Who stands to gain from an American Airlines merger?

Since American Airlines filed for bankruptcy last November, many are questioning whether US Airways or Delta could take advantage of a merger opportunity. Both US Airways and Delta have recently hired investment advisors to study bids and opportunities.

So who stands to gain the most from a potential buy out of AMR(AAMRQ-US)? In FactSet Ownership, we can see that selling AMR is the going trend and has been for the past few quarters among all investor types, including investment advisors, mutual fund managers, pension funds, and hedge funds. Overall, investment advisors and mutual fund managers have significantly reduced their exposure to AMR Corp over the last year. AMR filed for bankruptcy on November 29, 2011, but %OS held by these types of institutions had already been declining prior to that date.

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Top holders of AMR Corp are also holders of other securities in the airline industry. For example, Vanguard is the largest holder of AMR Corp, and it also owns a 4% position in Delta, almost a 4% position in United Continental holdings, and nearly a 5% stake in US Airways Group. A merger of any one of these securities with AMR would certainly affect Vanguard’s overall portfolio exposure to any of these securities.

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Some holders, Capital World Investors and Wellington for example, have large positions in Delta and United but do not invest in AMR. Are they purposely avoiding AMR because of looming merger talks or has AMR Corp fallen out of their investible universe of securities?

Capital World Investors sold out of its entire position of 7.4% of shares outstanding during the last quarter of 2011. Could it be that this investment was too risky after AMR filed for bankruptcy?

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Capital World Investors’ portfolio slightly increased its exposure to the airline industry over the past year, but overall it makes up less than 1% of the total portfolio. While Capital has changed the securities held within the industry, it has increased its position in United Continental and Delta, two companies that are in a position to take over AMR.

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One group that is not following the trend of institutions is insiders. AMR has seen an increase in insider ownership over the last year. A private company, Hong Leong Co (Malaysia) Bhd, took a 7% position in AMR as of September 30, 2011, then significantly dropped the position to just over 1% by the end of the year, but individuals were not selling out of their positions. The current top six individuals all saw an increase in position for the period ending June 30, 2011.

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Since AMR is the #3 airline in the U.S., who will take its place if a merger occurs? Or will AMR emerge a stronger company after all the dust settles? Will the individuals who hold stakes in the company gain by holding onto their AMR shares or will investors that have sold out of AMR breathe a sigh of relief?

FactSet clients: Launch these reports in Ownership 2.0.

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