Texas Business Report: What the American-US Airways Merger Means
Some analysts predict the deal could be bad news for leisure travelers, especially those in smaller markets.
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The Texas economy is one of the most robust in the world. Wildly profitable companies and ingenious entrepreneurs call this state home, and what happens here influences businesses around the nation. Here’s a slice of the profits, losses, big deals, and backroom decisions happening across Texas this week.
American Merger Story
AMR Corp., the Fort Worth–based parent of American Airlines, announced on Thursday that it will merge with US Airways in a deal worth $11 billion. If federal regulators approve the merger, the airline would become the largest in the world, Reuters reports.
US Airways CEO Doug Parker will head up the new company, which will be named American Airlines Group Inc. and will continue to fly under the American Airlines name. AMR CEO Tom Horton plans to accept a nearly $20 million severance package and “serve as non-executive chairman of the new company until sometime in 2014 and then will retire,” according to the Dallas Business Journal.
The Bottom Line: Some analysts predict that the deal could be bad news for leisure travelers, especially those in smaller markets, “as the big airlines continue to curb unprofitable or less-travelled routes,” according to experts interviewed by Reuters. There are also concerns over potential disruptions that could occur when the two airlines merge reservation and baggage handling systems, customer loyalty programs, and computer networks.
Blood Runs Coal
The Sierra Club is stepping up a lobbying campaign calling for the closure of three coal-fired power plants in East Texas, the Texas Tribune reported this week. The environmental advocacy group says the coal burned at the plants releases unsafe levels of mercury and other pollutants into the air. The plants are operated by Luminant, the power-generation arm of Dallas-based Energy Future Holdings, which claims the facilities are in compliance with state and federal regulations.
The Bottom Line: Sierra Club members “would like the plants to be gone by 2018, replaced with renewable energy sources like wind and solar power,” according to the Tribune. To move toward that goal, the club is asking residents and policymakers in the region to end their business with TXU Energy, which sells power on behalf of Luminant.
Fund in the Sun
The Texas Emerging Technology Fund has had a mixed track record since its inception in 2005, but a new report suggests that the program is currently turning a profit. Lawmakers in the House Committee on Technology praised the ETF on Monday for creating jobs and generating returns on taxpayer-funded investments in tech startups, the Austin Business Journal reports.
The ETF’s interim director told the committee that after the state invested $184 million in the ETF, its “current asset capital is valued at $186 million and $5 million has already cashed in by the state,” according to the ABJ.
The Bottom Line: The announcement is good news for ETF advocates—including Governor Rick Perry—in a year when state lawmakers will determine how much funding to allocate to the program. Proponents hope this week’s update will outshine previous reports citing decreasing employment at ETF-funded companies, as well as criticisms over a lack of transparency in the fund’s management.
Winner of the Week: The City of Sugar Land
If Sugar Land is looking for an opportunity to earn some extra cash, it may want to consider a name change. The California-based dating site SugarDaddie.com is offering the Houston suburb half a million dollars to officially change its name to “SugarDaddie.com, U.S.A.” for ten years, the Houston Business Journal reports. The deal would also require city to change the names of its fire department, airport and city hall, and host a ceremony in which Mayor James Thompson grants the key to the city to SugarDaddie’s CEO.
Surprisingly, Thompson says he is hesitant to accept the offer. But, he told the HBJ, “Never say never, depending on how many zeros (there are) and the decimal point. But as of today, the city of Sugar Land is not for sale.”
Loser of the Week: Dr Pepper Snapple
Due to rising costs of ingredients and packaging materials, Dr Pepper Snapple had a less profitable fourth quarter than analysts had projected. The Plano-based company reported this week that it earned 82 cents per share last quarter, falling short of Wall Street’s target of 85 cents, according to Thomson Reuters.
Executives said the increasing prices of apples, corn and paper board will contribute to a two percent bump in the company’s total cost of goods in 2013. That trend is affecting the soft-drink industry as a whole, including Coca-Cola, which also reported a slowdown in the growth of worldwide sales this week.