The U.S. Airways Group: A post-merger analysis

Abstract

America West Airlines acquired the bankrupt US Airways on September 27, 2005 to form the US Airways Group. Our paper analyzes the post-merger performance of the US Airways Group using airline operating metrics and financial ratios for the period 2005 to 2013. While the airline has still a long way to go to improve its leverage and liquidity ratios, its capital structure and ability to pay its obligations have improved since 2005. Moreover, although the airline is still inefficient in utilizing its assets, the efficiency improvements achieved since the merger have resulted in profits and positive returns to investors. Its share prices have also largely outperformed the S&P 500 and XAL since the merger, an indication that investors are pleased with how the merger is developing over time. In view of the US Airways Group's improving financial and operating performance, the merger is, essentially, a success.

An analysis of Delta Air Lines' oil refinery acquisition

“…When compared with the stock performance of other US-domiciled major airlines, however, Delta Air Lines' share price performance lags the US Airways Group's (stock ticker symbol: LCC) when the benchmark index is either the S&P 500 (see Figure 7) or the XAL (see Figure 8) while its share price performance is almost similar to United Airlines' CARs (stock ticker symbol: UAL) and outperforms Southwest Airlines' CARs (stock ticker symbol: LUV). The share price performance of American Airlines is not included in the analysis because the New (Manuela Jr. et al, 2016;Mehta, 2011). The share price performance of the US Airways Group between 10 January and 2 July 2012, the observation window for the DARs and CARs in Figures 5, 6, and 7, is largely due to its announcement to acquire the bankrupt American Airlines in January 2012 (Joyce, 2012) and its improving financial performance since America West Airlines acquired the bankrupt US Airways, forming the US Airways Group (Manuela Jr. et al, 2016), while the stock performance of United Airlines is due to its improving financial performance since its merger with Continental Airlines in October 2010 (Manuela Jr. et al, 2016).…”

“…The share price performance of American Airlines is not included in the analysis because the New (Manuela Jr. et al, 2016;Mehta, 2011). The share price performance of the US Airways Group between 10 January and 2 July 2012, the observation window for the DARs and CARs in Figures 5, 6, and 7, is largely due to its announcement to acquire the bankrupt American Airlines in January 2012 (Joyce, 2012) and its improving financial performance since America West Airlines acquired the bankrupt US Airways, forming the US Airways Group (Manuela Jr. et al, 2016), while the stock performance of United Airlines is due to its improving financial performance since its merger with Continental Airlines in October 2010 (Manuela Jr. et al, 2016). Therefore, the share price performance of Delta Air Lines may be attributed to its oil refinery acquisition announcement to better control is fuel costs in the long term than an industry-wide above-average performance of the US airline industry during the observation window because at least one major airline (Southwest Airlines) underperformed the S&P 500 and the XAL in the same period while Delta Air Lines' income before income taxes in Q1 and Q2 2012 is low and negative, respectively (see Figure 9).…”

“…While airline financial performance has been the subject of a great deal of research exploring issues from airline safety (Adrangi et al, 1997;Graham and Bowes, 1979) to outsourcing (Raghavan and Rhoades, 2008) to mergers or acquisitions (Manuela Jr. and Rhoades, 2013 andManuela Jr. et al, 2016;Singal, 1996) to hedging (Lim and Hong, 2014;Morell and Swan, 2006 ), there has yet to be any research focusing on the financial implications of oil refinery purchase since Delta Air Lines is the first carrier to pursue this audacious strategy. The purpose of this study is to analyze the impact of the oil refinery acquisition on the financial and operational performance of the airline using financial ratios and short-term stock performance as well as an econometric model that includes financial and airline operations variables, e.g., fuel cost per available seat mile (ASM), to provide additional evidence of the viability of this vertical integration acquisition.…”

Airline effective operations strategy during COVID-19 pandemic: across regional worldwide survey

“…This indicator was measured by previous studies as the break-even load factor (e.g. Manuela et al , 2016; Škurla Babić et al , 2017; Szabo et al , 2020). Some studies have adopted other measures, such as the monetary value break-even point, or the number of passengers per kilometer (e.g.…”

Do mergers and acquisitions improve firms' financial performance? The case of the U.S. generic drug industry

“…In certain industries, improvements in performance or profitability were identified, whereas in others, there was no change or reduced performance. Studies showing improved performance include Manuela, Rhoades, and Curtis (), which reports the postmerger performance of the U.S. Airways Group using airline data for the period 2005 to 2013. This merger has resulted in large profits and positive returns to investors.…”