As these costs move out of United Continental Holdings Inc (NYSE:UAL)’s quarterly reports, the company should begin to realize savings from the merger. Whether the airline reaches the $1 billion goal still remains to be seen, but analysts are already predicting increasing earnings over the next few years.
| Year | Earnings |
| 2011 | $2.26 |
| 2012 | ($2.18) |
| 2013 | est. $3.37 |
| 2014 | est. $4.84 |
Source: 4-traders.com.
Other examples
The airline merger making headlines today is not the years old United Continental merger, but the expected US Airways American Airlines merger. When Delta merged with Northwest, it claimed the title of world’s largest airline. United took the position when it merged with Continental and American Airlines will hold the crown after the latest merger is finalized.
While this airline empire-building is expected to produce savings down the road, following in the footsteps of the Delta and United mergers, the US Airways merger will likely produce major integration costs over the next few years. Additionally, US Airways will have to manage this merger while confronting labor issues existing within the current US Airways. How successful will the merger be? That will only become clear over the next five to 10 years. But US Airways investors should expect some turbulence along the way to their potentially sunny destination.
A merger pattern
Since 2008, the number of major airlines in the U.S. has been reduced significantly. Delta merging with Northwest, United with Continental, Southwest with AirTran, and the expected US Airways with American Airlines. These mergers tend to follow a pattern over a few years of benefits stated, costs incurred, and benefits realized. Delta has entered the final stage and is pursuing other opportunities with Virgin Atlantic and running its own oil refinery. United Continental Holdings Inc (NYSE:UAL) is moving closer to the end of costs incurred with greater earnings expected over the next few years. And US Airways is beginning the process and will enter the costs stage after the merger is approved by regulators. Mergers have reshaped the airline industry and potential airline investors need to recognize the costs and benefits of airline mergers on their potentially high-flying investment.
The article Skies Clearing for This Merged Airline originally appeared on Fool.com and is written by Alexander MacLennan.
Alexander MacLennan owns shares of Delta Air Lines. The Motley Fool has no position in any of the stocks mentioned. Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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