AA merger options
- Thread starter damajagua
- Start date
Simple - DO NOT MERGE. That is AA's best option at this point.
Every potential merger scenario for AA is fraught with problems, and the benefits do not outweigh the challenges/costs.
JetBlue brings major scale in New York - and at JFK specifically - which is quite attractive, but AA's costs are so high that much of JetBlue's network would be rendered uneconomic instantaneously. Plus, with the codeshare/interline/FFP agreement, AA can get many of the benefits without the cost of a merger.
USAirways brings a great hub in Charlotte, plus scale at premium Northeast airports - particularly LaGuardia (for now, at least), Reagan and Philadelphia. But, it also comes with the problem of how to dispose of a hub in Phoenix that I believe would be useless to AA, and labor troubles of its own that when combined with AA's would be World War III in the making.
Southwest - that's funny!
The truth is that AA does not really need a merger. It's problems at the moment stem from its own internal issues, and not from any external problems that can't be remedied organically. AA's network is already excellent.
Domestically, the five cornerstone markets are about as good as they get in each region. AA simply needs to solidify their presence in those markets, which will come with lower costs and reworked union contracts (getting an agreement with the APA on economic 90-seaters and on longer flying to Asia would do wonders). And internationally, AA is positioned similarly well. AA's Latin America network is without equal, and that isn't going to be changing anytime soon unless another airline starts hubbing in Miami. To Europe, AA's strength lies in core markets, and while I - like many - wish AA would add some secondary flying to some additional European markets, the ATI/JV with BA is already broadening AA's network there exponentially. And in Asia, AA needs to grow - plain and simple. But, alas, they don't need a merger to do that. With new 777s soon arriving - with 787s not far behind - AA will have more than enough capacity to grow into new markets in Asia. I think that if AA could bolster their service to the region by adding Osaka (767 from LAX), Nagoya (767/LAX), Seoul (777/DFW), Hong Kong (777/DFW and possibly ORD), and possibly Taipei (777/not sure where from) and Singapore (777/via NRT) to their existing roster of Tokyo, Shanghai and Beijing, that would be sufficient - especially when combined with JAL plus the access Cathay provides.
Over the long-run, with DFW, Chicago, Miami, New York and Los Angeles, AA's network is already sufficiently strong - and is now stronger still with ATIs with BA/Iberia, JAL, and perhaps soon LAN/TAM - to compete with Delta and United.
AA need not merge - it is perfectly fine on its own.
Exactly , No merger for AA. AA will do just fine growing internally ...... We learned our lesson with the merger/acquisition game. New planes, new employees and new markets will be the way of the future for AA. It's coming ...
Ken MacTiernan
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I don't want AA to merge with anyone because why do I want to see AA management ruin two airlines?
You left out Tel Aviv (777/JFK & MIA).
I largely agree AA is best as is. 90 seaters would be awesome especially if they could be operated by Eagle but APA will not allow that to happen. I'm interested to see AA launch a new J/F product as the Flagship Suite and NGBC are quite dated. I haven't flown AA long haul in over a month as I've been taking BA to LHR and its a world of difference. The current J seat is uncompetitive particularly when paired with the mediocre catering and liquor/wines AA offers.
Josh
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Agree with three of the points made...
1) Organic growth would be better than anything else, and with the right labor agreements, that rising tide will lift all boats...
2) Addressing the 90 seat issue is key, whether it be by dropping the scope clauses or bringing that flying in house at C-scale rates. Also critical but less so is coming to an agreement on ultra-long-haul flying.
3) AA most definitely needs to invest in updating its product. I am not a huge fan of Iberia, but it's simply a better seat than AA. Like Josh, I've been flying on AA's partners wherever there's an option to avoid AA's NGBC seat with inferior IFE and a lack of a 110V outlet. The streaming media announcement is great news, but as Cranky Flyer noted today, it's a moot point if you still don't have working powerports or USB outlets for customers to charge their iPad, laptop, or whatever other device they choose to use.
I strongly disagree with the notion that AA should bother flying into the Middle East or even Africa.... Let Royal Jordanian, BA, or IB carry that traffic. Nothing says "target symbol" like a big silver airplane with The Great Satan's colors and name on the side of it...
1) Organic growth would be better than anything else, and with the right labor agreements, that rising tide will lift all boats...
2) Addressing the 90 seat issue is key, whether it be by dropping the scope clauses or bringing that flying in house at C-scale rates. Also critical but less so is coming to an agreement on ultra-long-haul flying.
3) AA most definitely needs to invest in updating its product. I am not a huge fan of Iberia, but it's simply a better seat than AA. Like Josh, I've been flying on AA's partners wherever there's an option to avoid AA's NGBC seat with inferior IFE and a lack of a 110V outlet. The streaming media announcement is great news, but as Cranky Flyer noted today, it's a moot point if you still don't have working powerports or USB outlets for customers to charge their iPad, laptop, or whatever other device they choose to use.
I strongly disagree with the notion that AA should bother flying into the Middle East or even Africa.... Let Royal Jordanian, BA, or IB carry that traffic. Nothing says "target symbol" like a big silver airplane with The Great Satan's colors and name on the side of it...
Regarding the powerport issue, AA says that the 767-200's should ALL be turned back on by now and the 757's are being turned on as well. As of the other day I think 9 were reactivated. I think they said the 757's will be back on by the end of May. All we have left is Y/C on the 767-300's. Not sure, but the 9 newer 767's might not have had the same problem. Here is what AA has on AA.com regarding powerports, although I am not sure it is completely up to date. I think we were told the other day that the 767-200's would take 24 hours or so to reactivate. Sounds like the 757's have more to fix as they won't be turned on as fast.
Inflight Powerports
We know it is important to stay productive when flying and American Airlines is working to bring you more powerports across our entire fleet. Below is a quick update on the status of powerport availability by fleet type.
Fleet Type Fully Operational
Boeing 777 Yes
Boeing 767-200 Expected May 2011
Boeing 767-300 Business Yes
Boeing 767-300 Economy Expected by year-end
Boeing 757 Expected by year-end
Boeing 737 Yes
MD80 Yes
In addition, as part of our upgrade plan to our Boeing 737 and 757 interiors, our entire fleet of 737 and 757 powerports will be gradually converted to AC power which means a special DC power adapter will no longer be required. This upgrade plan also includes the installation of new seats, new cabin interiors and updated inflight entertainment systems throughout the aircraft. American Airlines recently reconfigured 18 of our existing 124 Boeing 757s, which operate on international routes and we're currently upgrading our remaining fleet for continued use on domestic routes.
We'll continue to provide updates as American brings you more comfort and productivity throughout your travels.
Inflight Powerports
We know it is important to stay productive when flying and American Airlines is working to bring you more powerports across our entire fleet. Below is a quick update on the status of powerport availability by fleet type.
Fleet Type Fully Operational
Boeing 777 Yes
Boeing 767-200 Expected May 2011
Boeing 767-300 Business Yes
Boeing 767-300 Economy Expected by year-end
Boeing 757 Expected by year-end
Boeing 737 Yes
MD80 Yes
In addition, as part of our upgrade plan to our Boeing 737 and 757 interiors, our entire fleet of 737 and 757 powerports will be gradually converted to AC power which means a special DC power adapter will no longer be required. This upgrade plan also includes the installation of new seats, new cabin interiors and updated inflight entertainment systems throughout the aircraft. American Airlines recently reconfigured 18 of our existing 124 Boeing 757s, which operate on international routes and we're currently upgrading our remaining fleet for continued use on domestic routes.
We'll continue to provide updates as American brings you more comfort and productivity throughout your travels.
Hopeful
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I think many people don't realize that the pilot SCOPE...although created mainly for the benefit of pilot security, does greatly affect every work group at AA.
Should the pilots concede their scope and allow more or unlimited seating to be flown, that would spell doom for AAers.
If this were to happen, you would see a shift of Eagle picking up much more domestic flying. Eagles' lower cost ranks would increase, and AA's ranks decrease virtually flying larger aircraft international routes.
That means less AA employees, less AA aircraft to staff and maintain, less AA flights to be staffed in flight and check in and ticketing.
SCOPE affects everyone.
Absolutely. The enormous positive impact to AA and its employees of getting an agreement with the pilots on 90-seaters and longhaul flying is hard to understate, in my view.
The 90-seater would totally transform AA's domestic network, as there are plenty of U.S. markets too big for a 70-seater but not big enough for an MD80, and AA is missing out on much of that revenue at the moment because of a lack of 90-seaters.
On long-haul, AA's current hub structure is perfectly fine for very effectively and competitively serving Asia, India and the Mid East, Africa, etc. - but they just need a consistent, long-term (not separate ad hoc side letters) agreement on long-haul flying.
I disagree. I don't think AA has any need to go flying into every landing strip in Africa that can handle a 767 a la Delta, but I think a few additional targeted markets in India, Africa and the Mid East could be quiet successful for AA. I think AA could profitably deploy the new 777-300ERs on Chicago-Mumbai and Miami-Johannesburg, and I think AA might even be able to make a 777 work on Chicago-Dubai, and maybe also a 767 on Miami-Lagos, Miami-Accra, and/or Miami-Dakar.
I have long contended that long-term, strategically, it would be better for the pilots to accept an effective B scale for the 90-seaters in order to not only get them on property - and thus expand the size of mainline and increase the amount of dues-paying mainline pilots (and other employees) - but also to keep that flying at mainline, whereas at the other U.S. legacies that flying is being done primarily by either non-union and/or regional operators.
As I see it, rather than truly creating a B scale with a different benefit and pension structure, the pilots should just agree to a new wage level within their current contact that is substantially lower than the MD80. Keep the same benefit and pension structure as all mainline pilots have now and will continue to have, but just agree on an hourly pay scale slightly below JetBlue, Delta Connection, USAirways Express, etc. have for their 90-seater pilots, and thus keep the overall cost competitive. I'm sure that is something that the company would be highly receptive to, and it would keep that flying at mainline, and improve the economic fortunes of union members and their employer - win-win for everyone.
I realize that the APA doesn't want to set the precedent of a B scale again. So fine - don't. Just agree to a lower pay scale (just as an MD80 FO makes less than a 757 FO, etc.) and keep the rest of the compensation package consistent with the rest of mainline. That way, the flying is still cost-competitive with the other 90-seater operators in America, but you don't have to segment your membership beyond purely the size of the plane they are flying - just as is already done today.
Hopeful
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Not a bad plan. But would the company open their arms to it? let alone the pilots!
I agree that the pilot scope provisions protect everyone at AA and that drastic changes to the scope clause could have devastating effects. But I don't see that happening. The APA pilots would burn the place down before they would agree to unlimited numbers of 70 seaters or 90-100 seaters and I don't see AA ever agreeing to pay APA rates to fly 70 seaters or 90-100 seaters. AA tried that with the F-100s with horrible economics.
AA finally has 47 first class equipped CRJ-700s at Eagle which goes a long way toward catching up with Delta and United, both of which have had many more 70 seaters than AA.
90-100 seaters at AA/Eagle would probably result in some downgauging of MD-80 routes but I don't see AA eliminating everything under 160 seats. It's possible that if AA bought some 90-100 seaters that some of those would be placed on routes currently flown by the 63-seat CRJ-700s and that some of those 63 seaters would be restored to single-class 70 seats and placed on routes currently flown by 44 and 50 seat RJs.
In the MRTC era, the MD-80s flew with 129 seats (139 prior to MRTC). A couple years ago I posted that AA should look at 73Gs to fill the role of 125-130 seat markets (where 160 seat 738s are just too many seats) but I don't see that happening. 73Gs have much better fuel economy numbers than MD-80s but nowhere near the fuel economy per ASM of the 738s. Underscoring that fact are the recent orders by Southwest of 738s.
I agree with commavia's idea to create a virtual B-scale for 90-100 seaters that would keep the planes at the mainline. Compromise is key to any agreement and perhaps the APA allowing another 25-50 70 seaters at Eagle would help get that agreement.
I don't doubt that other workgroups benefit from APA scope. Take a walk down the UA concourses at ORD or DL at DTW and ATL you'll see many more 70 seaters and fewer mainline. United has been retreating UAL mainline while significantly increasing UAX throughout the past decade. Many medium-large markets on see largely or even exclusively UAX service. Keep in mind that the combined UA+CO 2011 payroll is smaller than stand alone UA in 2000. It will be interesting to see how things play out regarding UA/CO scope. ALPA obviously wants CO scope to prevail but that's not going to happen given the plethora of UAX carriers and large UAX presence. An Embraer 190 would be awesome for AA but it would not be economically viable at the current mainline pay rates. Personally I don't mind and even prefer some of the CR7s and E70s to the UA 319/320s. A Shuttle America E70 or GoJet CR7 is vastly preferable to UAL mainline on short flight. AA needs a pilot union like TWU so the company can start making gains and imposing new workrules.
Josh
One pilots opinion. Not one more jet to eagle >50 seats. Liquidate is my position on the deal. That is also the general position of the UAL/CAL pilots who are in negotiations. They may have to live with current feeder agreements for awhile, but no more.
Most posters here have thrown around the 90 seat number. Any of the newer designs will be a family of aircraft from 90-120+ seats and would be ridiculous for AA to order knowing that they would face another operational wall to adjust the aircraft size to the market. the current CA rate for Jetblue on a their EMB190 is $149/hour for 85 hours plus the 5% 401K match. There is a difference between AA's current pilot retirement, what the exact number is I don't know.
The big problem AA has with a family of 90-120 seaters is that once you bust 99 seats, you add another AA Flight Attendant. I can assure you that 90% of the AA pilots are not going low ball themselves into a crap pay, 110 seat B-Scale just to subsidize a $45/hour position in the back of the jet and a few 30 year aircraft cleaners at a place like ORD.
There are areas where APA/AA may think outside the box with scheduling that might permit something to happen. A deal letting pilots fly 80 hours in 12 days would be a good start. There are also huge issues at AA has competing with other carriers that employ a good number of people in positions that literally take little to zero education and a 2 weeks or less in training.
Just for reference. The current pay levels are unsustainable in the industry. FAA student pilot starts are in the toliet and the airline career after the military is looked upon as a complete joke except for FDX/UPS/SWA. Colgan Air was just the start.
Most posters here have thrown around the 90 seat number. Any of the newer designs will be a family of aircraft from 90-120+ seats and would be ridiculous for AA to order knowing that they would face another operational wall to adjust the aircraft size to the market. the current CA rate for Jetblue on a their EMB190 is $149/hour for 85 hours plus the 5% 401K match. There is a difference between AA's current pilot retirement, what the exact number is I don't know.
The big problem AA has with a family of 90-120 seaters is that once you bust 99 seats, you add another AA Flight Attendant. I can assure you that 90% of the AA pilots are not going low ball themselves into a crap pay, 110 seat B-Scale just to subsidize a $45/hour position in the back of the jet and a few 30 year aircraft cleaners at a place like ORD.
There are areas where APA/AA may think outside the box with scheduling that might permit something to happen. A deal letting pilots fly 80 hours in 12 days would be a good start. There are also huge issues at AA has competing with other carriers that employ a good number of people in positions that literally take little to zero education and a 2 weeks or less in training.
Just for reference. The current pay levels are unsustainable in the industry. FAA student pilot starts are in the toliet and the airline career after the military is looked upon as a complete joke except for FDX/UPS/SWA. Colgan Air was just the start.
Merger? AA already did merge, thats how we became the biggest carrier, when they bought TWA. Over the years we shed most of what we got with TWA, and are now at number three, behind UAL/CO and DL/NWA but a recent release by Delta says they will be shedding 140 aircraft, that will bring them down to number three, from 744 to 604 aircarft . UAL/CO have 707 but they havent completed the merger process and they will likely shrink as well so without even merging we could easily become the biggest airline again.
AA has 624, not counting Eagle.
AA has 624, not counting Eagle.
