STOCK MARKET WATCH -- Friday, 13 January 2012

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60. Vultures Circling Corpse of American Airlines

http://www.slate.com/blogs/moneybox/2012/01/13/vultures_circling_corpse_of_american_airlines.html

As American Airlines lingers in bankruptcy in the consolidation-happy airline industry, firms are pouring in to consider buying the company led by Delta (advised by Blackstone) and US Airways with the private equity TPG Group also possibly interested in a piece of the action.

The best outcome from a passenger's point of view is probably a patriotic merger between American and US Air which would give the United States three really big global carriers—United, Delta, and US/American—with the merged entity ideally joining the OneWorld alliance so we'd have strong representation in each of the three major global airline alliances. Then Southwest, JetBlue, Frontier, etc. would provide extra competition on domestic routes. An American merger with Delta, by contrast, would raise a bunch of competition policy issues and presumably the combined firm would need to divest some assets in order to be allowed to go forward. However that worked out, we'd be left with a kind of lopsided market with two big players and a bunch of smaller ones. But American's management seems to want to try to restructure and keep on going it alone in which case the can of future bankrupties and consolidations will probably just end up getting kicked down the road.