August 31 "Chip''s Corner" released

C

chipmunn

Guest
Today USaviation.com released this week's "Chip's Corner" article that looks at the new major airline alliances and their impact on commercial aviation. The column can be viewed by selecting Magazine on the tool bar, Airline Commentary, and "A look at the pending airline industry alliances".
Chip
 
OP
C

chipmunn

Guest
Rob:

Delta's website lists hubs at ATL, CVG, DFW & SLC and LAX & JFK as international gateways. JFK & LAX were lumped into the hub category for "graphics" simplicity.

Chip
 

motnot

Advanced
Aug 20, 2002
185
0
Just a suggestion. When you let people know the column is out, post a link to it. I don't always read it, but I have the darndest time finding when I do (unless I'm missing something obvious).
 
OP
C

chipmunn

Guest
Motnot:

I understand the current message board software does not permit a link to be posted, but a new version is due out as early as this week that will provide this option.

Chip
 

ladevale

Newbie
Sep 3, 2002
7
0
Chip,

It is very obvious what you are trying to accomplish in this article. You are playing up the advantages that would accrue to US and UA from their codeshare deal. You are clearly very happy about the prospects of such a business arrangement. Good for you.

Though I understand your happiness, I think you must understand how that being happy or hopeful does not often equate with being objective. Where in you poorly constructed report do you take the time to point out what Delta hopes to gain from its agreement with Continental and Northwest? Furthermore, where in there do you point out that the US - UA deal casts the viability of Dulles as a multi-dimensional hub into doubt? There are plusses and minuses to both codeshare deals. Instead of thoroughly recording them and analyzing them, you more or less combined the press reports on the alliances with material from the press releases. That is not very objective. That smells of some kind of agenda. That makes for very bad reporting or analysis.

From reading your posts and your other "articles," I have learned that you are quite fond of conspiracy theories as well. I guess your latest conspiracy theory is that the DOT did not make the exact terms of the US-UA codeshare deal public because somewhere in there US and UA reveal their plans to merge in bankruptcy proceedings. How do you know this? Did this information come from the same source that told you that the DOT would in your own words "fast-track" the US-UA deal? Looks like that source was wrong because we are now going on 60 days. More significantly, the DOT has asked the DOJ for their opinion of the matter. Shouldn't take them long to dig out their file on the UA-US Airways merger. Doesn't bode well. We may be looking at another 30 days after that. (Remember I was the one who warned you that approval wouldn't come in the first 30 days.)

One also has to marvel at your ability to turn innuendo and speculation into fact. Toward the end of your argument, you indulge in useless speculation about what Siegel will do if he can't obtain the necessary concessions. To make your argument sound more credible, you quote the speculative theories of a more credible person than yourself (I guess), Harlan Platt. He seems to echo what you want to hear, so you accept it as fact that without the necessary concessions US Airways will merge with United. You must not be a reasonable thinker because reason (if you had any) would have caused you to wonder whether or not US Airways could expect to obtain the same loan guarantees from the ATSB if its business plan changed.

As far as I know, the business plan they submitted to the ATSB did not include a merger with United. Here, of course, I know what you are going to say. The ATSB's own provisions for administering the guarantees stipulate that the ATSB's funds can be used for mergers and acquisitions. But, even if they can, US Airways would have to submit a new business plan to the ATSB under those terms. They currently do not have the approval of the ATSB board to use funds guaranteed by the ATSB for that purpose. This is something that in your pursuit of objectivity (yeah right!) you should have mentioned and considered.

The last part of your article reminds me very much of what my C or D students do in their papers. They find some expert who agrees with what they say and they use him to subtantiate a claim they want to make without first considering how credible that expert might be to the community who may know something about the topic being disucussed. Had you quoted Bob Crandall and he had made the points you are making with George A. Warde then I might be more prone to agree with you. Of course, Bob would have done something that George doesn't do in your quotation. As he was known to do, that is why he was such a favorite interview of the financial press, Bob would make a claim and explain why he thought that claim was correct. All George does is make claims that are as unsubstantiated as yours. Not, helping his cause in any way, and thus further eroding his credibility, is the use of the words, "sick puppies." I just don't think Crandall would have ever used those words. By the way, where is George Warde these days? It sounds like he is in some convalescent hospital?

If you were my English student, there is one more thing I would say. It is an ill-advised rhetorical move to try to defend the credibility of one of your alleged experts by invoking the testimony of someone else, especially someone whose own authority might be open to question. Aside from the fact that George Warde is not the topic of your "article," this move tends to signal to your reader that you at least intuit at some level that your expert is not likely to be perceived by your audience as having any credibility. As a result, your reader can't help but ask - Who is Jay Hancock? What is so credible about being the Business Editor of the Baltimore Sun? As compared to the Business Editor of the New York Times or WSJ? Who is Chip Munn? How credibile is he when he can't even figure out that if Warde needs Hancock to be credible either one can't be very credible?
 

Pacemaker

Senior
Sep 3, 2002
475
0
Doesn't this whole codeshare already eerily resemble the early days of the merger? I think this thing is in for a lot more scrutiny and probably won't pass muster despite the "done deal" rhetoric coming from some corners.
 
OP
C

chipmunn

Guest
Ladevale:

I found your comments interesting, but there is more going on between the parties than has been disclosed. Will something happen?

Maybe, maybe not.

Before any transaction could occur the parties need to know if Glenn Tilton can prevent UA’s potential bankruptcy, which some Wall Street analysts like Jim Higgins and investors seem to believe will now occur. Until UA’s type of restructuring is answered, I believe nothing will occur, but we could know the answer to the restructuring question in short order.

There is one thing I do know, a voluntary restructuring to meet the ATSB's amended application deadline of September 16, per today’s Wall Street Journal, with employee, creditor, vender, and lessor agreements in place, will be a very difficult task to complete, if not impossible.

With both company's future uncertain, that could lead to the liquidation of either company, nothing will be done until UA's restructuring path is known.

In regard to your happiness comment, I’m not sure of your point. What I want is for US to prosper and at this point, it’s unclear what will occur at both UA and US. Although UA has certain strengths, the company’s restructuring is significantly behind US’ and it could be better for US and its employees to align itself with someone other than UA.

In regard to the regulatory review, The DOT's informal review of the UA-US code share plan was extended until September 23, but the regulators refused to open a docket on the carriers' request to form an alliance, despite the urging by the Air Carrier Association of America (ACAA) in Docket OST-02-12986.

In their DOT code share filing UA-UA asked for the filing to not be publicly disclosed, which indicated there could be more to their application, otherwise why would there be a need to keep the information confidential? DL & AA backed the ACAA request for both the UA & US ATSB applications and code share plans to have a docketed proceeding with full disclosure; however, the DOT declined the request to discuss details of the UA-US application and have kept the review on the front burner. Why would Norm Mineta have done this?

Recently, the Washington Post reported under the terms of the Texas Pacific Group (TPG) - US Airways agreement after September 23, US is free to consider other offers from other interested parties. This is the same day that the DOT's code share review is complete. Is there something to this date or is it coincidental?

Another interesting point is that the UA-US code share plan does not include joint pricing, scheduling, and sales functions, which is expected to eliminate antitrust concerns, but to my knowledge, DL, NW, & CO have not made the same concession. This point in itself, is a major difference between the two proposal's.

In regard to your Bob Crandall comment, the former AMR CEO offered the following observation of US in a recent Washington Post OpEd column: “As the US Airways reorganization proceeds, other carriers will find themselves confronted with a new, more effective competitor.” I'm surprised you missed this point, but evidently the UA ALPA MEC agreed with Crandall, since the pilot’s leaders approved the code share agreement and did not send the proposal our for membership ratification.

Ladevale, would you care to identify yourself and your position? It may be interesting to see if a “special interest” viewpoint exists?

Thanks for your comments.

Chip
 

USFlyer

Veteran
Aug 19, 2002
2,084
292
If all the DOJ does is dig out their previous UA-US file, they will make a decision based on VERY inaccurate information. The US of today is nowhere near what it was when that whole merger mess started. As I recall, US had somewhere near 400 aircraft; now it will be in the high 200s (we hope). US had a significant presence at BWI, thus making the BWI-IAD-DCA of a combined UA-US too much market concentration. Now, BWI is nothing more than a regular station on the US network. US has decreased transcon flying, focusing solely on transcons from the three hubs, while beefing up Caribbean service quite a bit; UA has next to nothing of the latter.

Also, remember this is a codeshare, not a merger. I already suspect codesharing in the biggest market -- Washington -- may be somewhat limited, particularly in the competing markets (e.g., DCA-GSP/DCA-RDU on US vs. IAD-GSP/IAD-RDU on UA). It's far easier to structure a palatable codeshare deal than it is to structure a palatable merger. If CO-NW can do it, US-UA certainly can as well. I'm also not convinced CO-NW-DL will be disapproved; however, as with any codesharing deal, I expect some markets to be off limits. I'd say the biggest problem with CO-NW-DL will be the pilots.

Just my two cents...
 
OP
C

chipmunn

Guest
USFlyer:

USFlyer said: If all the DOJ does is dig out their previous UA-US file, they will make a decision based on VERY inaccurate information.

Chip comments: USFlyer, you bring up an interesting and valid point. Since the merger termination the two carriers 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. What other major US airlines have virtually identical fleet types?

2. Adjusted their route networks and downsized their operations reducing over lap and antitrust issues.

3. Signed a code share agreement, which was ratified by both ALPA MEC's.

4. Reached an agreement where US have received a formal invitation to join the Star Alliance.

5. Both have filed for the ATSB loan guarantee, where specific language states the funds can be used for M&A activity. The OMB rules state, "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 the way in which any required regulatory or judicial approvals will be obtained, including antitrust approval for any proposed acquisition."

6. The airlines have asked that their code share and loan guarantee applications be keep confidential by the DOT, DOJ, and ATSB. Why? Per DOT Docket OST-02-12986, the ACAA request co-sponsored by DL & AA formally asked the regulators to suspend the proceedings and to open the docket for a public review; however, the DOT declined the request. With over 100 code share agreements in the U.S. and the DOT never opposing one, why did the DOT not grant the ACAA and DL-AA request? If there is nothing going on, why not let the review be made public knowledge per established protocol?

7. Greg Taylor, former US senior vice president of planning, who held the same position with UA in the 90s, recently left US and went back to UA in the same capacity. If the two airlines were going to see some type of corporate combination, who would be better than Taylor, with his in-depth knowledge of both airlines, to advise the parties on how to proceed?

8. UA's restructuring plan seems to copy the program implemented by Siegel. Is there collusion and has US advised UA on the ATSB process, or are the similarities coincidental?

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?

Again, I understand the parties have held discussions on a deeper relationship, but with each airline having multiple problems, it's unclear whether or not any further integration could occur.

Chip
 
Aug 20, 2002
7
0
www.usaviation.com
lamevale:

Don't break your arm patting yourself on the back. We're all thoroughly impressed with your accomplished English background. It's a shame you had to put someone else down to raise yourself up.

Personally, I come to this board for Chip's OPINION as well as the facts that surface from his tireless investigations. The few minutes I wasted reading YOUR self-promotion piece are lost minutes that I shall never recover.

I'm pretty sure there's an edit function here. You may want to re-read your last paragraph. Your words don't exactly jump off the page.[;)]
 

Latest posts