Why the American Airlines–US Airways Merger Was Inevitable

In 2005, airline industry dynamics started changing. Delta Air Lines merged with Northwest, and United Airlines merged with Continental Airlines. As a result, American Airlines, an industry leader before, suddenly found itself much smaller than its legacy peers. United Airlines took the number-one spot followed by Delta Air Lines. That pushed American Airlines to third place.

Larger capacity and increased geographic coverage improved UAL’s and DAL’s operational efficiencies. It helped them improve yield, or revenue earned per seat.

So a merger was the natural course for American Airlines in order to regain its top position. The bankruptcy only strengthened the case for American Airlines to merge with another airline—US Airways.

Investors can gain coverage to airline stocks by investing in the SPDR S&P Transportation ETF (XTN).

In the next part of the series, we’ll see how American Airlines and US Airways overcame objections from the United States Department of Justice.

View more information: https://marketrealist.com/2016/06/american-airlines-merger-us-airways-inevitable/

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