Merger Info

[WorldTraveler]

This is a good, level headed discussion. 767, Please don’t apologize for sharing your well conceived thoughts. Here goes another lengthy post.

I don’t agree that WN controls the industry. They have the financial stability to move where and when they want in the industry but the industry is far too fragmented for any carrier to control the industry.

Here are a few trends I see developing followed by some of my specific expectations of what will happen to some of the key carriers in the industry:

- There will be failures among the legacy carrier ranks (see below). The industry has been artificially protected from evolving to where it needs to go for 25 years; the government is no longer willing to stop or protect consolidation or failures. The only consideration the US government will give to merger and acquisition activity is whether a combined carrier would hold excessive control in a particular market (which is why the UA-US merger was stopped and why the only parts of UA that AA could acquire would be their Pacific routes since AA duplicates UA on the other limited access parts of its network such as ORD, Latin America, LHR).

- There may be some consolidating among LCCs but I’m not sure it will be significant. Culture is much more important for the LCCs and their culture is all very different from each other and from the legacies.

- Hubs will become less important insomuch as duplicate connecting capacity can be eliminated. DL’s closing of DFW as a hub and reallocating that capacity to its other hubs accomplishes that as did AA’s downsizing of STL. US will lose key network flows by closing PIT so is not going to benefit as AA and DL does although they are clearly counting on the UA codeshare to help them cover that capacity. Hubs will continue to be necessary in order to serve markets that will never support point to point flying, including many international markets.

- There will be more point to point flying, including with RJs. This not only will give the legacy carriers a place to move some of their excess capacity but will help to head off further LCC growth.

- LCC growth will be stymied by those legacies that turn themselves around and are in a position to defend their own markets. LCC costs will rise as they take on additional fleet types and have employees who demand pay proportional to the company’s prosperities.

- Overall airline compensation will shrink but a greater percentage of it will come from “at risk†sources such as profit sharing and other performance based compensation. The legacies are in an ideal position to force these kinds of changes and will change the compensation models to look more like the LCCs. It is not a surprise that the reason the LCCs do better financially is because their employees have a reason to ensure the company’s survival.

- Some of the LCCs will venture into international markets but there will not be huge successes. As legacy costs come down, LCCs will have few advantages since the cost advantage drops as flights get longer. International airports do not have the excess capacity that is needed to accommodate stimulated traffic volumes.

- Although they will grow their international systems, at least a couple legacies will have large domestic operations. It is impossible to support international routes without domestic feed and a large base over which international costs and equipment can be spread.

- Domestic alliances are short-lived efforts to grow from a marketing standpoint but will never deliver the reductions in redundant capacity (esp. between hubs) and costs (every airline still has a headquarters and all the associated costs) that is necessary for the legacy carriers to turn themselves around. Further, domestic alliances do not allow for revenue growth but win only on the basis of the biggest alliance and the biggest carrier within that alliance will see some revenue growth.



AA – AA will be one of 2 or 3 legacy carriers with a worldwide and large domestic route system. Their employees may be in for another round of cuts based on what DL is likely to get in cost cuts and UA’s ability to dump pensions. AA is exactly where DL was 2 years ago – flush with cash which gives labor very little reason to sacrifice anything. AA has some major markets (DFW and MIA) still very vulnerable to LCC invasion which will require cost cuts to support the eroded revenue. Although AA could acquire US or UA assets (Pacific only, DEN maybe), they are probably the only carrier that doesn’t need to do so and probably would be very hesitant to do so unless they are willing to give up the progress made so far in patching things up with labor post TWA.

AS – A valuable and well-run niche player, AS could be an attractive acquisition candidate should the industry consolidate.

B6 – B6 will continue to have a significant cost advantage but only for a couple more years as their EMBs come on line and the A320s roll off warranty and require major maintenance. They will have to look for growth opportunities beyond JFK since AA and DL appear more than willing to pull out all the stops to keep B6 in a box at JFK. While fighting B6 is costly for any airline, having AA and DL slugging it out (really against B6) will make it very hard for B6 to continue to grow as easily into new markets from JFK as they have so far.

CO – CO could easily stand on its own if it wanted to but is very stretched financially and is not likely to gain the financial cushion necessary to significantly acquire assets from other carriers should they come available. Since CO has hubs in some very large markets, it can be a profitable niche network player but will have a hard time defending its turf if significant LCC expansion occurs in its hubs (not likely in EWR due to ATC constraints). CO could be acquired but NW is the most likely candidate and that is complicated by fleet incompatibility.

DH – Independence will stay around long enough to make life very miserable for UA but may not accomplish much else. While the Airbii should create enough flow to help fill some of the RJ’s seats, there clearly is way too much capacity at IAD right now given that other carriers’ jet to jet or jet to RJ connections will be preferable for connecting traffic leaving DH to fight it out w/ UA for the local WAS market.

DL – I believe DL management will get the concessions it wants from the pilots and debtholders simply because the price all stakeholders will pay and the control the company has in bankruptcy is something no party wants to give up. Remember that this is exactly where AA was 18 months ago; I expect that DL will get the concessions it needs while standing on the steps of the courthouse while waving its bankruptcy papers in its stakeholders faces. With the cuts proposed, DL will have the lowest costs in the legacy industry and at a level low enough to service its significant debt and still have money to acquire assets. While CO was once a possibility, DL’s growth at JFK seems to rule that out. After DL completes its restructuring, I expect that DL will soon be talking with UA and its creditors about acquiring a significant portion of UA’s assets including the Pacific, California, LHR, and ORD.

F9 – F9 will learn from overextending itself and will continue to be a significant thorn in the side of whoever hubs at DEN. DIA will have to get its costs down in order to be an attractive hub for any legacy carrier, particularly when every legacy carrier has reasonable alternatives to DEN. DIA’s high costs will be a deterrent to LCC growth as well.

FL – AirTran will find competing with Delta harder based on DL’s lower costs and beefed up ATL schedule and will expand into a new hub such as DFW where they will gain nationwide coverage. They are probably also a strong candidate for a major Latin American expansion.

NW – NW is in a difficult position without a major position on either coast. NW has benefited from the lack of LCC competition in its hubs relative to what other legacies face but that luck is bound to run out. NW is apparently afraid of a showdown with labor on costs but will be very hindered by not addressing its costs – which likely will the industry’s highest after a DL restructuring. NW is well-managed and aggressive and could be an acquirer either of US assets or CO if fleet compatibility were not such a problem.

UA – While I try to respect the investment UA employees have in their employer, UA is simply doing all of the wrong things when it comes to turning itself around such as revenue is falling faster than costs, employees are being alienated through aggressive cost cutting, and an aweful lot of energy is being poured into new products with no assurance that those costs are necessary or will produce a return (Ted, PS). As such I cannot be optimistic about UA, particularly in light of UA’s inability to attract financiers interested in helping the airline get out of Chapter 11. As noted above, I see DL as the most likely acquirer based on a strong DL turnaround and the fact that DL has the least overlap with UA of any US carrier and is most needy of what UA has to offer. I don’t see foreign ownership laws being changed fast enough to help UA.

US - What can we say to the poor folks at US? I do not believe US’s most valuable assets (slots and terminal facilities) will be thrown in masse on the market to be picked apart and divided among other carriers simply because those assets represent a valuable franchise that someone will be willing to pay for – esp. if one wants to set up an east coast based airline. Unfortunately, the employees can be hired for any follow-on airline to US for a fraction of the price and without any of the legacy benefits (which is pretty much where US employees are with the current pay proposals).

WN – WN can go where it wants based on its costs and reputation but will move to the higher end of the LCC cost band based on its employees expectations of sharing in a greater portion of the company’s successes. Perhaps the least likely to venture overseas.

The airline industry will look very different from what it does today. It is naïve to think all of the legacies are doomed and all of the LCCs will prosper unabated. History and logic dictate otherwise.

 

[funguy2]

Nice post World Traveller...

I guess I should have been more specific on my comments about Southwest's pricing power... They were short-term in nature... I continue to believe if LUV increases fares, the industry will follow. However, I do not believe LUV has any incentive to do so, at this time (if oil goes to $55 or $60/bbl, that may change).

back to your post... I thought you did a good job with a summary, although a few players were left out... mainly HP, to a lesser extent TZ, YX, and NK (and their 95 Airbus order...)

I think TZ will likely see the same fate as US, as it simply doesn't produce high enough yields...

HP, YX, and NK I think are wild cards... HP has a decent niche, however will continue to operate under WN's thumb. Any likely domestic expansion opportunities for HP would likely also be under WN's thumb. I think ultimately, they either stay essentially unchanged, or become a player in the LCC consolidation (and the odds of it being successful are probably 50/50 depending on what they try).

YX has a couple options... 1. They continue to experiment with this low-fare strategy until they are consumed in the LCC consolidation (probably FL - nice fit w/ fleet and route structure, the M80's being a problem, but FL can convert some 737NG options to firm orders for replacement on the quick) Or 2. They give up on much of their scheduled service, and focus on markets which can be successful with an all-premium service. Ultimately this would require LAX-JFK/IAD transcons, but would also involve moving away (but not abandoning) MKE, and focusing on DCA, LGA, LAX, and maybe a few other major cities with no dominent hub and lots of biz traffic "major player" types. However, this will require extremely cunning management and some investment capital, and of course fractional ownership becomes more of a competitor. I'd like to see them try #2, but I am afraid nobody will have the vision and $$.

NK has potential to become the LCC of the Caribbean... AA has defended this gem well over the past 10-15 years, however, it too will be vulnerable to LCC penetration, which I think will come from Spirit.

 

[767jetz]

To add a couple of thoughts:

Southwest can no dictate industry pricing. While they are a major force where they fly, they are still a niche airline, and have expanded carefully, into only certain markets, and only on their terms. Very smart for them. However in the grand landscape of US commercial aviation, they are a small fry. I don't remember the exact numbers, but if you look at the number of places they actually fly, and consider that they often serve secondary airports (ie: Midway, ISP, BWI, etc.) it is obvious they cherry pick markets where there is enough excess fat. Again, good for them. But they are not a big enough player to dictate fares for everyone else.

As for Delta, I disagree that they are in the same position as AA was 2 years ago. Delta's problems are far more severe and plentiful. Culture is much different, particularly with the pilots. The recent agreement with the pilots is a temporary fix for a pilot shortage, but they still face a serious outflow due to retirements. I predict that they will be in CH11 before the Holidays. It is the only way hey will get the cost structure to compete.

With regards to United, I believe that Tilton is determined to ensure that UA is one of the players left standing. Despite Union noise, I think the employees are more determined than any other in the industry to climb back to the top. Tilton has been very slow and methodical throughout the BK process. He does not rush anything just because some "expert" writes and article in the paper. Much of the media hype directed at UA over the last 2 years has been just that... hype. And much of it has been off the mark. We have surprised the critics over and over again, and are still alive and kicking. We have made more progress than anyone believed we would, and more than anyone has given us credit for. We continue to win awards for inflight entertainment, lead the industry in performance and "intent-to-repurchase," and customer service. Most frequent flyers who have had the oportunity to sample us and the competition, (not talking about one segment to Omaha either) consider our product better than most. There are more challenges ahead and more pain for everyone. But Tilton still has the support of several of the largest financial institutions in the world, and is committed to preserving our franchise and expanding it. In the end I believe the cost cuts will be found, pensions will change, and when that happens the financial community will step up to the plate.

 

[funguy2]

To add a couple of thoughts:

Southwest can no dictate industry pricing. While they are a major force where they fly, they are still a niche airline, and have expanded carefully, into only certain markets, and only on their terms. Very smart for them. However in the grand landscape of US commercial aviation, they are a small fry. I don't remember the exact numbers, but if you look at the number of places they actually fly, and consider that they often serve secondary airports (ie: Midway, ISP, BWI, etc.) it is obvious they cherry pick markets where there is enough excess fat. Again, good for them. But they are not a big enough player to dictate fares for everyone else.

[post="186307"][/post]​

Small fry? They serve something like 50%+ of the top 100 traveled US markets, and are No. 4 in terms of RPM's (or was is number of revenue pax?). I don't think they are a small fry.

I think your point was since they fly only to 55+ cities, they cannot materially affect pricing to places they don't serve. I disagree with that, for two reasons... One, people already drive from CLT to RDU, MEM to LIT, and ICT to MCI to fly on Southwest... So any fare change at RDU will be noticable on the CLT market and so on. Second, I think if LUV were to raise fares, it would show the public that even the low-fare darling needs to raise fares, and would probably allow the industry to raise fares, and end the cycle one carrier raising fares, some carriers match, some don't, then rescind fare increases, we have been witnessing every month or so.

But again, as I said, this is little incentive for LUV to do so.

I've also discussed, in other threads, macro-economic reasons to avoid fare increases, however, I think most US airlines feel they would do better with less demand and higher yield than they are getting now (hence they would raise fares, as several have been trying...)

 

[WorldTraveler]

I agree with both of your posts and counterposts. LUV is very selective about where they fly but let's not at all mistake that they and other LCCs see blood in the water and are willing to adjust their strategies in order to gain access to the major markets they need.

I'm not sure I don't believe HP will be kept in the box as much as you assume. Although much of their livelihood has been derived by bottom-feeding off the network carriers, there are still enough opportunities to grow and HP understands that an airline must grow or its costs very quickly start going in the bad direction. Their transcon foray will prove to be a futile attempt at market expansion that was rebuffed by aggressive network carriers and lower cost LCCs. They will have to find other markets to expand but I think they will.

I appreciate the loyalty you have for your employer, 767. However, all the loyalty, intent, and even remarkable improvements on the income statement do not solve the balance sheet problems UA faces. Perhaps UA employees are willing to accept pension termination and another round of cost cuts but I don’t get the impression that it’s going to be that simple based on what people post here. If those kind of cuts can be tolerated, then yes, UA has a chance of staying in the game. Unfortunately, lenders look at United’s costs – which are still very much on the high end of the range for network carriers – and will demand more cost cuts. Based on history in bankruptcy so far, United has been cutting revenues faster than costs. I posted on the AA board recently that UA’s revenues in 2003 are only 80% of what they were in 2001 – which was already a dramatic cut from 2000 and before. In the same period, DL and NW revenues varied only by about 4%. US was the only other airline that saw revenues fall to the degree they did at UA. However, UA and US’ CASM’s are not coming down at the same rate.
In order to get out of bankruptcy, UA has to stabilize, if not grow, revenues while cutting costs much more aggressively than they have so far. Other network carriers are not staying put either so you will see AA and DL’s costs fall relative to UA while LCC’s continue their assault on UA revenues; 19 A319s at Independence will have a very negative effect on UA’s revenues since IAD is the only transcon market where UA has held its own in terms of revenue and share. Based on what US employees have been through, I’m not sure that any employee group is capable of withstanding the continual assault on their livelihoods necessary to turn a company around. Further, UA has to find investors willing to risk their money in an environment which continues to be very unstable 3 years after 9/11. An acquirer really has to only assume responsibility for UAL’s debts while, in order to survive UAL has to find money to not only cover its debts but also fund its business on an ongoing basis. It really is easier for a business to be sold off than it is to stay in business, particularly when it is one like United Airlines that has a very valuable and potentially profitable franchise.

Turning to DL, I think rumors of their demise have been vastly overstated. Keep in mind that DL was viewed very positively by the financial media up until a year ago. As Jerry Grinstein moved into the big chair, he decided that he was going to end the game Delta had played for 2 years after 9/11 of borrowing money and presenting a very rosy picture of DL’s outlook. There was a noticeable decision to start talking up the downfall of the company and the need for cost cuts. You will see what I mean if you read some of their financial statements. After 2 years of trying to get concessions from the pilots, Delta decided the only way they were going to win was to run the company down to the wire financially and present an increasingly negative outlook of DL’s future. As expected, the financial ratings agencies quickly started lowering their outlook on Delta and the negative press has flowed like water. At the same time, DL managed their cash so as to exhaust it quickly by paying pension contributions and debt payments EARLY. Delta is within weeks of telling ALPA and the bondholders that they have waited long enough and will file for bankruptcy imminently knowing full well that those stakeholders will blink on the courthouse steps just like AA’s labor groups did.
DL’s debt load is not dramatically worse than any of the other legacy carriers. In fact, just as Delta has reported $1B losses over the past 3 years, it has serviced debt and pension payments approaching those kinds of numbers. When you take out $2B more in costs and still service $1B of debt per year, DL becomes profitable even though it still has very large debt payments. As UAL will find out when it puts together a plan to exit bankruptcy bankers don’t FORGIVE debt, they restructure it (push it out further) and trade things for it like equity. DL understands they will be servicing large amounts of debt for a number of years to come.
There is no reason to think DL will not continue to generate as much revenue as they are now, if not more, in the next couple years. DL has probably the least amount of remaining exposure to LCC incursion on its network, and as I noted above, DL has done a very good job of maintaining revenue while keeping costs stable. When you take $2B plus off of DL’s cost base, they will all of the sudden be the lowest cost airline among the network carriers. On that basis, I am confident that DL will be very capable of not only surviving but acquiring.

 

[magsau]

World,

DL is toast and all the massaging you tout about acquiring assets of UAL only makes you sound like one very wrong US320Cap. Funny how you like to bash the UAL franchise but yet you yearn for a piece of it.

Get over it and believe the DL BK is coming soon.

 

[Cosmo]

Based on history in bankruptcy so far, United has been cutting revenues faster than costs.

WorldTraveler:

While I think you have contributed some well-thought-out posts to this discussion, the above quote is simply wrong. I've seen you make the same comment in several threads recently, and I finally took the time to look up the data to prove that it's wrong.

Looking at the second quarter and first half of 2004 compared with the same periods in 2003, United's operating revenues grew substantially faster than its operating expenses. The numbers are as follows (with the year-over-year percent change):

Operating Revenues: 2Q2004 - $4.041 billion, 2Q2003 - $3.109 billion, up 30%
Operating Expenses: 2Q2004 - $4.034 billion, 2Q2003 - $3.540 billion, up 14%

Operating Revenues: 1H2004 - $7.773 billion, 1H2003 - $6.293 billion, up 24%
Operating Expenses: 1H2004 - $7.977 billion, 1H2003 - $7.537 billion, up 6%

In contrast, the same comparisons for Delta are much more troubling since the carrier's operating expense growth outpaced its operating revenue growth:

Operating Revenues: 2Q2004 - $3.961 billion, 2Q2003 - $3.496 billion, up 13%
Operating Expenses: 2Q2004 - $4.202 billion, 2Q2003 - $3.300 billion, up 27%

Operating Revenues: 1H2004 - $7.490 billion, 1H2003 - $6.820 billion, up 10%
Operating Expenses: 1H2004 - $8.119 billion, 1H2003 - $7.159 billion, up 13%

Thus, I believe you've been a bit too harsh regarding United's prospects, especially when you compare the carrier's recent results with those recorded in 2000. That's four years ago, pre-9/11, which is ancient history in "legacy airline time". Looking at United's results since it entered Chapter 11 proceedings is IMHO a much better indicator of the progress the carrier has made to correct its previous structural problems. That said, United still has some serious work to do to emerge from bankruptcy, with a resolution of the pension issue being the most important task. But I believe United will be able to emerge within the next 6-12 months despite the seemingly slow pace at which it is (at least outwardly) currently moving.

On the other hand, I think you've been a bit too lenient when reviewing Delta's current situation. Delta might have manipulated its cash holdings to precipitate the "crisis" negotiations with its pilots, but the poor financial results from its operations are not nearly as easily manipulated and constitute real problems that must be addressed and fixed. And while I don't doubt that Delta can fix its problems in the next few years, I believe that the carrier's need for relief from its massive debt load (in excess of $20 billion) makes it virtually impossible to do outside of Chapter 11 procedures if Delta is to achieve a competitive cost structure. JMHO.

 

[WorldTraveler]

Mags,
320 manipulates data to try to convince everyone else to save his butt. I have no butt to save nor do I misinterpret the facts. There are people like Cosmo who I appreciate because they interpret data and come to reasonable conclusions just as I do. I am critical of UA for getting itself in such a horrible predicament when it has unquestionably the best network of any airline in the world. And I am critical of certain employee groups and UA for the combative relationship that has existed for years despite having the best chance for employees to reshape any major US company.

Yes, Cosmo, statistics can show any number of positions. My numbers were based on full calendar year performance for the three years ended 2003 and was presented for all 6 legacy carriers. Yes, UA has grown revenues over the past 6 months and that is commendable. I have acknowledged that UA has made significant improvements in its operational performance from a financial perspective. I have said, however, that UA's biggest challenge right now is not in generating a profit because I think they have as good a shot of doing that as anyone but instead it is in satisfying the demands of exit financiers to cut costs to levels that will alienate employees, if UA's employees are anything like US's. There is a huge difference from a company seeking cost cuts OUTSIDE of bankruptcy which is the vatage point of Delta and American and those of United and USAirways. Bankruptcy is very brutal for the airlines which is why there are so few airlines that have emerged and none that have not dramatically changed their business plan - something UA has not done. If Delta ends up in bankruptcy, I'll change my tune but I'm not betting that bankruptcy will be necessary - simply because every stakeholder recognizes that they will give up way more inside of bankruptcy that they will outside.
I honestly think Delta's situation will be largely resolved within the next month if not less. DL's bond restructuring offer is due Oct 14 or so. DL just picked up about $350 million more based on the sale of its Orbitz stake (which is larger than that of any other airline if I am not mistaken - correct me if I'm wrong) and the sale of the MD11s to Fedex.

Yes, we all have biases but I don't think anyone has considered how aggressive the cuts are Delta is making. Those cuts will put Delta's CASM as best in the legacy industry. No other airline, including UA, is proposing cuts anywhere close to those as large as Delta is proposing - and executing to obtain. If you doubt how quickly airlines can turn themselves around and generate cash when they have the right costs, look at how AMR's cash balance has improved in 18 months flat. And that is while fuel has been at $40 BBL plus.

 

[casual rat]

I still think that if UA raised fares in the $5.00-$10.00 area, and stuck to its guns, more money would be made. How many tickets do we sell in a single day? Multiply it by the rise in fare, and it's total profit period. The KISS theory works sometimes. UA needs money. Fuel costs UA more than it did a month ago. Offset it with a minimal fare increase, continue to trim 'the pork', and I swear, UA'll be in a better position if we stick with it. Let the LCCs overbook their flights. Let them work harder and into the sphere of diminishing returns. Let them pay off Denied Boardings. Let their marginal employees get overloaded. We have economy of scale to our advantage. We should use it. Too bad tunnel vision is hard to cure. Excellent posts on this thread BTW! JMHO...of course.

 

[mrfish3726]

"What this industry needs is a couple of liquidations," said Neidl, whose firm is the investment banking unit of Credit Agricole Indosuez

http://yahoo.reuters.com/financeQuoteCompa...30688325_newsml

Great Posts World, you always have GREAT posts.

 

[WorldTraveler]

Casual rat,
eveyone would like just a few more bucks from every ticket but it's not likely to happen if for no other reason than that there are enough competitors who want to sink a competitor or too that they are willing to hold off on a fare increase. Further, raising fares disproportionately drives away a certain number of passengers. There aren't enough passengers to fill the number of seats in the US fleet now except for a few very peak periods.
Thank you, Fish. Even though I have been antagonistic to some people based on their actions in the past, I have learned the value of engaging people by discussing facts and not slamming them with rhetoric simply for the sake of eliciting a negative response. Each of us has different capacities to bring knowledge to the table but the collective value of a forum like this is being able to appreciate all of the contributions made - even though we may interpret the outcome differently.

I agree with Neidl's assessment - in parts. Liquidation of a carrier or two will only make it easier for the LCCs with their hundreds of aircraft on order to find markets to fly them. If that makes it easier for some of the remaining carriers, then I wouldn't disagree that removing some capacity would be beneficial.

If anyone believes that removing capacity or acquiring any other carrier will solve the industry's problems in and of itself, they are mistaken. The revenue picture for the legacies is permanently changed and the only way that profitability can be achieved is by using assets more efficiently and getting costs down to match revenues. So far, AA has probably done the best job on the efficiency side although I think all of the carriers have demonstrated their ability to improve efficiency.

In terms of costs, I don't think anyone should forget that for many, many years Delta was the lowest cost producer in the legacy carrier (long before it was known as the legacy industy) and it was for that reason that Delta has long been one of the best positioned airlines financially. And it has been that financial savvy that has allowed Delta to grow from being a relative no-name airline of the south into one of the world's leading airlines. Continental is perhaps the only other airline that has built itself without valuable historic route awards and preferential treatment; Continental more recently, and Delta historically, are scrappy competitors who have carved a place for themselves. The same leadership that made Delta what it was for decades is now back in charge; gone are the corporate tycoons who seemed to think they knew how to run big companies since we all know that airlines defy every kind of business logic and rule. Those same historic leaders will get Delta's costs back down where Delta can be a very viable competitor again but this time will make it a global powerhouse.

I still put have the expectation that AA and DL will be the leaders in the industry for the next decade and will be at least two of the carriers left standing when the airline industry inevitably shakes out.

 

[Busdrvr]

"What this industry needs is a couple of liquidations," said Neidl, whose firm is the investment banking unit of Credit Agricole Indosuez

http://yahoo.reuters.com/financeQuoteCompa...30688325_newsml

Great Posts World, you always have GREAT posts.

[post="186370"][/post]​

Lets see, he uses inaccurate data to slam UAL and it's a "great post"

Interesting you quoted Neidl, i see he's move up in the world... at this rate, his next gig will be at the Bank of Cuidad Acuna.

But I will agree, a few liquidations may be in order. Let's start with the airlines with the current worst margins and load factors (despite low pay...) Um, that'd be you Fish :unsure:

 

[mrfish3726]

ONLY time will tell BUS, we'll see how UAL's quarter ends up? 56 MIL lose for August wasn't very impressive to ANYONE!

Going to take Worlds advice and play nice BUS! Because really we have nothing to worry about here at F9. B)

 

[Whadayano]

Nice to read some serious arguments. Couple of thoughts: Casual rat, one of the reasons the LCC's were able to do so well was that with roughly a 40% lower fare in a given market, traffic grows about 100%, as a rule of thumb. So even $5and $10 increases hurt traffic and can be a net revenue loser (from the 1-2-3 passengers who stay home/drive instead), even if everyone goes along! In fact, in most of its short haul markets when WN has raised fares in the past, its been $2-3, and only $5 on the really long haul (for them) markets. Fuel would make them do more this time if they weren't hedged, but with 80% hedged this year and next at $24 and $25 respectively, they are golden. On DAL I think based mostly on past actions and the few pilots I know there that as World says, they will in the end go along. But I disagree with World that that will let them build cash. They are getting more and more exposed to low cost competition, as is everyone, but most imprtant will be the U and UA settlements. If the pensions go away, how can Delta kep carrying that burden while others shed it? This is a problem for all the legacies; if UAL gets out from under the rest will have to. Finally World I know the bankers want to stretch out and not eliminate the debt, but except for the leases and the equipment secured loans, UAL's creditors dont have a lot of leverage. If
UAL present a plan to the judge that says, judge, we need to convert that debt to new equity at 10 cents on the dollar, otherwise we can't make it--won't the judge go along?

 

[NewHampshire Black Bears]

I too will add my admiration, for this great thread !!!!!!!

I'm somewhat surprised that, given the knowlege of the contributing posters, that the "following" has been OVERLOOKED, with regard to AA and NW.

When the "Manure" hits the fan at HIGH SPEED, what is(and will be) AA's "1" weapon ?? ................................... "AMERICAN EAGLE"

NW's ????

A VERY cooperative pilot group, that fully realizes todays "badly" UNIQUE industry situation, and a KILLER hub in NRT.

When I stated earlier that AA and NW would expand, I should have said more specifically, INTERNATIONALLY.

NH/BB's