American Airlines and US Airways on Friday announced that
their respective pilots unions approved a framework that would govern "the
terms of employment for pilots" in the event of a merger between the two
carriers. Several analysts viewed the memorandum of understanding as another signal
that the likelihood of a deal continues to grow.
"With the American Airlines pilots
reaching a pilot contract and labor groups at both airlines coming to an
agreement in anticipation of a merger, the next logical step would be an
announcement," according to a Monday research note from Dahlman
Rose & Co. analyst Helane Becker.
The carriers in a joint statement indicated that the MOU
"will assist all of the stakeholders, including the Boards of AMR and US
Airways, in making an informed decision as to whether a merger should
ultimately be pursued."
Some analysts expect merger discussions to top the agenda at
a Wednesday meeting of AA's board of directors. AA CEO Tom Horton in a Jan. 3
memo told employees that the carrier continued to "evaluate the potential
benefits, costs and risks of a potential merger," with plans to reach a decision
Buckingham Research Group analyst Daniel McKenzie in a Monday
research note said the MOU "raises the probability that US Airways
executes on a merger with AMR." Even before that agreement was announced, Buckingham
analysts "assigned an 80 percent probability" of a deal happening. If
AA declined to merge, the carrier would "suffer the wrath of their
creditors who expect a materially better recovery than AMR can offer as a
standalone carrier," according to McKenzie.
In addition to the MOU, Wolfe Trahan analyst Hunter Keay in
a Friday research note pointed to other harbingers of a merger. He noted that
market capitalization for U.S. network carriers grew 30 percent in the past six
weeks. Although AA stocks were delisted as the carrier reorganizes under bankruptcy
court protection, unsecured bonds in the airline also "have rallied
hard," according to Keay. Both serve as further indications that the
market is anticipating a deal.