American Airlines Group Inc (AAL)

[rockland2u]

I will be using numbers provided by JP Morgan for the calculations. We have some variables:

LCC price: let’s call it X
LCC shares oustanding: 736.8 million
AMR liabilities to creditors and employees: $7.565 billion, or $7,565 million
AMR shares outstanding: $335.3 million

To simplify, let’s get rid of the millions.

The value of US Airways is 756.8*X
The portion allocated to AMR is 72%*756.8*X=530.5*X
The leftover for AAMRQ shareholders is 530.5*X-7565
Value per AAMRQ share is (530.5*X-7565)/335.3

AAMRQ price = 1.582*LCC price – 22.56

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You see, AAMRQ price totally depends on LCC price. To give you perspective, if LCC price is $15 per share, then AAMRQ will be worth $1.17. On the other hand, if LCC price gets to $20 per share, AAMRQ will be valued at $9.08. If LCC price drops below $14.26, AAMRQ shares will be worthless.