Are We

[MrMarky]

Hi Chip,

Very interesting stuff you have posted. Several months ago I posted my own conjecture about the possibility of the ATSB facilitating a merger between UA and US. As I recall, most replies poo-poo'd the idea. In any event, I have posted some thoughts in bold below, on a few of your points and I'd be interested to hear your response.

Thanks,

Marky

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Since the merger termination the two carrier's have completed most of the planned post merger heavy restructuring. The airlines have:

1. Aligned their fleets to be identical by type, except for nine A-330s, which can easily be returned to the owners per the bankruptcy code. Each company operates B-737s, A-320 family, B-757, and B-767 aircraft. No other major airlines have virtually identical fleet types.

Well that takes care of types but what about those pesky subfleets? AA determined they were better off getting rid of the TWA 757/767 aircraft rather than deal with a fleet using different engines. I have the impression that engine differences can be a biggie in terms of fleet incompatibility as far as maintenance, spares and perhaps some crew training. The US A-319/320's use CFM-56 engines. The UA 319/320's use IAE V-2500 engines. The US 757's use RR engines, while the UA 757's are Pratt & Whitney powered. The US 767's use GE engines and the UA 767's use Pratt.

9. On Wednesday, August 27, US changed its ticketing policies, domestic consolidators, corporate discount programs, paper ticket charge, and pricing changes. Less than 24 hours later, UA announced similar plans. Could UA have known about the changes, to be the first airline to match the US program, or was it coincidental the partners implemented their changes within 24 hours of one another?

I believe any collusion in this area would be illegal under US anti-trust laws.

...there is ATSB language to force consolidation...
Will the Board elect this option? I do not know, but they have the power to force a merger...

Can you please share the relevant language regarding the ATSB's authority in this area? I did not know it existed. In my post of several months ago, I was operating on a what if basis. I don't recall seeing any language in the ATSA legislation granting such power to the ATSB, but I could be wrong.

Thanks, Chip

Marky

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[UAL777flyer]

Chip,

Also, as I'm sure you're aware, virtually every U.S. major has followed suit on tightening the ticket loopholes.

 

[chipmunn]

Hi MrMarky:

I’m sorry I have not responded sooner, but I frequent the UA board about once a week and I do not read all of the postings. In regard to your post, I agree with the subfleet issue, but I do not believe that would be enough to stop a corporate combination, if desired.

I also agree “collusion in this area would be illegal under US anti-trust lawsâ€￾, but it seems odd that within 24 hours UA adopted a similar program to US.

There is one area of the OMB regulations that discuss the ATSB’s shaping power. When discussing how a loan guarantee can be applied, the regulations says, “If loan funds are to be used to purchase an existing firm, or the substantial assets of an existing firm, the business plan of the combined entity shall contain a discussion of an existing firm, the business plan of the combined entity shall contain a discussion of the way in which any required regulatory or judicial approvals will be obtained, including antitrust approval for any proposed acquisition.â€￾

It is clear the ATSB has extraordinary authority, the rules discuss M&A activity, and the board can even make a condition for a loan guarantee such things as a bankruptcy filing, an asset divestiture, or a corporate combination.

I do not know if UA & US will combine in some fashion and it will be up to the parties involved to decide their course of action, but there are some unusual signs and something has to be done with the industry in crisis. In addition, I believe there are so many moving parts that even the players do not know how this will all wash out; however, nothing will be decided until its known whether or not UA seeks bankruptcy protection.

What I find interesting is that Norm Mineta serves on the ATSB and is the DOT Secretary. UA & US asked the DOT to not disclose their code share details and the DOT declined the ACAA (with DL & AA support) for a full docket review, which would have made the proceedings public. Why the secrets and why did the UA pilots obtain pre-nuptial seniority language in their agreement, if nothing could happen to combine the carrier's?

Chip

 

[Winglet]

Tying U to UAL would be like throwing a drowning man a block of cement. The problem is goverment propping up long-time chronically sick carriers at a time when there is WAY too much capacity. When that happens, it drives up costs for viable companies resulting in dumbing-down compensation throughout the industry. The problem isn't compensation, it's TOO much capacity resulting in very low ticket prices. Is is fair that the government, in effect, subsidizes chronically failed carriers who can chop employee compensation via the courts, then go out and sell tickets at undercut prices?

 

[UAL777flyer]

I've said it once and I'll say it again. Using the ATSB and bankruptcy to attempt another go at a UA/US merger would be a foolish mistake that could prove a death knell for the combined company. Regardless of the network, city presense, s-curve and revenue benefits, it won't work without the support of the workforce. Using this process, which includes employees concessions, as a means of forcing a merger down the employees throats, would be suicidal. I sincerely hope that Glenn Tilton doesn't attempt to swallow some of Goodwin's leftover kool-aid.

 

[N305AS]

ANOTHER run at a UA/US merger? They need to right their respective ships before anything else could be considered.

Some people say that a merger between these two companies would be a good thing; that two heads are better than one.

My reply to that is: Not when both are stupid.

 

[Tango-Bravo]

[blockquote]
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On 9/11/2002 1:05:16 PM N305AS wrote:

ANOTHER run at a UA/US merger? They need to right their respective ships before anything else could be considered.


Some people say that a merger between these two companies would be a good thing; that "two heads are better than one."


My reply to that is: "Not when both are stupid."
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[/blockquote]


How right you are! A US/UA merger would accomplish nothing more than to compound the stupidity and managerial ineptitude both have convincingly demonstrated and add each others' baggage to the new two-headed monstrosity that would be created.

Further, believe it or not, like it or not, IMO one huge reason for the critical condition of US, UA and AA (and the less-than-healthy state of DL, NW and CO) is their unwieldy size which has brought them to the point of becoming exceeding difficult to manage efficiently and effectively.

The last thing any of the U.S. Cartel airlines needs to put them on the road to recovery is to become even larger--and more unwieldy.

 

[ChairPrefRes]

My TWO cents worth on this issue is if (a strong if) Texas Pacific becomes involved in this scenario as a large equity holder in AWA and U I believe a more likely merger scenario would be U purchasing or merging with AWA and continuing a strong codeshare with UAL...From our end the pax FF's seem to look forward to the code share and I just think a U-UAL merger would not pass muster with the gov ...But a U-AWA might and I would gage whats going on in the back ground by what AWA does with it's CMH hub...Hope the Gov approves the code share and look forward to working with you guys on it...In fact many of us in res that book OA already voluntarily offer United on legs we dont fly to...I think this will help you guys in the long run...

 

[isthisok]

Check this out...............
UA files for Chapter 11 without concessions.
UA contracts are abrogated.
UA is history.
UA/US merge out of bankruptcy as US under new contracts in affect (abrogated IAM-M and CWA).
Big sticking point for original merger was seniority. US is more senior so they offer early retirements to get rid of senior people so seniority is not a big issue. Also in newly signed US contracts if their is a merger there is a snap back to old contract wages top make everybody happy.
Bottom line UA is history!
US is the new combo!
Believe it! It is written................

 

[UAL777flyer]

It's written? Really? Where? You pose an interesting perspective. However, I don't think it has any basis in reality. UA is not history. They have more going for it than US Airways. One way or another, UA will get it's costs lowered, either outside of bankruptcy or inside.

 

[GrahamAF]

The Fun Begins in Bankruptcy Court.

 

[N305AS]

I agree, this will NEVER happen, regardless of the cost benefit from lower contract rates.

Besides, the UA brand is FAR more recognizable and valuable than the US one. If a merger of any kind were to occur, UA would be the surviving carrier.