3 Reasons To Nix This Merger
- Thread starter swamt
- Start date
Yes. And that is just the problem. The Tom Hortons and the Doug Parkers of the world have built careers on telling the frontline people that "this is going to make us the most respected, profitable airline in the history of the world." And, neither has a clue as to how to pay for all these grand plans. On a personal level, Kroger's does not care one whit how many attaboys I've received at work (and I've received a lot of them). When they ring up the last item in my basket, they want to see money come out of my pocket, or they want my debit card to prove I have the money in the bank. We all need to be asking the management of our airlines where the money is coming from.
WorldTraveler
Corn Field
- Dec 5, 2003
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and it is precisely because too many deals in the business world today are being made to the benefit of one party but at enormous cost to another that the social fabric that made America great is at risk.
Pursuing this merger to help US retirees gain a fatter retirement check while subjecting active employees -many of them lower seniority - to layoffs and years of working for a financial weaker company because of all the merger-related difficulties that face airlines, then the deal is not a good one. If AA labor leaders are pushing this merger because they think they can add more employees to their roles while doing nothing to truly improve the overall financial well-being of AA employees, then the deal should not move forward.
I and a whole lot of people have no problem seeing mergers where everyone can win... but the proposition of AA-US has been so clearly based on one or more parties winning at the cost of others that lots of questions have to be asked.
When you consider that AA and US both have reasonably decent potential to survive and potentially thrive as standalone companies - and without the turmoil and cuts that will hit the average frontline worker - then it shouldn't be too hard to see why so many of us would far prefer to see AA and US cooperate on revenue strategies where it would help but not get involved in a messy merger that would benefit a few at the expense of the majority.
I believe that Uncle Carl uttered those same words that TWA would become the best airline in the world. But unlike the two charlatans running for AALLC CEO now, Uncle Carl had deep pockets then and still has ( $ 14 B ). Still he used little out of pocket $$$ and quickly stripped TWA of its LHR routes to sell to Crandall's AA thereby castrating TWA to pay back investors and himself.
The bottom line is that these recent two are in it for the money as well, just like our Uncle. They'll strip mine LCC and AA and thousand of employees will go into the trash heap.
They'll make millions in the process.
The bottom line is that these recent two are in it for the money as well, just like our Uncle. They'll strip mine LCC and AA and thousand of employees will go into the trash heap.
They'll make millions in the process.
wings396
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- Aug 20, 2002
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I disagree, you are way off base comparing either of the current 2 with Carl. Not saying they they aren't looking for a big payday, but not corporate raiders looking to sell of parts of the airline for their personal profit. I can't speak for Horton, but Parker actually wants to run the airline.
Well then the sooner the better, airline workers are becoming a scarce commodity, they wont go to the trash heap, they will be picked up even faster than the tin and gates by carriers that take better care of their employees than either Parker or Horton.
You're right I can't compare the two, they're both about ($14B ) short of Carl, lacking that big ticket they're cut from the same cloth. Howard Hughes ( the last real airlines guy ) tried with his millions and couldn't overtake PanAm. That era has led us to this, guys using the banks and not their own money to fund their dreams about having the biggest airline. In the end it's the BOD that'll make the decision to jettison routes and employees to reach the goal of having a profitable airline.
If size does matter lets see who has the biggest cojones, put personal assets on the table or walk away.
Don't trust any snake oil salesman unless you know for a fact that he has skin in the game. Both Parker and Horton are positioned for the upside with a guarantee of no downside. Parker/Horton, you think this merger is/is not the right thing to do? Put your money where your mouth is--not my money, not my job, not anyone else's money or job.
WT:
I and a whole lot of people have no problem seeing mergers where everyone can win...
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Ok WT, outside of DL/NWA (which I have reservations about just who benefitted the most), when was there ever a merger where everyone won? I can't recall one. IMHO mergers are always sloppy, ill conceived and hard as hell to implement. But never have I seen one where everyone gained. There are always those in the right seniority bracket or at a place in their personal lives that gained at the expense of others (case in point Eastern/Trump shuttle). It is just the way it is. Heck, just ask the Airtran people who the real gainers are with the WN merger er' buyout.
Like it or not Parker does seem to have the winning hand in this deal. If the mou is approved by US pilots, he will have managed to put just enough of a carrot out there to put an end to the Nic debacle. And as unbelievable as it seems he now has the US f/as seeing dollar signs, even though if you look at the math the T/A that US f/as will be voting on is for a lesser dollar amount than the last one even with the signing bonus. Because he as already saved the 40 million that would have been allocated for the first year of TA1. That 40 mil. is gone and will never ever be available to benefit the US f/as economically. In this case the carrot used is the mou discussions with APFA (seniority issues).
As a famous Hooker once said "We all smile and take money from somebody". So everyone is smilin' idly by just waiting for that nip at the apple. I hope it is a satisfying one.
The only way this merger works is it is done quickly, decisively, and accurate. When the next crisis hits the airline industry, and you know it is right around the corner, then management will have the justification to break out the axe and start chopping and trimming in the form of layoffs and route reductions. It is a question of which hub gets the axe. There is just no way the new AA keeps the current headcount competing with DL and UA.
So, to proceed with the merger or not to? I think the writing is on the wall right next to the fly paper and bug zapper.
I and a whole lot of people have no problem seeing mergers where everyone can win...
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Ok WT, outside of DL/NWA (which I have reservations about just who benefitted the most), when was there ever a merger where everyone won? I can't recall one. IMHO mergers are always sloppy, ill conceived and hard as hell to implement. But never have I seen one where everyone gained. There are always those in the right seniority bracket or at a place in their personal lives that gained at the expense of others (case in point Eastern/Trump shuttle). It is just the way it is. Heck, just ask the Airtran people who the real gainers are with the WN merger er' buyout.
Like it or not Parker does seem to have the winning hand in this deal. If the mou is approved by US pilots, he will have managed to put just enough of a carrot out there to put an end to the Nic debacle. And as unbelievable as it seems he now has the US f/as seeing dollar signs, even though if you look at the math the T/A that US f/as will be voting on is for a lesser dollar amount than the last one even with the signing bonus. Because he as already saved the 40 million that would have been allocated for the first year of TA1. That 40 mil. is gone and will never ever be available to benefit the US f/as economically. In this case the carrot used is the mou discussions with APFA (seniority issues).
As a famous Hooker once said "We all smile and take money from somebody". So everyone is smilin' idly by just waiting for that nip at the apple. I hope it is a satisfying one.
The only way this merger works is it is done quickly, decisively, and accurate. When the next crisis hits the airline industry, and you know it is right around the corner, then management will have the justification to break out the axe and start chopping and trimming in the form of layoffs and route reductions. It is a question of which hub gets the axe. There is just no way the new AA keeps the current headcount competing with DL and UA.
So, to proceed with the merger or not to? I think the writing is on the wall right next to the fly paper and bug zapper.
This is the same game plan as the 80's corporate raiders. Lorenzo, Ichan, Joseph Cheechi ( probably spelled wrong) stripped the airlines, reduced pay and benefits and layed off thousands of workers. This new century they are doing the same thing only using bankuptcy as their tool of choice to accomplish the same thing. Horton is hatchet man brought in to reduce the workers wages and benefits, reduce headcount and give the shareholders and the exec's millions in pay and bonus'es while Parker is looking to grow his airline empire with cheap labor. Kind of reminds of Frank Lorenzo only Parker is not as ruthless. Wings396 you don't really believe Parker, after the merger, will keep all assets. No, he will sell off what he deems is not necessary. When the routes and aircraft go so do its people. In my opinion and only my opinion, they are corporate raiders that will sell off parts of the airline for personal profit. They do nothing without thinking about how much will this put in my pocket. The work force is just a means to his bottom line.
Kind Regards,
Harvey West
You must discard that Pollyanna outlook and deal with reality.
The chopping and trimming of layoffs and hub reductions, etc. will not and can not await the next industry crisis. A "new" AA can not support 6 hubs in the eastern United States. It may still have activity in all those cities, but not 6 hub operations--BOS, NYC, PHL, DCA, CLT, MIA. We (current AA) have already eliminated the last of the BOS International flights. Something has to give. If AMR management continues in power, I would recommend a review of the history of AA acquiring/merging with other airlines, and the resultant disaster for the former airline's hubs/focus cities. TWA had over 400 departures/day from STL in 1999. When I was recalled from furlough in Nov.2004, there were still over 200 departures/day from STL. Today there are something like 28 or 30, and of those the great majority are either STL-ORD or STL-DFW.If you want to argue that STL is just a dead city, I suggest a trip over to East Terminal (WN) at STL. Busy. Busy. Busy. And, despite what the AA cheerleaders will tell you in a condescending tone of voice, it ain't just Ma and Pa Kettle and the kids goin' ta Disneyworld. The board first line at most of those departures is filled with business men/women in suits with computer in tow.
I understand that Reno Air had a similar number of departures from RNO. Today, AA has 2 flights/day from DFW, 1 from ORD and 4 Eagle flights from LAX. And, wasn't there some airline based in California that was going to provide AMR with West Coast north-south traffic? (Before my time. I was a mere child in the oil business in those days.) Any vestiges of it today?
Don't judge anyone by what they say. Judge them only by what they do.
I'm just sayin'.
WorldTraveler
Corn Field
- Dec 5, 2003
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Kat,
You raise several good points, as do the replies to them from others.
First, you are correct that mergers are never painless… someone always gives. The whole notion of mergers is that the merged company can be more efficient than the two previous parts. There are very, very few mergers that have resulted in no job losses or cuts and all revenue gains… I can’t think of a one in the airline industry.
Second, DL/NW will probably go down as one of the smoothest and most effective mergers of US airlines. DL achieved what it wanted thru the merger and the human cost was relatively low. Further, DL employees – including the former NW employees – are financially better off than they were on the day of the merger. Yes, some point to increases in health care costs, but health care and other benefits costs have gone up throughout America. DL employees will divide the largest profit sharing of any US airline next week.
Third, the reason why DL/NW worked so well is because DL was able to reduce the overlap assets that existed to grow the new, merged company. CVG and later MEM assets were moved to NYC where DL has gained far more revenue than how those assets were being used before. The challenge for any merger is to grow revenues BEYOND a simple combination of the two previous companies; it will require deep cuts if the combined company does not find new sources of revenue. I am not at all sure where AA and US can grow their revenues beyond what they already have; part of AA’s turnaround plan ALREADY requires growing revenues in order to make their standalone plan work – the amount required to fund a merger will be even larger. UA has yet to demonstrate that the merger has resulted in revenue growth – and that merger is going on a couple years old. WN is now making significant cuts, largely to FL’s operation, in order to meet the financial justification for its merger.
Fourth, there have indeed been cuts at DL – but DL said on the day of the merger that the cuts would come largely from Delta Connection carriers – and that is exactly where the cuts have come. You need only look at the traffic reports in the industry to see that DL is taking capacity out of the Connection carriers while insulating its own employees. Perhaps AA and US can come up w/ a plan that will involve keeping mainline growth flat while taking out regional carrier capacity, but I and others have doubts.
Fifth, I do not at all believe that Parker and US execs are necessarily going to gain any more thru the merger than they will if US remains standalone. There is an adage in American finance that stocks rise on rumors of a merger and fall when it is actually announced. Wall Street likes prospects of a merger and the hope for improved finances; LCC stock has had an enormous runup over the past year based on expectations of a merger w/ AMR but it is very likely that there will be a dramatic drop after an announcement is made – if it happens – and Parker knows this. The opportunity to make money on LCC stock is now.
Sixth, you and others have long believed that Parker was in the catbird seat regarding this merger. If the context is to gain more out of his own labor groups, then yes you are probably right. But if the context is the larger deal, I’m not at all certain your statement is true. We really don’t know that AMR’s creditors – who have to ultimately decide if a deal is worth it – believe a deal is in their best interests. So far as we know, the creditors have used the prospects of a merger solely to create a whiplash in negotiations between AA and US execs who have been trying to outbid each other. We really have no information at this point that the creditors have chosen AA standalone over a merger or vice versa.
Finally, speed with which the merger is finalized is not the merger of whether it will succeed or not. The measure that will last is whether it has achieved the goals necessary. Rushing to close hubs and cut costs will more likely than not result in lost revenue and opportunities down the road. Competitors will act on the merger; it will take months if not years to integrate systems and learn the ins and outs of the combined route system – all the computer simulations in the world can’t accurately predict what will happen when pieces that were not predicted – such as macroeconomic changes and competitor actions – are beyond what was expected. With personnel issues, once a decision is made, the consequences will be long-lasting – and they will not be anywhere close to as favorable as you and others expect.
I get really concerned when I hear you and wings and others say that as near-retirees, you expect to personally gain as a result of the merger and thus want to see it happen. It is no more noble to argue against the execs when you have the potential to gain at the expense of someone else – potentially someone else lower on the seniority list.
What cannot be denied is exactly what Jim has pointed out – that AA and US both have poor track records for successfully consummating mergers w/o significant negative effect on employees and customers. Whether that is totally within mgmt’s control or not, the results are there and employees who know the history of the industry will look at those issues far more honestly than will giddy investors who salivate at the prospect of a deal and then castigate management when they fail to deliver.
WorldTraveler
Corn Field
- Dec 5, 2003
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perhaps... but we have seen articles like this for about a year, including just days before AA announced yet another delay in filing its POR.
If it really does happen, then there will be no shortage of opportunities to discuss whether all of the opinions that have been made about this merger were right or not. This has been one of the most discussed events that has happened in the airline industry w/o anything official having been announced.
Regardless of your position on the merger, there is no denying that Parker and co. have put more effort into gaining media and analyst support for the idea of a merger than has ever taken place in the airline industry.
If it really does happen, then there will be no shortage of opportunities to discuss whether all of the opinions that have been made about this merger were right or not. This has been one of the most discussed events that has happened in the airline industry w/o anything official having been announced.
Regardless of your position on the merger, there is no denying that Parker and co. have put more effort into gaining media and analyst support for the idea of a merger than has ever taken place in the airline industry.
