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Always Ask What Your Airline Can Do For You: Delta Air Lines, Inc. (DAL), Southwest Airlines Co. (LUV)

  1. Labor issues: American had a long history of union disputes within the organization. This has led in the past to several strikes and caused the delay of many flights, as well as many disgruntled passengers. Now, after the merger (and the bankruptcy of American), the unions finally realize they must either compromise or cease to be. This will take a lot of operational pressure off the new integrated airline company.
  2. Cost savings: In the rapid capital expenditure world of airlines, cost saving is a must. The companies stated that they expect to save $150 million annually as a result of the merger.

The Fool flies ahead

Personally, I would stick with Buffett’s rule on airline stocks: Just avoid them. But if you’re a devoted airline fan, I believe that American – Airways is for you. With lean management, dominant routes and less debt, the new merger between American and Airways will create the best rival in the industry.

The article Always Ask What Your Airline Can Do For You originally appeared on and is written by Shmulik Karpf.

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