Industry M&a Activity?

[USA320Pilot]

Earlier this month I commented on this website that following US Airways’ emergence from bankruptcy that the airline could be involved in a corporate transaction and J.P. Morgan could be the investment banker.

Separately, J.P. Morgan is United Airlines DIP financier and today four lending institutions, one of which was J.P. Morgan, agreed to amend the terms of the carriers bankruptcy financing.

Complete Story

Yesterday J.P. Morgan hosted its annual Airline Conference where industry executives spoke on the state of the industry. According to the USA Today, United Airlines CEO Glenn Tilton says his airline could be a big player in a round of what he called an essential industry consolidation. "The market has no space for six network, hub-based, legacy carriers," Tilton said. Tilton strongly pushed the notion of consolidation, saying the big airlines should take cues from the telecommunications industry. SBC is buying AT&T, and MCI has accepted Verizon's bid as the industry adjusts to a new competitive landscape. Likewise, Tilton said, big airlines must consolidate to survive competition from fast-growing low-cost carriers.

Interestingly, senior executives from several rivals, speaking at the same conference sponsored by J.P. Morgan, were more skeptical. They cited the government's historical reticence to approve airline mergers, the complexity of combining networks, and the failure of past airline mergers to produce significant labor cost savings. "There have been historically a lot of barriers to consolidation in the airline industry, and those barriers remain in place today," said Gerard Arpey, American Airlines CEO. Continental President Jeff Smisek said consolidation wouldn't do much to control the industry's chronic overcapacity. Only eliminating weak carriers will do that, and even that's not likely, the USA Today reported.

Complete Story

Is it a coincidence that US Airways’ business partner United Airlines is once again talking about M&A activity and two of US Airways’ rivals, who both lead the effort to derail the previous US Airways – United merger, both spoke out against consolidation again?

Regards,

USA320Pilot

 

[us0004us]

did air wisconsin just pick the survivor of a usairways/ual merger?

 

[USA320Pilot]

us0004us:

Interesting point. The wild card...RSA?

Regards,

USA320Pilot

 

[us0004us]

two ceo's ,ual and american west , expressed a deep desire to aquire another airline.

both expressed this desire within the past six days or so....

both airlines route maps match up just about perfect w/usairways.....hmmm

now we have air wisconsin making a huge investment in their own future...

w/usairways.

why not invest with amwest or ual?


hmmm

 

[Fly]

rub, rub, rub, rub, rub, rub, rub......feel anything 320?......keep rubbing, something will happen.











but don't touch me! ewwwwwwww

 

[USA320Pilot]

Fly:

Surprise, surprise. M&A talk heats up again and you visit the US Airways forum. I wondered how long it would take for you to visit. Not long, yeah...

By the way, how are things goin' at UA?

Best regards,

USA320Pilot

 

[gso-crew]

Could this be happening?????


NEW YORK, September 18 (Investor’s Economic Resources)
Mergers and Acquisitions Coming to the Airline Industry?

The possibility of such a large portion of the industry in bankruptcy at the same time is not just a matter for the record books, but has important ramifications involving antitrust law. The "failing firm" and "existing assets" defenses and exemptions in antitrust law let otherwise anti-competitive deals proceed if the firms and industries attempting to merge are extremely dire straits.

Under those theories of antitrust law, the bankruptcy of Delta could open up a window during which mergers that would never be permitted otherwise could be allowed. The Justice Department blocked UAL’s attempt to buy US Airways on antitrust grounds. Today, such a merger would likely be permitted. If Delta were to enter bankruptcy, even larger mergers would probably be feasible based on “failing firm" and "existing assets" defenses.

Aside from any antitrust law considerations, there is no way that any of the non-bankrupt major legacy airlines could merge with each other because of their huge unfunded pension liabilities. Thus, any merger of major legacy airlines will have to be like American’s acquisition of TWA’s assets. After TWA’s pension plans were terminated along with all post-retirement employee obligations, American bought TWA’s assets.

American assumed certain of TWA’s debts and TWA employees were added to the bottom of the American Airlines seniority lists. As 9-11 occurred shortly after the merger, American furloughed most former TWA employees. Today there are few former TWA pilots or flight attendants still working at American Airlines.

If an antitrust law exemption based on the "failing firm" and "existing assets" doctrines were to develop, mergers thought inconceivable a few years ago might occur. American might be able to acquire the assets of Delta or even UAL on terms similar to those used in the TWA acquisition. The cash required would be relatively small, but it would involve the assumption of significant amounts of debt. Northwest and Continental might also try to take advantage of such an antitrust law exemption “window†to attempt to acquire the assets of UAL, Delta or US Airways on similar terms.

While the words “Penn Central†may come to mind when any such mega-mergers of legacy airlines are considered, there is no doubt that consolidation is sorely needed in the industry. One wrinkle may be that the non-bankrupt legacy carriers use the prospect of such acquisitions to obtain wage concessions from their unions. Many American Airlines pilots and flight attendants still have jobs today because the TWA employees went to the bottom of the seniority lists. Probably all of the employees at any major legacy airline now on furlough could all be recalled if their airline were to acquire the assets of a bankrupt legacy carrier and the bankrupt carrier’s employees were “stapled†to the bottom of the combined entity’s seniority lists.

The acquiring legacy airline might even be able to obtain wage concessions from its unions as a quid-pro-quo for giving its employees job security (at the expense of the bankrupt airline’s employees) significant enough to allow them to compete with the low cost carriers. That, combined with the capacity reductions and creation of local monopolies that such consolidation would entail, might actually allow a legacy carrier to actually earn a profit.

 

[magsau]

UA and CO or UA and DL.

US and ARW......Well I suppose 320 will get his merger, it will be with Air Willy and a brand new CRJ with his name on it.

Now I would call that a UCT, ICT and Justice all in one sentence

Cheers Skippy.

 

[Walmartgreeter]

UA and CO or UA and DL.

US and ARW......Well I suppose 320 will get his merger, it will be with Air Willy and a brand new CRJ with his name on it.


Magsau.....anybody can speculate, but in my opinion ALL bets are off. We are in uncharted territory now. Everyone had better put aside their petty opinions of which airlines will squash which.....If DAL does enter BK, it is going to be a free for all. Good luck to you guys at UAL. Greeter.

 

[North by Northwest]

GSO-CREW,

Your post is replete with great information.... Your reference to PENN -CENTRAL, did not go un-noticed.... Please, for all who wish to educate yourselves, link here.....
http://www.geocities.com/pcrrusa/indexpg2.html

It was a merger of over 185 companies !

Also, remember,,,,, any potential current mergers............ DAL F/A's are NON- UNION . So an aquisition of DAL ........... fill in the blank !

Just the facts, M'am, just the facts. :huh:

 

[WorldTraveler]

N by NW,
you should be reminded that DL has eliminated more union jobs than any airline in US history. Just think of all of those Western and Pan Am union cards that got burned just in the past 20 years!

I'm going out on a limb and say with a pretty high degree of certainty that UA and US will not be involved in M&A activity and be the surviving corporate entity; and if they do manage to acquire anyone, the entire company will fold within 2 years after an acquisition. And my prognostication is backed up by a steak dinner for 2 to the first lucky person who can prove me wrong.

mags,
interesting that you say here that UA is likely to merge w/ DL or CO. I don't disagree but I hope you don't think UA will survive.

 

[Walmartgreeter]

And my prognostication is backed up by a steak dinner for 2 to the first lucky person who can prove me wrong.

Hey! If you are correct, I may need the steak dinner sooner than later! Welcome back Traveler! Mark.

 

[USA320Pilot]

I find it interesting that UA employees Fly, Cosmo, & Magsau are back again posting on the US forum. Where have you been and how are things going at UA?

How come the only time you visit the US forum is when M&A activity is discussed? Are you worried about DOH or UA not the surviving business entity? How can that be?

Welcome back!

Regards,

USA320Pilot

P.S. There is no question that industry modeling is on-going and both UA and US are "in play". Time will tell how this all turns out, however, just prior to leaving the company, Dave Siegel finally admitted to me on our jumpseat that my comments on the UCT & ICT discussions were accurate.

 

[Dog Wonder]

The only connection this thread has to US Airways is imaginative speculation. Go to the United forum with this.

 

[USA320Pilot]

Dog Wonder:

With all due respect, you're not angry and bitter, are you?

Regards,

USA320Pilot