Consolidation

[LGA Fleet Service]

Check this article, ladies and gentleman.

http://www.thestreet.com/_aol/s/what-amr-c...E&cm_ite=NA

What,wave the bankruptcy magic wand and stiff employees, retirees and creditors alike?

I still need to know how a company that is a for profit organization can simply hand its pension obligations to the US Government claiming poverty then proudly emerge from bankruptcy to accolades from Wall Street.

I was always under the impression that the PBGC existed as a safety net for employees in case their employer went out of business, Not as a convenient "Get out of debt free" card.


I will never view beating creditors, employees and retirees bloody with the Chapter 11 club as a business practice worthy of accolades. :down:



Funny how employee contracts, vendor contracts and any other contract that management wants to get out of can go away in Chapter 11, but executive compensation is the one contract that is holier than the grail and more secure than Fort Knox.

 

[Boomer]

Given the contribution of aviation to GDP, and the control of Congress, the periodic bailouts for mismanagement are cheap in comparison to the the taxes brought in and the votes to be gathered.

 

[brokenwrench]

- Monday, October 22, 2007
Overview of Points From Leaders At
The Boyd Group Forecast Conference

All of us at The Boyd Group want to express our thanks to the attendees and sponsors of the 12th Annual Aviation Forecast Conference. This year marked the largest attendance yet, not to mention the most incisive and valuable forecast data available in aviation.
We well be posting more details - and lots of pictures - on a special web page next week. In the meantime, some of the general points that were illuminated...

Emerging Trends...

International-generated traffic is now the #1 most important sector for airlines. This is not, as university professors incorrectly spout, just folks going to and from foreign destinations, but the total revenues that such traffic generates for the domestic systems operated by comprehensive network carriers such as Northwest, Delta, and American.

The majority of passengers on that American GRU-DFW flight are not getting off to visit friends in the Metroplex. What lightweight academics miss is that the majority are connecting to other AA flights across the nation. Furthermore, the average business traveler coming to the US has travel plans to make several domestic segments on the CNC before he or she goes home.

An example noted in The Boyd Group's Aviation Trends session is traffic to and from India. The demographics are incredibly strong, and represent enormous back-of-the-hub traffic plumbing. Every community of any size in the US has an Indian population base that generates enormous international traffic to and from India. This, the Trend Forecast noted, represents just one of the emerging data points that small and midsize communities (as well as CNCs) need to review when planning air service development.

The Emerging Global Portal. Because of growing intra-regional traffic flows, particularly between Asia and Latin American, certain US points have potential to become "international" connecting hubs, or Global Portals. These will inter-connect traffic from points just as do domestic hubs, but will do so between points in each region which by themselves cannot support nonstops.

The net result will be enormous economic growth for the cities where the Global Portals are located. This is because, just as domestic hubsites are over-served by virtue of the inter-connecting traffic support, the Global Portal will have far more international service access, supported by the feed traffic going through the hubsite. Potentials Global Portals: AA/DFW, NW/DTW, CO/IAH, and DL/ATL. These will also enhance the value of alliances, both domestic and international.

Airline Trends That Might Not Be Trends. Two emgering and very trendy non-trends were discussed. These were "ancillary revenues" - where airlines can supposedly make a bundle selling stuff, and "unlocking shareholder value."

The first assumes that airlines can make some serious gelt nickel-and-diming customers. This ignores the fact that in the US consumers have limited tolerance for such shenanigans. It also ignores some hard operational issues, such as the increased workload in implementing and accounting for such activities, particularly at airports that are crowded and not particularly overstaffed with airline employees.

"Unlocking Shareholder Value" is nothing more that selling off the furniture and giving the dough to shareholders. When the dust settles, the airline is left gutted of parts that used to provide revenue and/or key support. Recommendation at the Conference: Translate this B-School jargon into English: "We're not interested in running an airline. We want a quick cash-out."

The New Airport Facility - Less Linear. More IT. More Virtual. We also noted that advances in IT services as well as airline retailing/processing is now shifting the airport facility needs in the US. AirIT, one of our sponsors, displayed a new system where passenger and baggage handling can be done - and will be done - anywhere, well before the consumers gets to the airport. Biggest needs for next-generation airports: Curb space to handle vehicles, baggage claim space, and whatever square footage they can foist off on the TSA. Not needed as much: processing space. (Heck, who needs "ticket counters" when there are no tickets? We'd also suggest checking out AirIT.com for a further view into this future.

More Next Monday... We'll be covering more of the important futurist points made at the Conference - including those by our speakers - in detail next week. Plus pictures. In the meantime we want to thank all of our sponsors who have helped establish The Boyd Group Forecast Conference the #1 event of its kind in aviation.

These include: Embraer, Northwest, Delta, AirIT, Airbus, Boeing, Airline Weekly, and of course our host, the Sarasota Bradenton International Airport.

 

[NewHampshire Black Bears]

435 Members of the US House of Representatives, 100 Members of the US Senate: absolute control of the US Aviation Industry.

Talk of "consolidation" within the industry ignores the fact that 535 ELECTED Politicians all have a greater stake in "Ma and Pa Kettle getting cheaper tickets to Disney" than they do actually allowing business to function as a business and Unions negotiating higher wage rates.

"Consolidation" in the airline sector is the siren song sung by the beautiful girl you never actually get to take home.

More carriers, absolutely; less service through consolidation: never.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Boomer,

You make a Great point about congress.

The window of M+A possibilities will last ONLY as long as DUMBYA is in office(approx. 14 months).
After that, with a likely Democratic control of all 3 houses of government, If any company's have "soon to be launched M/A plans, they best announce them VERY soon, because these things are'nt completed in a mere 6 months.

And as for AA(who most likely will sit on the sidelines), with every passing day, that NO M/A's are announced, plays "right into AA's hand"

 

[Alice Cramden]

The airline industry has always been a cash cow. The reason so many executives come and go and mostly go with millions.

If the Boyd Group is spot on, outlook for domestic carriers such as SWA, AirTran, JetBlue, etc., will be in a lot of trouble. VX should do well, they can codeshare with all Virgin international connections.

 

[NewHampshire Black Bears]

It's not about being hopeful/combative - and just because you haven't been "tainted" doesn't mean you won't... I don't know what AA will "act" on.. They more than likely will not play a role in future consolidation.. It will be DAL UAL NWA and CAL possibly US playing a large role in the consolidation... DAL UAL or NWA didn't feel the BK whip either until it happened.. You have to put yourself in the shoes of the investors of the company.. Not mgmt or Arpey, the investors and shareholders have the final say, if they want their money they will do whatever it takes to get it.. If there is a strike looming, I would bet you AA will file so fast it will make your head spin, maybe you SHOULD talk to some of the more experienced BK carriers reps, they will tell you just how fast it happened to them.. Good luck with the 35% raise though, I hope the pilots get it.. I hope the mechanics get theirs too...

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Very GOOD..Beauty(your correct statement that AA's Invester/stockholders will "have the Final Say")

Now,
Having said that, putting the guy from Iceland (Investor) aside for a moment, AA has been held by some Long time OLD investors.

Now beauty, I'll take you back in time, to an incident, that YOU may/may not remember.

Donald Trump(they don't come much BIGGER, or Bolder than Trump), bought a SHET load of AA stock. Well next thing you know, old "bad hair weave" TRUMP was so sure he had the muscle to take over/change AA, that the champagne was "on Ice".

But alas, the Good ol' boys, together with Crandall, put together a "Poison Pill" that made it Very Very hard for ANYONE to make AA DO something that AA did NOT want to do.

Helped by AA's "in bed unions", has enabled American Airlines to virtually DO, just about ANYTHING they want to do. Does that sound AArogant ? (to you)........DAM* right it does.

Where do you think all of us AAers got our AArogance(and BOY do we have it) ? Mostly from CRANDALL, and the company in general(meaning the way they've operated, especially the last 35 years)

So you can see "beauty"..(Trust me, you don't have to like it)..BUT...."It IS what it IS"

Signed(from);

The AArogant, Pompous A$$ employees of American Airlines..."Doing what we do best/Something special in the air/We know how/why you fly" !!!!!!!!!!!!!!!!!!!!!!!!!!

 

[donttouchthebeauty]

NHBB, thats the biggest sack of crap i've heard.. The airline days are much different now, and you folks fail to understand that. Trump Industry may have been the only one to try and do it, but when you get all the creditors that want their money back, and angry unions... Well then you have a problem... The glory days are over, but hey if you want to still be a cheerleader.. be my guest... Your post shows that you are foolish to think that way, look at our economy, what you said is like saying, We are the U.S.A. and Bush will never let anything happen to us, we are the land of the free and the home of the brave... What a load of hot air... NHBB, you need to rethink that one...

 

[NewHampshire Black Bears]

NHBB, thats the biggest sack of crap i've heard.. The airline days are much different now, and you folks fail to understand that. Trump Industry may have been the only one to try and do it, but when you get all the creditors that want their money back, and angry unions... Well then you have a problem... The glory days are over, but hey if you want to still be a cheerleader.. be my guest... Your post shows that you are foolish to think that way, look at our economy, what you said is like saying, We are the U.S.A. and Bush will never let anything happen to us, we are the land of the free and the home of the brave... What a load of hot air... NHBB, you need to rethink that one...

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

OK...beauty, I HAVE rethought it, and this is what I've come up with.

(uncle) Bobby CRANDALL.(You've heard of him, haven't you beauty) ??

With a multitude of negative things going on(in the Industry), it looks MORE + MORE like Crandall's prophecy of becoming a International /Hub to Hub/Transcons carrier, trancons(think HAMMERLOCK ..$$$..on the NYC/LAX route) is fast becoming to "fruition"

(And THAT is another reason AA will NEVER jettison It's most valuable weapon...A/E) !!!

PS,
Sorry to hear that "GLEN" is definitely going to FARM out M+E !!!!!!!!!!!!

 

[donttouchthebeauty]

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

OK...beauty, I HAVE rethought it, and this is what I've come up with.

(uncle) Bobby CRANDALL.(You've heard of him, haven't you beauty) ??

With a multitude of negative things going on(in the Industry), it looks MORE + MORE like Crandall's prophecy of becoming a International /Hub to Hub/Transcons carrier, trancons(think HAMMERLOCK ..$$$..on the NYC/LAX route) is fast becoming to "fruition"

(And THAT is another reason AA will NEVER jettison It's most valuable weapon...A/E) !!!

PS,
Sorry to hear that "GLEN" is definitely going to FARM out M+E !!!!!!!!!!!!

Your right, Glen will sell off as much as he can, maint., MP, and maybe cargo. But what you fail to understand, is when he does that, we will be the wealthiest airline around, with purchasing power........ It's not being done for no good reason.. As soon as it happens, we will merge or buy, and "Trump" all other airlines.... You will need to be competitive with us over at AA so watch out, I would't mark off the sale of yours either, and once your stock holders see our stock go throught the roof, well you know what will happen, the AA investors will be standing at Arpeys door...

 

[Boomer]

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Boomer,

You make a Great point about congress.

The window of M+A possibilities will last ONLY as long as DUMBYA is in office(approx. 14 months).
After that, with a likely Democratic control of all 3 houses of government, If any company's have "soon to be launched M/A plans, they best announce them VERY soon, because these things are'nt completed in a mere 6 months.

And as for AA(who most likely will sit on the sidelines), with every passing day, that NO M/A's are announced, plays "right into AA's hand"

NHBBs',
GWB has nothing to do with it...I know you need a grassy knoll but that dog ain't gonna hunt.

Kennedy and Carter deregulated the entire mess...despite differing parties being in control of either or both houses of congress, we have slid the same way: politics has not helped because one party rightfully assumes we have no where else to go and the other rightfully assumes that we will never be able to shift our support their way.

Don't forget that Clinton signed off on NAFTA and GATT, while Congress was held by Democrats when Kennedy and Carter signed off on the green mile for my future.

 

[NewHampshire Black Bears]

NHBBs',
GWB has nothing to do with it...I know you need a grassy knoll but that dog ain't gonna hunt.

Kennedy and Carter deregulated the entire mess...despite differing parties being in control of either or both houses of congress, we have slid the same way: politics has not helped because one party rightfully assumes we have no where else to go and the other rightfully assumes that we will never be able to shift our support their way.

Don't forget that Clinton signed off on NAFTA and GATT, while Congress was held by Democrats when Kennedy and Carter signed off on the green mile for my future.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Boomer,
I know you'll correct me, if I'm wrong, but it just seems (anyway), that when M+A's happen, the GOP is in the WH.

 

[FA Mikey]

Your right, Glen will sell off as much as he can, maint., MP, and maybe cargo. But what you fail to understand, is when he does that, we will be the wealthiest airline around, with purchasing power........ It's not being done for no good reason.. As soon as it happens, we will merge or buy, and "Trump" all other airlines.... You will need to be competitive with us over at AA so watch out, I would't mark off the sale of yours either, and once your stock holders see our stock go throught the roof, well you know what will happen, the AA investors will be standing at Arpeys door...

Since every other person here is smart enough to know that coming in to a large bunch of cash, means that the stock holders will reap a wind fall. All the money is not going to fund anything, like you dream.The UAL CEO is no longer interested in running the company as is. Its greater value is in pieces.

 

[donttouchthebeauty]

Since every other person here is smart enough to know that coming in to a large bunch of cash, means that the stock holders will reap a wind fall. All the money is not going to fund anything, like you dream.The UAL CEO is no longer interested in running the company as is. Its greater value is in pieces.

FAMikey, you walk right into your own traps everytime, if UAL is worth more in pieces (while making double profits of AMR) well I would sugest that would make AMR is worth much much more in pieces.. Your fantasy is sickening, and only b/c of your envy....

 

[FA Mikey]

FAMikey, you walk right into your own traps everytime, if UAL is worth more in pieces (while making double profits of AMR) well I would sugest that would make AMR is worth much much more in pieces.. Your fantasy is sickening, and only b/c of your envy....

UAL is looking at breaking itself up, AMR is not.

 

[Boomer]

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Boomer,
I know you'll correct me, if I'm wrong, but it just seems (anyway), that when M+A's happen, the GOP is in the WH.

NHBBs',
Below is the quickest link I could find along with a link to another publication. The text below supports the graph from the first link: Clinton administration holds the record for US M&A activity for the number of transactions announced and the value of those transactions.

US Domestic and Cross Border M&A Activity 1996-2006

M&A activity reaches record high
M&A activity reaches record high for third consecutive year
Weekly Corporate Growth Report, Jan 12, 1998
Last year marked the third year in a row of record merger and acquisition activity in the US and abroad. There were 7,772 US transactions valued at $653.5 billion, according to Houlihan Lokey's Mergerstat, a number that crushes by 41% the all-time record set in 1996 of $466.6 billion.

The number of announced transactions increased by 33.2%, from 5,836 in 1996, to 7,772 in 1997. The average deal size was $284.5 million, up significantly from the average size of $172.9 million in 1996. Additionally, mega-deals ($1 billion and above), made up for $369.5 billion, or 57% of the total U.S. deal market. A significant percentage of this was contributed by WorldCom's $35.3 billion bid for MCI, the largest US deal in history. The average price-to-earnings ratio was 28X, while the average premium was 38%.


The record-breaking M&A market was dominated by the Financial Services, with $205.7 billion in transactions. Close to onethird of the overall deal market was accounted for by banking and finance, brokerage, investment banking and insurance company transactions.

Banking and finance was the most active industry in 1997 by dollar value. It had 422 transactions valued at $111.9 billion, representing a 197% increase over 1996's deal value of $37.7 billion. Next came the brokerage, investment and management consulting industry with 321 transactions valued at $62.8 billion.

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In a subtle twist of irony, many of the most notable deal makers on Wall Street found themselves as takeover targets in 1997. Among these were Morgan Stanley Group Inc., Salomon Inc., Alex Brown Inc., Oppenheimer Group Inc., Furman Selz, Inc., and Wheat First Butcher Singer.

Finally, rounding out the consolidation in financial services was the insurance sector which ranked as the sixth most active industry in 1997, with 227 transactions that were valued at $31.1 billion.

"Based on continuing deregulation, we saw many more cross-sector mergers in the financial arena this year." said Houlihan Lokey managing director Scott Adelson. "Just like other industries, financial companies are trying to create operational synergies while competing in a one-stop shopping competitive environment," Adelson explained.

Seven of the fifteen largest deals announced in 1997 involved the acquisition of financial services companies. The top five industries were rounded off by Communications, Utilities and Leisure & Entertainment industries, which ranked third, fourth and fifth, respectively.

Globally, merger and acquisition transaction volume climbed to $1.63 trillion, up 48% from the $1.1 trillion in 1996. The forces that fueled the global performance are the same that led to the domestic records. Specifically, the record M&A activity both domestically and abroad was the result of a favorable stock market, regulatory and technological changes, and the desire by corporations to do large strategic transactions. Now that it's 1998, we can see how this all pays off.

Copyright Quality Services Company Jan 12, 1998
Provided by ProQuest Information and Learning Company. All rights Reserved