I agree with mweiss. Why should we be threatened by this? We are not going to be locked out of important markets because UA/US or UA/CO merge. With more and more open skies we can fly whereever we think it is profitable. And who cares how big we are beyond a certain point. The idea is to make the most money, not be the biggest necessarily.
AMR CEO says 'not threatened' by mergers
- Thread starter MERV
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BoeingBoy
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- Nov 9, 2003
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Guess when the last arbitrated pilot seniority integration was that resulted in DOH. As best as I remember it was the US/PI arbitration in 1989 - over 20 years ago. There have been 3 pilot seniority integrations since then that went to arbitration and they all ended up with modified relative position (slotting if you want although the IAM uses that term for DOH) - Shuttle/US, DL/NW, US/HP. Modified because differences in fleets were considered.
It seems that arbitrators have decided to some degree that seniority isn't necessarily a date on a calendar but what one can hold, especially airplane/seat wise.
Jim
Actually the trend is that the "smaller" airlines are buying the larger, see AW/US, Republic/Midwest/Frontier, even DL/NW has NW upper management running. The smallers have the cash or methods to raise the cash that the largers don't. Don't be suprised if the folks from Salt Lake and Orlando don't end up buying AA not the other way around. You could end up with B6 work rules, pay scales etc.
Now all that has been anounced is an interline baggage agreement. It's a stretch to turn that into merger talk
What those deals have in common is that the larger airline was in bankruptcy. Compare that to AA/TW, where AA was the surviving entity. TW was the one in bankruptcy. I'm not saying that it's impossible for B6 to end up the surviving entity in a merger with AA (and I don't think that such a merger would happen in the near future anyway), but I just don't find it likely.
Correction, TW was not in bankruptcy at the time of acquisition. The pre-pac BK was done to get rid of Uncle Carls Karibu agreement after the announcement that AA was purchasing TW. This was a prerequisite for the purchase.
eolesen
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- Jul 23, 2003
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The bankruptcy was inevitable with or without Karibu. Forget the actual number, but TW was down to days of operating cash. That plus upcoming debt repayments due would have pushed them over the edge regardless of the deal with AA.
I don't see AA threatened, but I also don't see them sitting idly by. There's a fair degree of airlines who currently aren't hitched up with any one partner (plus a couple who are open polygamists). I've discussed a bit of that on my blog, but right now it's looking a lot like an episode of "Melrose Place".....
Hopeful
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- Dec 21, 2002
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More like "Desperate Housewives"..
Anyway, I don't think the word "Threatened" really applies here....Maybe "Interested" is a better description to see how a potential
UA/US marriage would affect the market.
AA really cant do much, they arent in a position to. UA is in the drivers seat on this one, and it is being played out to the fullest. Take a look at things, IF UA and US merge, it puts CO and AA in a very odd position b/c neither of them can get with the other. In the end all, they can downsize the size of a merged UA/US and after 2 or so years, merge it with CO.. Or it could play out like this, One of them enters BK, and then split up. One thing is for sure, unless UA and CO hook up, AA's hands are tied and they know that. It will be interesting, and it would b=not surprise me to see AA enter BK protection to gut contracts etc... It look like thats where things are headed.
I think it's more likely that the B6 interline agreement was a distracting diversion so that everyone would be surprised by the upcoming offer by Arpey to combine with a full-service legacy airline. Wonder which one it will be?
Hopeful
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- Dec 21, 2002
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Can you please tell me this weeks winning lottery numbers?
In this industry, it's anybody's guess as to what will happen at any given time.
Is bigger really a necessity? Do airlines have to be like banks and car companies too big to fail? Will the DOJ finally realize allowing mega companies to continue to gobble up the competition doesnt really serve the public interest.
Does AA need a partner to survive? No, not really, and Arpey spelled out the reasons why. Will AA ultimately fail? Unlikely, it has survived far worse predicaments than today. The doom sayers are chomping at the bit hoping they are right, and will likely be proven wrong yet again.
AA and Co will likely make stronger ties with other foreign carriers and see how DL/NWA and possibly UA/US hash out there combinations. Trying to build a single money saving carrier from two costly ones. If it works great for them. The smarter money is on the two carriers on the side line. AA and CO can look at each other or another some where down the road. Thinking that something has to be done immediately in order to survive is simply foolish.
Does AA need a partner to survive? No, not really, and Arpey spelled out the reasons why. Will AA ultimately fail? Unlikely, it has survived far worse predicaments than today. The doom sayers are chomping at the bit hoping they are right, and will likely be proven wrong yet again.
AA and Co will likely make stronger ties with other foreign carriers and see how DL/NWA and possibly UA/US hash out there combinations. Trying to build a single money saving carrier from two costly ones. If it works great for them. The smarter money is on the two carriers on the side line. AA and CO can look at each other or another some where down the road. Thinking that something has to be done immediately in order to survive is simply foolish.
True. I used a bit of poetic license there. There was no doubt that TW was within minutes of filing if AA didn't grab them, so I just lumped TW in.
With all good things, there is a point of diminishing returns. An airline can grow to:
1) Increase scale, gaining efficiencies. This maximum hits pretty early by US airline standards. VX is probablynearly there.
2) Increase scope, adding new city pairs. The old US and HP didn't have full domestic coverage, but the merged US does. AA mostly does, though they've gone in and out of the domestic coastal north-south markets. Internationally, AA is strong to the south and east, but not the west.
3) Reduce average labor costs by reducing the average number of years of service. This tops out pretty quickly. B6 and VX may be the only two for whom this strategy still has decent legs.
Once you get scope fully covered, and topped out on the other two, mergers in and of themselves dont buy you anything, except perhaps a bit of time if you can manage a quick drawdown of capacity. Even then, it doesn't take long before someone with lower costs comes in to soak up that drawdown.
Of the legacy carriers, AA and CO appear to be the healthiest, though in different ways and for different reasons. Both of them can gain some by increasing scope, and perhaps one or both of them would do so if a combined UA/US drew down in a strategically useful area. I could imagine AA or CO being interested in CLT, for example.
OP
- Thread Starter
- #30
I agree to most of it. If AA were to choose UA they'll benefit from UAs route system mainly from Asian and European routes. Domestically Saving would come from their overlapping routes by cutting capacity. US just by overlapping routes CLT might become next STL and from a few major cities they have a big presences. If AA would buy or merge with B6 majority of their employees would come up to AAs pay rate because average years service is about 10. VX is still young with very low cost but they have no chance of being bought or merge with. They'll do it on their own or by buyouts. B6 would be a great asset if they deicide to buy or merge with someone.
