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Helane Becker, Dahlman Rose airlines analyst, weighs in on AMR and US Airways merger announcement today.
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-- -- says the American US Airways -- is good for the industry but what about those -- Helene -- is an airline analyst with -- Rosen Elaine thank you for being here much speculation about what does this do to ticket prices -- -- you say.
Not a whole lot but normally when you bring the number of airlines competing against each other smaller and smaller there's a less -- is usually bad news for the consumer right.
Right but in this case the top three airlines will only still control 70% of the industry's capacity and southwest is another 15%.
And then.
You have a whole bunch of other airlines like jetBlue virgin America Alaska Air Hawaiian and so on.
That will really accounts for the rest the industry's capacity is -- you have 25 to 30% of the capacity that's still out there that would be low fare low cost.
And and so they'll keep the Big Three on asked basically -- -- thing is though since deregulation about 35 years ago these airlines need.
Exacerbate almost have to raise prices don't they in order to start seeing some green at the bottom line yes -- -- in -- word seriously Yost.
On the in -- the industry's been profitable now for three years in -- -- and we think 2000.
Thirteen will be the fourth profitable year.
And in the 35 year since deregulation we've never had more than three profitable -- Generale.
Which is pretty astonishing and you're right they've never return capital to shareholders and that really needs to change if if that doesn't change it's going to be very typical for them going forward.
22.
It -- to borrow money really to fund expansion they provide very good jobs -- US jobs that on outsource.
You know pilots and flight attendants and so on so it's really important for the industry that this happened but from an investor standpoint -- like Q ninety Continental's -- yeah so when you look at the the transaction that was announced today it's an eleven billion dollar transaction.
And I and I think -- delta when I checked class was about thirteen and a half billion dollars in equity valuing united was.
A half -- in equity value and arguably the united and delta route structures.
Are still going to be much -- Then the -- structure that American US Airways is going -- how they they won't have the big Pacific division.
And and gas American is big on the trans Atlantic and and in Latin and South America but really so we're united and delta.
And we think that if if American deserves to sell new American deserves to sell an eleven billion.
United deserves to sell at least -- -- level because from a balance sheet perspective.
The united balance -- two years ahead of where this combined balance it's going to be and -- -- Do you worry that any kind of union pushed back on -- -- no no we don't primarily because they've negotiated.
Memorandum -- of understanding between all the unions.
To contemplate exactly this this -- com.
To assess size -- for in the airline industry and a so much been made about how big this deal is because it doesn't really matter.
Who we think it does yes and it's one of those cases were size is important.
And it's important for the corporate traveler a lot of corporations like to keep there employees on US airlines and it like today you know get the best possible -- And these three airlines really offer service worldwide now especially with the alliance is that there are all and it will strengthen the one world alliance which isn't you know kind of the third.
Largest for the third -- cast.
And and it really wasn't competitive with the other two cement that three airlines on solid footing I think that that will appeal to tell everybody.
All right interesting times ahead pulling back a thank you so much of being here appreciate it prices not going up -- --
