Top picks from S&P: US Airways

The recent merger and strong demand drives growth at the airliner.

By TheStockAdvisors May 24, 2013 4:13PM
Portrait of Pilots Sitting in the Cockpit, Adjusting the Controls copyright Digital Vision., Digital Vision, Getty Images(This post is part of a special report featuring 7 Top Picks from S&P Capital IQ.)

By Jim Corridore, S&P Capital IQ, The Outlook
Sector: Airlines

Our positive outlook for U.S. Airways (LCC) reflects improving air travel demand as well as our view that it has adequate cash to fund operations and pay debt obligations during the next 18 months. We believe industry capacity cuts in the past two years will support rising fares.

We think strong demand will drive additional attempts to raise fares over the next year. We also expect yields to benefit from increased corporate travel and less fare sales activity than usual.

U.S. Airways is the fifth largest airline operating in the U.S. with primary hubs in Charlotte, Philadelphia and Phoenix. The company considers itself to be the largest U.S. low-cost carrier as measured by revenue passenger miles as well as the only low-cost carrier with a significant international presence.

In February, U.S. Airways agreed to merge with AMR Corp., parent of American Airlines, which we view positively. The new carrier would operate under the American Airlines name, with U.S. Airways shareholders receiving about 28% of the combined company.

A merger solves the airline's international network problems and allows it to compete head to head with other U.S. global network carriers, in our view. U.S. Airways expects the transaction to close in the third quarter of 2013.

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Tags: LCC
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