Perhaps we're so easily fascinated with the industry because many of us periodically relinquish control of our lives to airlines and their crews. At any given time, the market seems to be juggling two or three major airline stories.
For the past few months, we've witnessed the intrigue of U.S. Airways'
BusinessWeek magazine was the first to report that investment banking firm Goldman Sachs
While anything is possible in this era of rampant private equity activity, a purchase of a U.S.-based airline by a foreign carrier seems highly unlikely. First, the federal government prohibits foreign entities from owning more than 25% of a U.S. carrier. There's also AMR's $18 billion in debt, which might prove daunting to any potential acquirer. Last but not least, there are the company's labor issues, including its current negotiations with its 12,000-strong pilots union. The union is seeking to recoup its share of the $1.6 billion in annual pay and benefit cuts made four years ago to save the carrier from bankruptcy. Though I still consider American somewhat attractive in an era of sliding fuel prices, I'd deem any talk of a takeover at American greatly exaggerated.
While rumors fly about American, Delta recently reported that it achieved an operating profit for 2006, the first time it's done so since 2000. It now appears that its committee of unsecured creditors supports its reorganization plan, which is likely to receive bankruptcy court approval in late April, paving the way for Delta's emergence as a stand-alone carrier. Delta weathered a pair of hostile offers from U.S. Airways before the would-be acquirer rescinded its final $9.8 billion bid on Feb. 1.
Meanwhile, JetBlue
Despite labor concerns, I'd encourage Fools to give American and United Airlines
For related Foolishness:
- A Modest Proposal for Airlines
- Quick Take: Another Reason Not to Invest in Airlines
- Southwest Flies to 2007: Fool by Numbers
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your comments or questions. The Fool's disclosure policy is flying high.