This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Why US Airways Wants a Deal with American

Flores noted that Parker's management team raised $8 billion to pursue the Delta merger. "I believe they would do it again," he said.

USAPA spokesman James Ray recalled that Bruce Lakefield, now chairman of the board of US Airways, is a former Lehman Brothers executive who presided over the merger with America West. The deal resulted partially from Lakefield's success in devising new methods to raise investment capital.

"It will be interesting to see if Lakefield can put another deal together," Ray said.

American intends to fund its restructuring with $4.1 billion in cash. But in a report issued Wednesday, Wolfe Trahan analyst Hunter Keay said $4.1 billion may not be enough.

"Given the likelihood of continuing cash burn throughout the course of the Chapter 11 process, the need for a debtor-in-possession loan at some point down the road should still be considered as a potential outcome," Keay wrote.

"We could easily see a DIP lender suggesting far more aggressive actions, up to and including a combination with another airline," Keay wrote. It could well be that such a lender would ally with a US Airways management that promises sweeping changes, and that can bring experience in managing a successful merger to the table.

Although American has said it wants to use bankruptcy to reduce costs, it seems clear that to compete with Delta and United, American must also boost revenue and economies of scale. Unlike previous merger partners Northwest and Continental, US Airways has little to offer internationally, but it could offer American a broader domestic footprint.

Key assets include a Charlotte, N.C. , hub that provides the only competition to Atlanta for gathering southeast passengers, and a strong presence at Washington Reagan National Airport, long a profit center. Significantly, American has minimal overlap with these two key operations.

US Airways' Phoenix hub connects passengers between the East and West, offering an opportunity for consolidation with American's bigger Dallas hub. US Airways' Philadelphia hub and American's hub at New York's Kennedy International both offer abundant trans-Atlantic service, providing an opportunity to build synergies between two airports. (Philadelphia has better connections; Kennedy has more local traffic.) Aviation consultant Sandy Rederer said that American also has "a lot of internal technology infrastructure that US Airways lacks."

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,051.73 -48.45 -0.28%
S&P 500 1,973.63 -4.59 -0.23%
NASDAQ 4,424.7040 -7.4420 -0.17%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs