A bit of litigation news is boosting share prices for United Airlines (NASDAQ: UAL) stock this morning.
Over the weekend, the Chicago Sun-Times reported American Airlines Group (NASDAQ: AAL) is suing Chicago’s O’Hare Airport (more precisely, the “Chicago Department of Aviation”) for “prematurely reorganizing gates,” taking away four of American’s slots and giving five more slots to United. American argues this breaches its seven-year-old airline use and lease agreement with the airport and will help United push American out to become the “sole hub carrier” at O’Hare.
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United shareholders like the sound of that a lot, though, and United stock is up 2.1% as of 11:20 a.m. ET Monday. Curiously, American shareholders like the news as well (or, at least, the fact that American is fighting for slots), and its share price is up 2.5%.
Doing the Chicago tussle
United is a long way away from “sole hub carrier” status. As the Sun-Times reports, while United controls 40% of O’Hare gates currently (88 gates), American has 30% — 71 gates. If the reorganization takes effect, United’s share might go to 42%, and American’s might fall by less than 2%.
That’s hardly revolutionary.
Still, American contends the agreement promised it “the opportunity to earn its fair share of gates at O’Hare before a gate redetermination could be triggered,” and that the Department is denying it that fair shake. American asks that no reallocation be permitted before April 2027.
Image source: Getty Images.
How should investors react?
Without all the details, it’s hard to comment on the merits of the lawsuit — but I can comment on the merits of these airline stocks. American Airlines stock looks cheap at 10.5 times earnings. United is even cheaper at just 6.7 times earnings.
Based on those numbers alone, I’m inclined to think United’s the better buy.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
