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Texas-based AMR may seek merger

Texas business owners are likely all too familiar with the many ways that the events of Sept. 11, 2001, changed America. One way that life changed for Americans is how airline business is conducted. Another significant change in the country since the 2001 attacks is the continually struggling economy. With those two factors combined, many airlines have engaged in mergers in order to keep their business in the air.

Airline mergers are not uncommon since the 2001 attacks. The most recent talk of mergers amongst the airlines concerns AMR -- the parent company of American Airlines -- and US Airways Group. Both companies are seeking to become more competitive in both size and costs, and AMR has recently filed bankruptcy protection as a means of achieving those goals.

US Airways is currently the fifth largest United States airline. American Airlines was once the national leader, but that company has dropped to third after other airlines enacted mergers and acquisitions in the wake of the 2001 attacks. AMR was determined to avoid bankruptcy after Sept. 11, 2001, when other airlines began to merge in order to create larger spanning networks. However, AMR shares fell 86 percent to only 26 cents a share. On the other hand, at the time of the last report, United Airlines was holding shares at $17 per.

US Airways attempted a hostile bid for Delta Airlines in 2006. Professionals in the industry claim that there is potentially "one big deal left" in the industry. If Texas-based AMR wants to stay in the air, the company will need a partner in order to keep going. The merger would continue a current trend for airline acquisitions, whereby mergers take place as a way for companies to try to maximize profits rather than maximize their market share.

Professionals commenting on the topic suggest that US Airways wants the deal, but a spokesperson for the company declined to comment. A spokesperson for AMR simply stated that the company does not comment on rumors. AMR is the fourth airline after United, Delta, and Northwest to seek bankruptcy protection. Delta merged with Northwest in 2008, while United merged with Continental in 2010, and these two mergers have led to an increase in share values for the companies. The mergers serve as good case studies for the next big merger in the airline industry.

Source: Bloomberg, "US Airways Seen as Possible Merger Partner for AMR," Mark Clothier and Thomas Black, Nov. 30, 2011

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