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US Airways Group Inc (LCC), AMR Corporation (AAMRQ): It’s Not Over Yet

Book value and cash
With both a positive book value and tangible book value, US Airways compares favorably to other legacy carriers. United Continental Holdings Inc (NYSE:UAL)’s tangible book value is less than zero and the airline trades at a much higher P/B ratio than US Airways. Delta Air Lines has negative values for both book value and tangible book value making it the least attractive in this comparison.

US Airways has also built an impressive cash position with nearly $20 per share in cash. Of course the airline still has billions in debt (like all legacy carriers) but the liquidity provided with this cash compares favorably with United Continental Holdings Inc (NYSE:UAL) and Delta’s cash per share.

It’s not over yet
While much of the public believes the US Airways-AMR Corporation (OTCMKTS:AAMRQ) merger has been killed, investors should know that there is still a court battle and more negotiations to wade through before this corporate drama is over. If the merger is eventually approved, US Airways shares have major upside potential based around the market’s valuation prior to the DOJ challenge. But even if the merger does die in court or over the negotiating table, US Airways still offers significant value in its P/E ratio and a favorable book value and cash position. With the added potential to expand its network by acquiring sold off American Airlines assets, I believe US Airways shares have significant upside, merger or no merger.


The article This Airline’s a Good Value, Merger or No Merger originally appeared on is written by Alexander MacLennan.

Alexander MacLennan owns shares of Delta Air Lines and Air Canada (a Star Alliance member). He is also long the following options: $22 JAN 2015 Delta calls, $25 JAN 2015 Delta calls, $30 JAN 2015 Delta calls, $17 JAN 2015 US Airways calls. The Motley Fool has no position in any of the stocks mentioned. 

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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