US went for DL (bust) but why not NW or CO

[TravelDude]

So I understand from the previous posts there is a mixed reaction to CO and how DL may have been just a tactic (maybe). But, back to NW and the question posed above.

- NW is in bankruptcy like DL
- NW has a large Airbus fleet, which as we have seen is US aircraft vendor of choice.
- NW has a strong midwest network and hubs, US is lacking this central midwest coverage.
- NW has an amazing pacific network, which is none exitent for US
- NW has a numerous B747 Cargo freighters which in the past have kept NW profitable when the passenger market took a slump.

So with all those statements, why would Parker not want NW to be a apart of US?

Appreciate the humor responses

But I am looking for a good serious discussion or counter arguement on why NW should not have been the target of Parker's quest to build a bigger empire!

 

[FutureUScapt]

Appreciate the humor responses

But I am looking for a good serious discussion or counter arguement on why NW should not have been the target of Parker's quest to build a bigger empire!

As some others have stated, Parker was (and still) believes that there is too much domestic capacity, which keeps fares and yields at relatively low levels. By merging with DL, US would be able to cut excess capacity which would lead to higher fares and yields. Parker used the AVL example several times, saying that there are something like 15? flights a day on DL and US to ATL and CLT, but that AVL could still be served adequately with 7 flights to ATL and 4 to CLT. That means less seats are for sale which will push fares up, and less airplanes are required, which will lower overall costs.

While buying NW would have created a worldwide airline, I'm guessing that the potential synergies from having common fleets and a very lucrative FF program still didn't equal the synergies that would have been available from the DL merger. NW and US are not major competitors like DL or WN are and there wouldn't have been much room to remove capacity, except for MEM (I'm assuming) and hub to hub routes like DTW-PHL, etc.

 

[TravelDude]

FutureUScapt appreciate the perspective, good point about if the goal was to bring down capacity versus grow the empire.

 

[FWAAA]

I continue to subscribe to the belief that a play for NW will bring competing offers, given that its NRT ops and China authorities are scarce commodities. In contrast, DL owns nothing that can't be replicated. Parker's bid for DL brought no other bidders, so he only had to bid against himself.

AA's got about $5.5 billion in unrestricted cash and might just go after NW if someone else does. So AA could either bid up Parker to a high price, causing Parker to overpay (ouch) or might even outbid Parker and begin capturing $10 - $12 billion of additional annual revenue(ouch) that won't be Parker's.

DL was a safe play - nobody else coveted it.

 

[EMBFA]

I agree, his idea for consolidation is to reduce capacity and overlap, not grow the airline. Merging NW and US makes pefect sense route and fleet wise- its would be the worlds largest airline with virtually every corner of the nation blanketed with service. They would easily have the most comprehensive domestic network, plus the impressive Asia network combined with US's growing transatlantic presence. But the new airline wouldn't do much to shrink capacity, aside from closing PIT and MEM, and some minor reductions at the hubs.

Everyone pretty much agrees that there just needs to be less hubs, less capacity, and less network airlines for the American airline industry to ever be healthy. It was assumed that at least one airline would be knocked out in the bankrupcies (most assumed US would be the one). Since that didnt happen, the reductions will come from mergers, whether now or in the next cycle. Parker figured hey, why not be the one to choose while we have the power position. The target had other plans though.

For at least the last ten years, US has always been groomed for a merger... the HP one was just starters. Thats why theres never any money spent on developing routes or a brand, the game plan is to be a part of something else. They are worried now, because they could be left out in the cold if there was a UA-CO or DL-NW combo. The original east coast US (and maybe HP too to a lesser extent) were attractive to several of the other airlines, I'm not sure how much they are wanted together. It will be interesting to see what his plan is. Doesn't look like they will go after NW, at least not now. United seems to be the only other airline thats all hot and bothered about consolidation, and they are already posting losses again, who knows. Anything could happen.

You can guarantee this is what they are concerning themselves with at headquarters, not pies and computer systems.

 

[TravelDude]

Thanks FWAAA & EMBFA you both made great points

Although I think they would still be important cities agree about PIT & MEM likely loosing hub status under a combined US and NW network.

Another point I was thinking is the alliances, rumor is the SkyTeam Alliance is struggling with NW, DL, and CO and that one will likely jump ship. Given NW ties to KLM and would say that would mean either DL or CO would jump. Sounds like UA is hot to buy CO so that could take care of that problem.

I know the merger between US and HP is messy and far from complete. But if there is going to be continued industry consolidation, I would love to see US add NW to the team. This was US employees could really claim to be WORLD WIDE international carrier and being taken serious. Not to mention US Airways is a great brand name for the combined companies...true flag carrier like British Airways. US could be the LCC demostically and offer a nice product internationally. Be sweet to see all those combined US/NW airbuses flying in the new livery...

NARROW:
A319 HP=39 US=54 NW=66 =159
A320 HP=55 US=20 NW=73 =148
A321 US=28 =28
B737 HP=27 US=69 =96
B757 HP=12 US=31 NW=71 =114
DC9 NW=152 =152
TOTAL NARROW =697

WIDE:
A330 US=9 NW=27 =36
B747 NW=35 =35
B767 US=10 =10
TOTAL WIDE =81

TOTAL COMBINED FLEETS =778

Now that is impressive numbers!

Hubs: CLT, DET, LAS, MSP, NRT, PHL, PHX
Hubs likely to lose to become focus cities MEM, PIT

Now that looks to be one damn powerful airline to be reckoned with!

 

[BuffaloJoe]

Thanks FWAAA & EMBFA you both made great points

Although I think they would still be important cities agree about PIT & MEM likely loosing hub status under a combined US and NW network.

Another point I was thinking is the alliances, rumor is the SkyTeam Alliance is struggling with NW, DL, and CO and that one will likely jump ship. Given NW ties to KLM and would say that would mean either DL or CO would jump. Sounds like UA is hot to buy CO so that could take care of that problem.

I know the merger between US and HP is messy and far from complete. But if there is going to be continued industry consolidation, I would love to see US add NW to the team. This was US employees could really claim to be WORLD WIDE international carrier and being taken serious. Not to mention US Airways is a great brand name for the combined companies...true flag carrier like British Airways. US could be the LCC demostically and offer a nice product internationally. Be sweet to see all those combined US/NW airbuses flying in the new livery...

NARROW:
A319 HP=39 US=54 NW=66 =159
A320 HP=55 US=20 NW=73 =148
A321 US=28 =28
B737 HP=27 US=69 =96
B757 HP=12 US=31 NW=71 =114
DC9 NW=152 =152
TOTAL NARROW =697

WIDE:
A330 US=9 NW=27 =36
B747 NW=35 =35
B767 US=10 =10
TOTAL WIDE =81

TOTAL COMBINED FLEETS =778

Now that is impressive numbers!

Hubs: CLT, DET, LAS, MSP, NRT, PHL, PHX
Hubs likely to lose to become focus cities MEM, PIT

Now that looks to be one damn powerful airline to be reckoned with!

You forgot all the RJ's

 

[TravelDude]

You forgot all the RJ's

Yeah i did not have a source for all the RJs feel free to add

 

[TravelDude]

So why is Parker not going after NW...planes too old? too unionized? too much debt? Do NW airbus use different engine?

Just trying to figure out why he is not snapping them up while they are in bankruptcy.

 

[Be Careful What You Wish For.]

Please correct me if I am wrong, but did DP say that the benefits of a merger can only realized while carriers were in BK?

 

[FWAAA]

So why is Parker not going after NW...planes too old? too unionized? too much debt? Do NW airbus use different engine?

Just trying to figure out why he is not snapping them up while they are in bankruptcy.

I honestly think that the responses in posts 5, 15, 16, 17, 32, 34 and 35 answered that question. My apologies to anyone who feels slighted that I didn't list your response.

Industry consolidation isn't always about becoming larger or growing the empire. Sometimes it's all about reducing competition and increasing the yields. DL offered that. And to carry it further, the lenders who lined up behind Parker to help him buy DL aren't gonna line up to help him buy NW, precisely because there aren't the same capacity reduction possibilities.

Add to that the possibility of bidding competition for NW. I suspect that CO, DL and AA might be able to outbid Parker for NW, if he could find financing for a NW bid. NW has valuable properties that the other three don't have: China and NRT's 5th Freedom ops. And those three might pay plenty to get them.

 

[ussnark]

So looks like the DL thing will not come back to life.

But why was it DL to start with? Why not NW with its large airbus fleet and strong midwest hubs and pacific operations. The new US is lacking in the midwest and pacific.

On yet another hand CO would give great southern access and better central and south america flying.

Okay, so before ANYONE or EVERYONE gets worked up, I am not saying another merger should happen. I am just curious what made Parker want DL so bad when to me NW looks like the better fit.

Thoughts?

Perhaps Parkers intentions had nothing to do with a buyout or merger.

Perhaps, at the behest of Star Alliance (some say), he simply was pushing DAL to see how stable they were, hoping, perhaps, they might fragment or even cause other airlines to de-stabilize. If DAL were forced to sell off their "shuttle", it could cause instability in the entire US airline industry as airlines fought over pieces.

Some believe that as US was looking over the DAL 767s they thought they might have a chance at destabilizing DAL with a hostile bid and therefore chose to lose the 767 bid.

In the end, the only losers were the US employees who gave concessions to "save" the airline but will be chagrined to find their money was used instead on bogus ventures like the "buyout" of DAL and the "failed marketing of QIK to the world", among many, so far, losers.