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Funds Fly With Airline Stocks

Fidelity, Vanguard funds get a boost from US Airways' Delta bid.

Updated from 7:48 a.m. EST

US Airways'


announcement Wednesday of an

unsolicited $8 billion bid to merge with bankrupt

Delta Airlines


was a boon to investors in several Fidelity mutual funds.

Fidelity Investments disclosed in regulatory filings last month that its combined holdings in US Airways were 9.9% of the company's stock. That was down from 5% previously.

The filings didn't indicate which mutual funds held the stock, but data from Morningstar indicate that


Fidelity Growth Company was the biggest fund holder of the carrier's stock as of May 31, when it held 9.27%. Although US Airways was not the Fidelity Growth Company's biggest holding at the time, it represented 1.35% of the fund's approximately $29 billion in assets.

US Airways' stock rallied $8.58, Wednesday, or 16.85%, to close at $59.51.

Two other Fidelity funds,


Fidelity Mid Cap Advisor and


Fidelity Equity Income II, were the second-biggest fund investors in US Airways, with 1.87% and 0.78% of the carrier's stock as of May 31, according to Morningstar.


Vanguard Windsor ranks as the fourth-biggest fund holder with 0.48% of US Airways' stock as of June 30, followed by


CGM Capital Development,


American Century Heritage,


Vanguard Explorer,


Diversified Equity Growth,


Leuthold Core Investment and


Dreyfus Mid Cap Value.

US Airways said the merger would create the world's largest carrier and generate an annual $1.65 billion in savings and benefits. More than half of the savings would be lost if Delta emerges from bankruptcy as a standalone company, because it would forego the right under U.S. bankruptcy law to reject leases.

In total, US Airways offered $4 billion in cash and $4 billion in stock to Delta's unsecured creditors.

Delta CEO Gerald Grinstein issued a statement saying the proposal would be reviewed but that his company's goal "has always been to emerge from bankruptcy in the first half of 2007 as a strong, standalone carrier."

Stocks of other carriers also benefited as the offer raised investors' hopes for more merger activity in the overcrowded U.S. airline industry.

UAL Corp.


the parent of United Airlines rose $3.29, or 8.96%, to finish at $39.99. American Airlines' parent



ended up $1.65, or 5.38%, at $32.33.

Vanguard Windsor is the top holder of UAL, with 5.82% of the company's stock as of June 30, followed by


American Funds Growth Fund of America with 4.8%, Fidelity Advisor Mid Cap with 2.7%, Fidelity Growth Company with 2.1% and Fidelity Equity Income II with 1.8%, according to Morningstar.

AMR's top holders include


Vanguard PRIMECAP with 4.47% as of June 30,


Calamos Growth with 3.29%,


Legg Mason Opportunity with 3.05%,


Oppenheimer Global Opportunities with 2.82% and


Fidelity Capital Appreciation with 2.43%, according to Morningstar.

The ranking of the Fidelity funds has likely fallen in the meantime, however. The money manager said last month that it had cut its combined stakes in both UAL and AMR to 5% from 13%.

Allison Bisbey Colter joined in 2006 from the New York office of Dow Jones Newswires, where she spent the previous seven years covering consumer finance, mutual funds and hedge funds. Prior to that, she worked in Europe for Dow Jones covering transportation from London and Italian capital markets from Milan. She is a graduate of Wesleyan University, where she received a BA in government.