(Reuters) - Twitter Inc priced its initial public offering above its expected range to raise at least $1.8 billion, …
Showing posts with label Airways. Show all posts
Showing posts with label Airways. Show all posts
Friday, 8 November 2013
US Airways price target raised to $30 from $24 at Imperial Capital
Twitter prices above range to raise at least $1.8 billionReuters
Thursday, 7 November 2013
Did American Airlines And US Airways Get A Green Light To Merge?
On Monday, both US Airways (LCC) and American Airlines (OTC:AAMRQ) saw their shares rally sharply after talk that the government might actually be open for a settlement and it might give the two companies a conditional "green light" if they agree to make some concessions. This is the first time since the announcement of the DOJ lawsuit that the government is willing to negotiate as the court case is scheduled to start in a couple weeks.
When the Department of Justice first announced the lawsuit it was going to pursue against the two airline companies, some analysts downplayed it by saying that the government would end up sitting down with these companies and settling on terms. Back then, the government officials said that they had absolutely no interest in settling with the two companies and they wanted the merger to fall apart regardless of what concessions the airline companies could come up with.
On Monday, the U.S. attorney general Eric Holder said that the government would be fine with settling with the airline companies if they agree to give up on some take-off and landing spots in several airports including Reagan National at the nation's capital. This is the first time ever the government openly said it would be ok with the idea of a merger and the government's tone is a lot different than how it was a few months ago. As the government shutdown slowed the hand of the government, it probably found itself in a position that is difficult to defend in court.
The government will still look for solutions that are likely to alleviate its concerns, such as decreased competition, too much pricing power and too many spots to be held by the merged company in certain airports. For the next two weeks, negotiations will be going on to determine the best course of action and the best case scenario calls for a settlement before the court date.
It is very surprising to hear Mr. Holder talk about the case before the court date. A lot of people predicted that the government would be negotiating with the airline companies for a solution before the court date, but no one really expected the government to be vocal about it.
A lot of investors are taking this development as a green light from the government for the merger. The shares of American Airlines rallied by about 25% and US Airways appreciated by another 5% in the earlier hours of trading but ended the day up by only 1%. While I agree that this is a huge development, there is still a lot of work to do in the next 2 weeks before a settlement can be reached.
I have been covering this merger for nearly a year and US Airways has been one of my best performing stocks this year. In the last 52 weeks, the shares of US Airways rallied by 82% and since early 2011, investors saw the value of their shares appreciate by 410%. While some of the rally was fueled by the merger speculation, much of the rally could be attributable to the success of US Airways CEO Doug Parker. Under Mr. Parker's management, US Airways was able to grow its earnings by more than 300% in the last couple years. Even after multiplying in the last couple years, US Airways is still cheap with a trailing P/E of 8 and forward P/E of 7. This is why I kept insisting that the company was cheap regardless of whether the merger happened or not.
After the merger, each share of US Airways will become a share of the new American Airlines (the company's name will be American Airlines) and these shares will make up 28% of the new company. If the merger happens, the combined company is expected to generate $40 billion in revenues and $2-3 billion in net earnings. Even if we take a conservative P/E ratio of 8 to value this company, we would be looking at a new American Airlines that's worth $20 billion. If US Airways makes up 28% of the new company, this values US Airways at $5.6 billion, which is far above the company's current value of $4.4 billion. After the merger, the shares of US Airways should be worth $28-30. If the merger doesn't happen, US Airways should still be worth around $25, given its low valuation. The company's current market value is $4.4 whereas its cash and short term investments alone total $3.5 billion. I currently have some shares of US Airways in addition to some calls. I used to sell covered calls every month in order to increase my overall return (which brought my breakeven price to far below $10). However, I haven't done that recently. Regardless of the merger, US Airways continues to offer strong value to investors. The next couple weeks will be very busy and exciting for the management and shareholders of US Airways as the merger story will end one way or another.
Disclosure: I am long LCC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
Tuesday, 5 November 2013
US Airways fined $1.2 million over disabilities infractions
Asian shares struggle, euro dips ahead of ECBReuters
Asian shares sagged on Tuesday after hawkish comments from China's premier ahead of a key Communist Party meeting, …
U.S. in Talks to Settle Suit Over American-US Airways Merger
Mr. Holder’s comments on the negotiations, which began just three weeks before a trial on the suit was scheduled to start in federal court in the District of Columbia, raised expectations on Wall Street and in the aviation industry that the merger would stay in place with relatively modest concessions. The department sued in August to block the merger, which would create the nation’s largest airline. Claiming that the combination would harm consumers, Justice Department officials said that they had to take a tough stance because other big airline mergers had increased airfares. Several legal and airline specialists said that despite that talk, the Justice Department’s case was relatively weak and that it now appeared to be narrowing its main concerns about competition to a few airports. Robert A. McTamaney, a mergers and acquisitions lawyer at Carter Ledyard & Millburn in New York, said Mr. Holder seemed to be “holding out something of an olive branch.” Mr. Holder told reporters in Washington that the government would insist, in any settlement, on “divestitures of facilities at key constrained airports throughout the United States.” For example, Mr. Holder said the department had determined how many slots it would want American and US Airways to sell at Reagan National Airport near Washington, where the two airlines together control about two-thirds of the landing and takeoff slots. He declined to specify the number and did not name any other airports. But while department officials initially talked in August about 1,000 pairs of cities where the combination of American and US Airways would dominate a route and could increase fares, Mr. McTamaney said a settlement might require them to sell slots to competitors at only a few airports. One problem for the Justice Department, he said, is that many smaller airports do not produce enough traffic to sustain competition among airlines for a more than a few months. “Historically, in a lot of these markets, two airlines cannot make money,” Mr. McTamaney said. “It doesn’t matter whose name is on the side of the plane.” Mr. Holder said the department hoped for a settlement, but remained “fully prepared to take this case to trial.” He added, “We will not agree to something that does not fundamentally resolve the concerns that were expressed in the complaint.” The Justice Department has approved several mergers in recent years, including the combination of Delta Air Lines and Northwest, United and Continental, and Southwest and AirTran. Government lawyers have said that given the growing concentration in the industry — the proposed merger would result in four airlines carrying more than 80 percent of the nation’s commercial air travel — an additional merger would hurt passengers. But some airline analysts had expected the sides to settle before the case reached court. That view gained traction last week when the Justice Department, American Airlines and US Airways picked a mediator, as requested by the court. “Justice will be unable to convince a judge the merger is anticompetitive, especially given that AMR and US Airways offer far less competitive overlap versus all three previous mergers approved by Justice,” according to a report last week by Vicki Bryan, an analyst at GimmeCredit. Negotiations are a far cry from the Justice Department’s initial statements, after filing its challenge, when its lawyers vowed to take the case to court. The government’s case against the merger has also suffered several small setbacks in recent months, which threaten to weaken its position before the Nov. 25 trial. Last month, the attorney general of Texas, who had joined the federal challenge with five other states and the District of Columbia, withdrew his support after negotiating a separate arrangement with American Airlines. Under that deal, the airline promised to keep its headquarters in the Dallas-Fort Worth area, which it had promised repeatedly in the past, and agreed to maintain daily service to more than 20 airports in Texas. Another defection might be looming. Pam Bondi, the attorney general of Florida, another state that had joined the challenge, said she had met with Thomas W. Horton, the chairman and chief executive of American Airlines, and indicated they were working on a “timely resolution.” The Justice Department is facing a tight schedule to prepare for the trial and present evidence. It had initially sought a court date in March 2014, but was rebuffed by Judge Colleen Kollar-Kotelly, of the United States District Court for the District of Columbia, who set an earlier date. The airlines argue that their merger would benefit passengers by providing more flights to more airports, in the United States and abroad, and offer a stronger counterweight to Delta and United. The federal challenge to the merger followed a tumultuous period of restructuring for American Airlines, which filed for bankruptcy in 2011. The reorganization was approved by a federal judge in September, subject to Justice Department approval of the merger. As part of the plan, American agreed to merge with US Airways, a move that received the backing of creditors and its three main labor groups. Shares of American’s parent, the AMR Corporation, jumped nearly 25 percent Monday on the news about the settlement talks.
U.S. Justice Dept hopes to settle American, US Airways fight
Asian shares struggle, euro dips ahead of ECBReuters
Asian shares sagged on Tuesday after hawkish comments from China's premier ahead of a key Communist Party meeting, …
Justice Department details deal for American, US Airways fight
By Diane Bartz
WASHINGTON (Reuters) - The Justice Department wants US Airways and American Airlines to divest landing and take-off slots at Reagan National and other "key" U.S. airports as a condition to drop its effort to block a proposed merger, Attorney General Eric Holder said on Monday.
Share prices in the airlines jumped as Holder seemed to offer a path to an agreement, three weeks before the scheduled start of a trial on November 25.
The bankrupt AMR Corp (AAMRQ.PK), parent of American Airlines, closed up 24.5 percent in heavy volume, while those of US Airways (LCC) at one point rose more than 5 percent to their highest in almost six years before retreating to close up 1.2 percent.
Holder said that talks with the companies were ongoing and he hoped for an agreement before the trial is due to start.
The Justice Department's complaint focused on the carriers' dominant position at Reagan National, outside Washington, and on more than 1,000 city pairings that American and US Airways now dominate. It said the merger would reduce choice for travelers and lead to higher fares.
Holder would not elaborate on Monday about whether the government has a specific number of slots in mind that the carriers need to sell to advance the deal. There were a "number of ways" to address the government's concerns, he said.
"What we have tried to focus on is to make sure that any resolution in this case necessarily includes divestitures of facilities at key constrained airports throughout the United States," Holder said.
"We hope that we will be able to resolve this short of trial, but if we do not meet those demands that we have, we are fully prepared to take this case to trial," he said. "We will not agree to something that does not fundamentally resolve the concerns that were expressed in the complaint."
Experts said it is unusual for an attorney general to comment at length in the middle of antitrust battle.
"I think it's a positive sign (of potential settlement), but it's important not to over-read it," Herbert Hovenkamp, an antitrust expert who teaches at the University of Iowa's College of Law, said of Holder's comments.
Several antitrust specialists were surprised by the share price increases, which suggested that investors saw Holder's utterances as a tipping point in favor of the merger.
Three said Holder essentially backed up previous comments from his antitrust deputy, Bill Baer, by insisting that the merger created antitrust problems in a number of markets nationally.
"Bill Baer can now sit there and say "'You heard from the boss. What can I do?'...This is a message to the parties," said Steve Axinn, a Justice Department veteran now at the law firm Axinn Veltrop and Harkrider LLP.
Seth Bloom, a former staffer for the Senate Judiciary Committee's antitrust subcommittee, agreed the comments did not necessarily signal that a quick settlement was in the works.
"He's saying you need divestitures nationally...and so the airlines have to make a fundamental change in their merger proposals," he said. "It's a very difficult case to settle."
Three weeks before the scheduled start of the trial, US Airways and American Airlines can agree to a package of divestitures, prepare to litigate, or abandon a merger that has been years in the making, Hovenkamp said.
"The government is asking for a lot and the parties want to give up as little as possible," Hovenkamp added.
DOMINANT AT REAGAN NATIONAL
The two carriers control a combined 69 percent of takeoff and landing slots at Reagan National, an airport used by many members of Congress to fly to their home districts.
Roughly 55 percent of slots at the airport are held by US Airways and 14 percent held by American. Airline officials have said privately that they are willing to cede some slots, but not scale back by the equivalent of the entire 14-percent American share.
US Airways declined comment on Holder's remarks. American Airlines did not respond to requests for comment.
(Additional reporting by David Ingram in Washington and Karen Jacobs in Atlanta; Editing by Ros Krasny, Lisa Von Ahnn, L Gevirtz and Ken Wills)
What Does the DoJ Want from US Airways and American Airlines?
The Department of Justice is asking for more than US Airways (NYSE:LCC) and AMR Corp.’s (AAMRQ.PK) American Airlines may want to give in order for their planned merger to succeed. According to people familiar with the discussions who spoke to The Wall Street Journal, the Justice Department wants the airlines to give up takeoff and landing slots at airports around the country if the government agency is to drop its lawsuit blocking the merger.
Previous discussions focused on Ronald Reagan National Airport outside Washington, D.C., where the combined airline would own 69 percent of the takeoff and landing slots. It was expected that the DoJ would ask the airlines to give up space there, but a source who spoke to the Journal said the Department of Justice made a list of airports around the country where it wants US Airways and American Airlines to give up spaces.
The DoJ said that the merger, which will create the world’s largest airline by traffic, will result in only four carriers owning 80 percent of the U.S. flight market, which will reduce competition and potentially raise prices. The airlines say the merger will help them better compete with bigger airlines like United Continental (NYSE:UAL) and Delta Air Lines (NYSE:DAL), which will ultimately be good for consumers.
Monday, 4 November 2013
U.S. Justice Dept details deal for American, US Airways fight
* AMR Corp shares spike up 24.5 percent
* US Airways stock reaches highest level in nearly 6 years
* Holder - could resolve merger concerns before scheduled trial
By Diane Bartz
WASHINGTON, Nov 4 (Reuters) - The U.S. Justice Department wants US Airways and American Airlines to divest landing and take-off slots at Reagan National and other "key" U.S. airports as a condition to drop its effort to block a proposed merger, Attorney General Eric Holder said on Monday.
Share prices in the airlines jumped as Holder seemed to offer a path to an agreement, three weeks before the scheduled start of a trial on Nov. 25.
The bankrupt AMR Corp, parent of American Airlines, closed up 24.5 percent in heavy volume, while those of US Airways at one point rose more than 5 percent to their highest in almost six years before retreating to close up 1.2 percent.
Holder said that talks with the companies were ongoing and he hoped for an agreement before the trial is due to start.
The Justice Department's complaint focused on the carriers' dominant position at Reagan National, outside Washington, and on more than 1,000 city pairings that American and US Airways now dominate. It said the merger would reduce choice for travelers and lead to higher fares.
Holder would not elaborate on Monday about whether the government has a specific number of slots in mind that the carriers need to sell to advance the deal. There were a "number of ways" to address the government's concerns, he said.
"What we have tried to focus on is to make sure that any resolution in this case necessarily includes divestitures of facilities at key constrained airports throughout the United States," Holder said.
"We hope that we will be able to resolve this short of trial, but if we do not meet those demands that we have, we are fully prepared to take this case to trial," he said. "We will not agree to something that does not fundamentally resolve the concerns that were expressed in the complaint."
Experts said it is unusual for an attorney general to comment at length in the middle of antitrust battle.
"I think it's a positive sign (of potential settlement), but it's important not to over-read it," Herbert Hovenkamp, an antitrust expert who teaches at the University of Iowa's College of Law, said of Holder's comments.
Several antitrust specialists were surprised by the share price increases, which suggested that investors saw Holder's utterances as a tipping point in favor of the merger.
Three said Holder essentially backed up previous comments from his antitrust deputy, Bill Baer, by insisting that the merger created antitrust problems in a number of markets nationally.
"Bill Baer can now sit there and say "'You heard from the boss. What can I do?'...This is a message to the parties," said Steve Axinn, a Justice Department veteran now at the law firm Axinn Veltrop and Harkrider LLP.
Seth Bloom, a former staffer for the Senate Judiciary Committee's antitrust subcommittee, agreed the comments did not necessarily signal that a quick settlement was in the works.
"He's saying you need divestitures nationally...and so the airlines have to make a fundamental change in their merger proposals," he said. "It's a very difficult case to settle."
Three weeks before the scheduled start of the trial, US Airways and American Airlines can agree to a package of divestitures, prepare to litigate, or abandon a merger that has been years in the making, Hovenkamp said.
"The government is asking for a lot and the parties want to give up as little as possible," Hovenkamp added.
DOMINANT AT REAGAN NATIONAL
The two carriers control a combined 69 percent of takeoff and landing slots at Reagan National, an airport used by many members of Congress to fly to their home districts.
Roughly 55 percent of slots at the airport are held by US Airways and 14 percent held by American. Airline officials have said privately that they are willing to cede some slots, but not scale back by the equivalent of the entire 14-percent American share.
US Airways declined comment on Holder's remarks. American Airlines did not respond to requests for comment.
Let's Make a Deal: AMR Corp., US Airways Fly on DoJ Talks
Remember when the DoJ said it wouldn’t make a deal with US Airways (LCC) and AMR Corp. (AAMRQ)? Well, it looks like they’re willing to make a deal after all.
Associated PressThe Wall Street Journal has the details:
U.S. antitrust authorities want to see a broad package of divestitures from AMR Corp. and US Airways Group Inc. as part of any deal to settle the government’s challenge to their merger plan, people familiar with the matter said.
The people said talks are under way between the two sides three weeks before a trial of the antitrust challenge is set to open in Washington…
A person familiar with the Justice Department’s thinking said department lawyers insist that any settlement should include divestitures at key airports throughout the U.S. The department believes that the two airlines would need to divest assets at those airports to ensure that their merger wouldn’t limit consumer choices on nonstop and connecting flights or harm consumers by raising fares, this person said.
Shares of AMR Corp. have jumped 23% to $9.70 at 12:11 p.m., while US Airways has gained 4% to $23.35. They’re not the only one’s gaining today, as Delta Air Lines (DAL) has risen 3.8% to $27.65, Spirit Airlines (SAVE) has advanced 3% to $44.16 and United Continental (UAL) is up 2.3% at $36.37.
Morgan Stanley’s John Godyn and team see the good times continuing for airline stocks. They write:
It continues to be abundantly clear that we’re in an airline bull market supported by two key pillars: (1) an airline macro goldilocks scenario based on the view that fuel prices are likely to trend flat to down while US GDP is upwardly biased favoring domestically levered companies, and (2) belief in the power of industry discipline, long a pillar of our Stronger For Longer thesis on the cycle. With commentary suggesting these pillars will remain intact for the foreseeable future, we reiterate our Attractive Industry View…
Amplifying this upside is what we believe is a strong case for multiple expansion. Margin stability and healthier balance sheets have materially altered tail-risk across airlines and this has yet to be priced in. Simply put, as airline fundamentals converge toward higher valued peers, so should their multiples.
Godyn says United, Delta and Spirit are “poised to move significantly higher” through the end of 2014.
Subscribe to:
Posts (Atom)