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TheStreet Open House

American Is Doing Great But US Airways Merger Still Needed, CEO Says

Stocks in this article: AAMRQ LCC

Texas Congressman Marc Veasey, one of 68 Democrats who signed a letter to President Obama advocating for a merger, said Thursday that the Department of Justice should consider the impact on workers if the merger does not occur.

Veasey, whose Fort Worth district includes thousands of American workers, spoke at a rally last month, when unions at the two carriers blitzed Washington last month, staging a demonstration blocks from the Justice Department.

"I hope they are listening," he said, in an interview on Thursday. "Maybe someone at Justice may not have understood the impact (of stopping the merger) would have on union workers and on thousands of jobs. This is management and labor working together. Justice may not have had a good understanding that (its action) would create a duopoly."

Veasey said he would welcome a settlement, noting "That would be the easiest and best way to do it for workers and consumers."

Meanwhile, JPMorgan analyst Jamie Baker has boosted his estimate on the likelihood of a merger to 60% from 50%. This led him to raise his target price for stock in American shares to $9.50 and to upgrade his rating to overweight from neutral. In a report issued Tuesday, Baker wrote that he does not expect a negotiated settlement.

" Our skepticism is driven by the view that satisfying the entirety of DOJ's complaint would result in significantly diminished revenue synergies, to the point that costs would rise in a merger and little else," he said. "But relenting labor pressure coupled with the Texas Attorney General (and possibly others?) dropping out certainly can't hurt, in our view, and may ultimately cause DOJ to soften its position."

American isn't the only party that could do well if the merger isn't approved. Imperial Capital analyst Bob McAdoo has an outperform rating on US Airways and a $24 price target. He said a merger breakdown would likely represent a buying opportunity.

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