Britain's IAG is likely to be the most affected, among Europeanairlines, as the proposed merger between American Airlines (AMR) and US Airwaysruns into political turbulence, reckons Deutsche Bank.
In a surprise move that could delay or even derail the plans, the U.S.government on Tuesday sued to block the deal to create the world's biggestairline, saying consumers would end up paying higher fares.
"The relevance for IAG is that IAG has an anti-trust immunisedtrans-atlantic joint venture (JV) with AMR and the hope had been that if USAirways and AMR were to merge then significantly more volume would flow throughthis JV," Deutsche's analysts write.
"We know this JV is extremely profitable, and hence the increased flowswould likely have been a sizable positive ... we would position this as an eventwhich does not change the fundamental buy case (restructuring of Iberia) butdoes make one of the upside positives more difficult."
Despite the possible negative implications, though, shares in IAG are up 2.6percent, taking heart from Deutsche still sticking to its "core 'buy'" view onthe stock and from upbeat comments - unrelated to the U.S. merger - on the stockfrom two other banks.
Nomura, also buyers, upgrade the price target, while Macquarie raised itsrating to outperform from underperform, with both noting progress inrestructuring and adjusting forecasts for Vueling acquisition.
IAG's shares outperform broadly flat rivals for Lufthansa and AirFrance KLM, for whom Deutsche sees smaller negative implications fromthe U.S. merger problems "on the fact that any consolidation on thetransatlantic would have helped their respective pricing power as well".
It reckons the news is of no relevance to easyJet or Ryannair.
Reuters messaging rm://antonina.vorobyova.thomsonreuters.com@reuters.net
easyJet (EZJ)