Airline merger rumors flying

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Nov 11, 2003
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Airline merger rumors flying
Speculation unites United, Continental
MARK SKERTIC
Chicago Tribune
CHICAGO - Someday soon, there may be fewer airlines listed on airport arrival and departure screens.

Which names could disappear is the subject of intense industry speculation. But with most of the larger carriers again reporting profits, merger-and-acquisition talk is gaining momentum.

Delta Air Lines and Northwest Airlines, both operating in bankruptcy, often are seen as the two most likely targets for a suitor. But United Airlines, Continental Airlines and US Airways also have come up as possible partners.

Even last week's threats of terrorist attacks haven't dimmed interest in consolidation, although stock prices have fallen since the alerts were issued.

In a note Monday, Calyon Securities analyst Ray Neidl advised that a Continental-United marriage is among those some speculate would make sense.

Neidl cautioned that it may be too early in the industry's economic recovery to begin mergers, but he added that a deal between United and Continental, healthy airlines with largely different market strengths, "would set off a chain reaction in the industry."

The industry is primed to contract, airline analyst Michael Roach said.

"There are too many legacy carriers. ... Everyone agrees there are too many," he said. "As a result, it's possible to imagine almost any kind of combination."

That could include combining either Northwest or Delta with a healthier operator. Or some analysts predict that Northwest and Delta could merge, hoping that the resulting carrier would be stronger financially.

Good arguments can be made for those moves and more, but each also brings unique problems, said Joe Brancatelli, editor and publisher of a newsletter for business travelers.

"They all make sense, but I see problems with all combinations," he said. "There's a lot of stuff that goes on when you try to merge cultures and corporations."

In 1980, in the era before airline deregulation, Pan American World Airways and National Airlines merged. The plan was intended to give Pan Am the domestic-route network it lacked, increasing passenger traffic to its international routes. The deal made sense when looking at route maps, but expensive problems quickly emerged.

"The fleets were completely incompatible. The systems were completely incompatible," said airline analyst Robert Mann. "And they had paid a real premium ... to control National. They had paid too much and done it without taking a real pencil to the cost of integration or the real time frame for integration."

The National Airlines name disappeared soon after it was acquired by Pan Am. Pan Am survived about a decade longer, declaring bankruptcy in 1991. In its effort to stave off financial problems in its final years, it sold many of its valuable assets, including Asian routes, to United Airlines.

In addition to routes, fleets and operations, other challenges come when combining airlines. Most of the larger carriers have unionized work forces. Reconciling sometimes vastly different labor deals can take years.

American Airlines bought Trans World Airlines in 2001, after that carrier sought bankruptcy protection. The deal saved the jobs of more than 20,000 TWA workers. But they lost seniority when they were integrated into American's unions, resulting in many being among the first to be laid off when the industry began suffering financially a few years later.

United and US Airways terminated pension plans while in bankruptcy. Now, if either attempted to merge with a carrier that still offers a pension, a battle likely would ensue with employees who would want to keep the sometimes lucrative retirement benefit.

"That would not be a trivial issue," said Aaron Gellman, a professor at Northwestern University's Transportation Center. "It's complicated."

As a result, reaping the benefits from a merger "is going to take a couple years, no matter what scenario is proposed," Gellman said.

The most recent large merger took place last year, when America West Airlines combined with the US Airways. The new US Airways faces challenges, including integrating different reservation technologies and resolving labor issues, but the rejuvenated carrier has quickly begun outperforming many of its peers financially.

The merger was made easier because US Airways was on financial life support. It was in the midst of its second bankruptcy in three years and had given up planes, cut pay and benefits, and jettisoned its pension plans. Many industry analysts predicted liquidation.

US Airways Chief Executive Douglas Parker said he thinks there are financial opportunities by combining with a carrier going through financial reorganization.

"Mergers can create a lot of value," he said. "We clearly demonstrated that putting two companies together can create value."
 
US Airways Chief Executive Douglas Parker said he thinks there are financial opportunities by combining with a carrier going through financial reorganization.

"Mergers can create a lot of value," he said. "We clearly demonstrated that putting two companies together can create value."



My question is; Was Mr. Parker referring to the financial opportunities and value for stockholders or the financial opportunities and value for himself in stock options?

(tounge in cheek question)
 
American Airlines bought Trans World Airlines in 2001, after that carrier sought bankruptcy protection. The deal saved the jobs of more than 20,000 TWA workers. But they lost seniority when they were integrated into American's unions, resulting in many being among the first to be laid off when the industry began suffering financially a few years later.


Yes and No. Yes, American Airlines bought Trans World Airlines in 2001. And No, they did not save the jobs of 20,000 TWA workers.
 
US Airways Chief Executive Douglas Parker said he thinks there are financial opportunities by combining with a carrier going through financial reorganization.

"Mergers can create a lot of value," he said. "We clearly demonstrated that putting two companies together can create value."
My question is; Was Mr. Parker referring to the financial opportunities and value for stockholders or the financial opportunities and value for himself in stock options?

(tounge in cheek question)
He said "value" but in his mind he was thinking "stock options". :shock:
 
Value, meant the merger turned a company on the verge of liquidation (us airways) and a company only valued at 150 million, into a company that is valued at over 4 billion dollars.

UWCactus Posted on: Aug 9 2006, 04:14 PM


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I read this article this morning and was disgusted by the rhetoric by the union. Though unions and company alike will posture themselves, it's very disappointing to see what is supposed to be a positive, fresh look at a new company get beat down in front of the public in such a way that makes employees feel embarrassed. All employees, not just union employees.

There are thousands of employees that support this effort and would like to feel proud to work for their company. Some areas of embarrassment we cannot completely control, lost bags, customer complaints, misconnects, it all goes with the territory, but to have unnecessary public bashing of the company by its' employee unions is just shameful.

I support the union and their cause, but I do not support they're negative impact on non-unionized employees by these harsh words.

Again, this union leader makes it sound to the public that raises are being given to "management"..that is not the case, at US West, its grade 22 and above..and not all of those employees are management, trust me I share an office with them.
Forum: US Airways · Post Preview: #405148 · Replies: 30 · Views: 1,677

UWCactus Posted on: Aug 9 2006, 04:14 PM
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Group: Registered Member
Posts: 293
Joined: 12-October 05
Member No.: 7,928

I read this article this morning and was disgusted by the rhetoric by the union. Though unions and company alike will posture themselves, it's very disappointing to see what is supposed to be a positive, fresh look at a new company get beat down in front of the public in such a way that makes employees feel embarrassed. All employees, not just union employees.

There are thousands of employees that support this effort and would like to feel proud to work for their company. Some areas of embarrassment we cannot completely control, lost bags, customer complaints, misconnects, it all goes with the territory, but to have unnecessary public bashing of the company by its' employee unions is just shameful.

I support the union and their cause, but I do not support they're negative impact on non-unionized employees by these harsh words.

Again, this union leader makes it sound to the public that raises are being given to "management"..that is not the case, at US West, its grade 22 and above..and not all of those employees are management, trust me I share an office with them.
Forum: US Airways · Post Preview: #405148 · Replies: 30 · Views: 1,677



SPIN DOCTOR
 
UWCactus Posted on: Aug 9 2006, 04:14 PM
Senior
****

Group: Registered Member
Posts: 293
Joined: 12-October 05
Member No.: 7,928

I read this article this morning and was disgusted by the rhetoric by the union. Though unions and company alike will posture themselves, it's very disappointing to see what is supposed to be a positive, fresh look at a new company get beat down in front of the public in such a way that makes employees feel embarrassed. All employees, not just union employees.

There are thousands of employees that support this effort and would like to feel proud to work for their company. Some areas of embarrassment we cannot completely control, lost bags, customer complaints, misconnects, it all goes with the territory, but to have unnecessary public bashing of the company by its' employee unions is just shameful.

I support the union and their cause, but I do not support they're negative impact on non-unionized employees by these harsh words.

Again, this union leader makes it sound to the public that raises are being given to "management"..that is not the case, at US West, its grade 22 and above..and not all of those employees are management, trust me I share an office with them.
Forum: US Airways · Post Preview: #405148 · Replies: 30 · Views: 1,677
SPIN DOCTOR


Nostradamus got it right.

Wow, your nose couldn't be planted any more "terra firma", I'm sure. Permanently embedded. We are all working our butts off. However, no support from the higher ups that you seem to endorse, we do not have the tools to help our passengers. Once again it is, react,react, react, react,react, etc.
I was embarrassed before the statement. Union no consiquence. Been embarassed for quite a while.
You got one thing right, I would love to once again be proud of the company I work for, but it seems it is to be much of the same game, but worse, for all the miscommunication and cultural incongruity.
Before you start spouting off on how you are in the know because you are in the home office (wait,you already did that), the front line would have a much better seat to witness what you implying. Not yours. It doesn't match up. It should be within the companies control. It is what is offered as a service. You are one giant COP OUT
Missed bags, misconnects, and improper customer service is what is expected? I guarantee it is not! The people that buy tickets on LCC or whatever are not expecting that. Nor, do the care about what problems the airline is having. When they put down the good green, they want to get from point a to point b, with their bags. It is what they expect. It is what they deserve. Not lip service. Dont burden those with the responsibility of providing customer service with anything less than that because you already sucked the heart out of what ever positive moral you ever had out of the body. The work force. The front line. It is indeed a battle field.
Without seeing it first hand, you wouldn't have a clue.
You should be disgusted with yourself.
 
I'll second that. So with this new management sitting at the negotiationg table with the flight attendants and nothing but "cost neutral" comming out of their mouths we should accept that? The CEO is cashing in millions and millions and the company is making millions WHY. Because of you and me brother. THE WORKER. Well I will not be party to the agenda. Sit around the crew room like it's a camp fire and sing songs? It is a shame indeed that a union would have to slam the very company its members work for but when you have management that wants to smile for the camera and screw you behind it it's pretty difficult. I think it's safe to say we all want to be proud. Those of us on the east that I can speak for are here because we want to be here. The ones that had enough seem to have taken their leaves. Because we CHOSE to stay does not mean we need to roll over like rover and keep on taking it. NOT GONNA HAPPEN! ! ! ! We'll get this thing going when we get a contract that we deserve.