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US Airways Group Inc (LCC) Poised to Prosper Alone

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With all of the debates regarding the US Airways Group Inc (NYSE:LCC) merger with AMR Corporation (OTCMKTS:AAMRQ), the market has missed the strong results of US Airways as a stand-alone company. Though the airline might need the merger to compete equally with the other major carriers, US Airways Group Inc (NYSE:LCC) appears poised for better days regardless.

US Airways Group Inc (NYSE:LCC)

The companies originally announced the merger back in February, but the Department of Justice (DOJ) shocked the markets by filing to block the merger in August. The stock plummeted on fears that the inability to further consolidate the industry would lead airlines to the price wars of the past. The August data doesn’t suggest that scenario is actually occurring, or will occur.

Merger dilemma

While the merger with AMR Corporation (OTCMKTS:AAMRQ) provides significant synergies, it doesn’t mean the airline can’t survive without it. US Airways Group Inc (NYSE:LCC) has been producing significant profits, and blocking of the merger by the DOJ won’t make the industry suddenly want to compete aggressively against each other. Does American Airlines really want to be aggressive on pricing after coming out of bankruptcy?

At the end of August, a federal judge set a trial date of Nov. 25 to decide the government’s lawsuit blocking the proposed merger. While that’s quicker than the March 2014 date originally proposed by the DOJ, the three months timeline to start the trial and uncertain outcome places American Airlines in a precarious place. The airline is attempting to exit from bankruptcy, and it had originally based that plan on a merger with US Airways Group Inc (NYSE:LCC).

The government’s main concern rests with the 1,043 city pairs that it says will no longer have acceptable competition after the merger. Ronald Reagan Washington National Airport, in particular, has 69% of its takeoff and landings controlled by US Airways Group Inc (NYSE:LCC) and  AMR Corporation (OTCMKTS:AAMRQ).

Regardless of the outcome, US Airways Group Inc (NYSE:LCC) appears to benefit in either scenario. Delaying the merger could further weaken American Airlines in bankruptcy, providing a boost to all other airlines. Approving the merger allows the combined entity to compete effectively against Delta Air Lines, Inc. (NYSE:DAL) and United Airlines. The alternative is that American emerges from bankruptcy independent — in short, no different than the market’s current situation.

Record August load factor

US Airways enjoyed a record load factor of 87.9% in August, up 0.6 points versus August 2012. The increase came even with a 5.6% increase in the available seat miles (ASMs).

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