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