AA - Jetblue - Alaska Airlines

[WorldTraveler]

actually, based on the CASM which AMR is planning for in its 1113 documents, AA's CASM will put it within a few percent of AS' - so an AS merger is indeed possible if AA chose to pursue it.
While AS can say it is not interested in pursuing mergers with anyone, it is a publicly traded company and as such has to consider any reasonable offer. AS claims that a significant part of its revenue comes from its multiple codeshares - but whether that revenue can be replaced by network synergies or reduced costs in a merger is up to the acquirer - not AS to decide.
Hostile takeovers generally don't work in service industries but hostile becomes a relative term if the money is right.
Right now, ALK's market cap is about 1/3 that of UAL and LUV with DL at about 3X plus another billion.
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However, AA has to decide what is strategically most important - because companies can't do two separate mergers at the same time. Strategically B6 offers far more to AA over the longterm but the CASM difference with B6 will be alot higher.
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Interestingly B6 is now taking a role similar to AS in codesharing w/ every airline possible - which might make it more difficult for an acquirer to replace all the revenue that is lost, esp. since B6 flies into much more int'l heavy markets.

 

[eolesen]

It's hardly a secret that management at ALK, Hawaiian and JBLU are only interested in being "friends with benefits" vs. being married or monogamous.

 

[etops1]

It's hardly a secret that management at ALK, Hawaiian and JBLU are only interested in being "friends with benefits" vs. being married or monogamous.

Very true.

 

[Bob Owens]

Alaska is the second highest paid mechanics for pass airline, falling right behind the Southwest mechanics. No clue what the JB mechs get paid.

By the way AA's proposal is $34/chg , in 2018!!

Read recently that the maids cleaning rooms in Manhattan currently get $33/hr.

 

[TWU informer]

By the way AA's proposal is $34/chg , in 2018!!

Read recently that the maids cleaning rooms in Manhattan currently get $33/hr.

I have a strong feeling that I will be voting NO this time.

What is the plan beyond that idea?

 

[jersey777]

By the way AA's proposal is $34/chg , in 2018!!

Read recently that the maids cleaning rooms in Manhattan currently get $33/hr.

Was this the article you read by chance?

http://bizmology.hoovers.com/2012/03/02/60k-salaries-for-new-york-city-maids-a-good-sign-for-hospitality-sector/

The american middle class might be alive and well after all!

 

[WorldTraveler]

It's hardly a secret that management at ALK, Hawaiian and JBLU are only interested in being "friends with benefits" vs. being married or monogamous.

exactly, E... since domestic airlines can't share revenue with other domestic airlines, they get more money by having multiple codeshares.
But that also makes any of those codeshare partners with them less valuable - since they don't have a "monogamous relationship".... and there are clear advantages of having a true merger vs. multiple codeshares - some of which include true connectivity of customer programs and IT systems plus joint/connected terminals.
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Having multiple codeshare partners is better than not having an AA presence in a market at all- but it can never provide the level of connectivity provided in a merger.
And it still remains that any other carrier could choose to acquire one of those smaller carriers before AMR is in a position to do so.
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The key takeaway, though, is that the long spoken adage that AA is not in a cost position to acquire other airlines will not be true if AA successfully achieves the cost savings it is planning for.

 

[Buck]

It's hardly a secret that management at ALK, Hawaiian and JBLU are only interested in being "friends with benefits" vs. being married or monogamous.

Funny that JBLU is code sharing with JAL .......

 

[BleacherBum]

Even if Jet Blue and/or Alaska would agree to merge (which i highly doubt) - AA/Jblu/ALK will never fly because the DOT/DOJ would never allow it. The government is all about low cost (low fare) competition and for AA to significantly grow its domestic footprint (especially at JFK and BOS) - at the cost of wiping out 2 low cost competitors - i just don't see that ever coming close to happening.

 

[Deleted member 17588]

Even if Jet Blue and/or Alaska would agree to merge (which i highly doubt) - AA/Jblu/ALK will never fly because the DOT/DOJ would never allow it. The government is all about low cost (low fare) competition and for AA to significantly grow its domestic footprint (especially at JFK and BOS) - at the cost of wiping out 2 low cost competitors - i just don't see that ever coming close to happening.

Of course if you turn the situation "upside down," if AA gets what they are asking for in their term sheets, AA will be stooping down to the level of a Low Cost Carrier, not the other way around. The crisis of losing LCC competition is averted.

 

[BleacherBum]

Does anyone consider US Airways to be a low cost carrier? Prob not - but more importantly the government definitely does not, so hypothetically if AA were to trim wages, benefits etc down to US's levels during the bankruptcy process (which is prob close to what they are asking - correct?), they would still not be considered a lcc.
For AA to become a true lcc (one that the government would recognize as such) - they would have to go way beyond what they are currently proposing.

 

[wings396]

AA, nor any of the legacy carriers can ever be a true LCC.
It's either one or the other, and we all know the airline within an airline concept doesn't work. When you offer a FC product, and have a fair amount of Intl. Flying it is nearly impossible to incorporate the LCC concept. It just doesn't work. Macys can't be Walmart either, you just have to cater to a different clientele of people.

 

[FWAAA]

Does anyone consider US Airways to be a low cost carrier? Prob not - but more importantly the government definitely does not, so hypothetically if AA were to trim wages, benefits etc down to US's levels during the bankruptcy process (which is prob close to what they are asking - correct?), they would still not be considered a lcc.
For AA to become a true lcc (one that the government would recognize as such) - they would have to go way beyond what they are currently proposing.

US is not a low cost carrier despite its aspirational stock ticker. US is a low-wage, relatively high-cost airline.

About the bolded portion: AA is not slashing pay rates, and thus even if AA achieves everything it seeks in bankruptcy, the wage structure of US will still be substantially lower than AA. (Except for mechanics, Bob). US pilots earn tens of thousands of dollars less than AA pilots and US FAs make, on average, several thousand dollars less than AA FAs.

 

[WorldTraveler]

US is not a low cost carrier despite its aspirational stock ticker. US is a low-wage, relatively high-cost airline.

About the bolded portion: AA is not slashing pay rates, and thus even if AA achieves everything it seeks in bankruptcy, the wage structure of US will still be substantially lower than AA. (Except for mechanics, Bob). US pilots earn tens of thousands of dollars less than AA pilots and US FAs make, on average, several thousand dollars less than AA FAs.

those points are vividly demonstrated in AMR's 1113 documents (page 44 of the 107 page version) in which AMR notes that LCC's CASM is only slightly below the average of the network carriers yet LCC average employee compensation is average for the low fare carriers.....
AMR also has a graph in their showing that the change in labor CASM at US was the highest (at 24%) of all network carriers during the decade starting 2002 YET
US also has the lowest stage length adjusted passenger RASM and the lowest profit margin for 2011.
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US simply does not have revenue generating capabilities on par with its network carrier peers yet it has costs very close to them....
no other US airline has its revenue generating capabilities as mismatched with its costs as US does.
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Any airline would create better value to AA than US - which is why AMR's creditors - other than labor who are trying to minimize the impact of the 1113 process - will choose any merger partner for AA other than US.
If US was the only option, then they might jump - but they are not.

 

[767one]

jetBlue would bring a lot of BOS and JFK market share, along with some loyal customers. Alaska would provide a good N/S presence up and down the West Coast.

Only problem is that both airlines are fairly low-wage and pretty solidly low-cost, meaning that their costs would climb a lot if combined with AA.

Similar to the problem with US, another very low-wage airline (although not quite so low-cost).

Even if AA implements the 1113 term sheets, its wages (except the mechanics, Bob) will still be far ahead of US' wages, particularly the pilots and FAs. AA is seeking to reduce its labor costs, but even if successful, it isn't going to become a low-wage or low-cost airliine.

Probably plan on going low cost with BK Deux.