Merger Talks Gain Between Us Air And America West

[DCAflyer]

From the WSJ article that USA320Pilot quoted:

"There are abundant sources of equity for the deal," said one person close to the talks. Those investors could include hedge funds, other airlines and Retirement Systems of Alabama, a pension fund that is US Airways' largest shareholder. Pension-fund officials have declined to comment."

This is interesting because there was speculation a few weeks back that we might see a trilateral merger among UAIR, AWA, and Frontier. Now, I'm not much of a conspiracy theorist, but assuming for the sake of argument that Frontier was brought into the deal, that would give us leverage to build up DEN as a quasi-mid-west hub, since we began hearing credible reports just yesterday that the combined company would include a mid-west focus. Frontier also flies an Airbus fleet (good fit, except for the seven 318's, but cockpit commonality, nonetheless!) and they fly two daily nonstops from DEN to LGA... so maybe we would see some sort of a buildup of flights on that route. (Remember... UAIR is the only airline with its own terminal at LGA and plenty of gates!) Just food for thought!

 

[funguy2]

Again... What markets are there, besides the obvious local market, which cannot be handled efficiently via PHX/CLT?

Let's face it... There may be a slight back-haul, but folks in COS, ABQ, and ELP can connect at PHX to go east... Or US-HP can add COS/ABQ/ELP to CLT flights.

Frontier does not add much to this merger IMO. Don't get me wrong, F9 is a nice company and can do well for itself... It just doesn't add much to a US-HP merger, and is probably not worth the complications it would cause.

US-HP could use a hub somewhere in the middle, or like ORD/MDW, MKE, STL, IND, SDF... Somewhere in that vincinity... That said, currently all of the viable hubs in that area are more or less taken (assuming no carrier goes out of business)... So I, personally, don't see it happening...

I think anything in the vicinity of DEN, MCI, OKC, it too close to HP's current hubs to be valuable to the merged entity... I think anything like CLE, PIT, BNA, RDU, DTW, are too close to US hubs/focus cities to be valuable.

I think the most likely mid-continent hub for a merged US-HP would be MKE... But I suspect that NW would fight that very hard, and all the "conventional wisdom" on this board already has Midwest acquired by AirTran in the way the industry plays out...

 

[Bluestreak]

What type of assets does Air Wisconsin have in DEN? When you figure in Air Whiskey and F9 I think DEN looks more interesting. Both airlines already have established profitable routes in and out of denver. does Air whiskey run its own out stations? I am pretty sure air wisconsin runs ops in Aspen. That's a high yeild market operated by low cost express employees. What about places like Jackson Hole and Durango? F9 and air wisconsin really get my imagination running.

 

[DCAflyer]

Again... What markets are there, besides the obvious local market, which cannot be handled efficiently via PHX/CLT?

Let's face it... There may be a slight back-haul, but folks in COS, ABQ, and ELP can connect at PHX to go east... Or US-HP can add COS/ABQ/ELP to CLT flights.

Frontier does not add much to this merger IMO. Don't get me wrong, F9 is a nice company and can do well for itself... It just doesn't add much to a US-HP merger, and is probably not worth the complications it would cause.

US-HP could use a hub somewhere in the middle, or like ORD/MDW, MKE, STL, IND, SDF... Somewhere in that vincinity... That said, currently all of the viable hubs in that area are more or less taken (assuming no carrier goes out of business)... So I, personally, don't see it happening...

I think anything in the vicinity of DEN, MCI, OKC, it too close to HP's current hubs to be valuable to the merged entity... I think anything like CLE, PIT, BNA, RDU, DTW, are too close to US hubs/focus cities to be valuable.

I think the most likely mid-continent hub for a merged US-HP would be MKE... But I suspect that NW would fight that very hard, and all the "conventional wisdom" on this board already has Midwest acquired by AirTran in the way the industry plays out...

[post="268058"][/post]​

I think you assume that current operations will stay roughly the same in an "overlay" merger. I don't see things being that simple.

Under the F9 scenario, we might see, for instance, something like this:

PHX as a rolling hub and possible future pacific rim gateway;
DEN as either a banked or rolling east-west hub;
PHL as a rolling north/south hub and trans-Atlantic gateway;
CLT as a banked hub and Carribean/Central/South American gateway;
DCA, LAS, LGA, and BOS as focus cities.

There could even be smaller focus cities (MAU or HNL with small jet feeds to the other islands; SJU focus city, again with SJ island feeders).

Bringing DEN into play now with F9 affords us an opportunity to exploit significant O&D traffic with costs lower than UAL as well as exploit geography since a mid-continent hub is sorely needed.

 

[WestCoastGuy]

Any merger would have to include the fumigation of the rats nest in CCY. Those there can not and will not think outside the box of the East Coast corridor. They have no conception of a midwest or west coast operation. For this to succeed, the new entity must have a Hdqrs and Operations Center located off the East coast, managers and staffing knowledgable about more than just the Eastern Seaboard.

 

[longing4piedmont]

For this to succeed, the new entity must have a Hdqrs and Operations Center located off the East coast, managers and staffing knowledgable about more than just the Eastern Seaboard.

[post="268082"][/post]​

I think many here would settle for a team who DID have a knowledge of the east coast and management and staffing.......... Ok, how about one that knows how to run an airline?

 

[funguy2]

Bringing DEN into play now with F9 affords us an opportunity to exploit significant O&D traffic with costs lower than UAL as well as exploit geography since a mid-continent hub is sorely needed.

[post="268079"][/post]​

I disagree...

1. The largest city between PHX and DEN is a tossup - its either Flagstaff or Durango... Larger cities like SLC and/or ABQ can be effectly served from either DEN or PHX. Both cities are in the same time zone... And they are about 2 hours by air apart... I don't think there is much "geography" to exploit...

2. The days of every city having a hub is over. DEN used to support 3 hubs, now it supports about 1.5. DFW is down to 1 hub. I think the development of new focus cities is fine, but a new banked hub seems to be way too much.

3. Costs of running a hub at DEN are very expensive... If the merged US-HP should somehow acquire F9 and operate an extra hub at DEN, they should re-open PIT too... Then the combined company could have an extra hub at a high cost airport in both the east and west!

 

[DCAflyer]

I disagree...

1. The largest city between PHX and DEN is a tossup - its either Flagstaff or Durango... Larger cities like SLC and/or ABQ can be effectly served from either DEN or PHX. Both cities are in the same time zone... And they are about 2 hours by air apart... I don't think there is much "geography" to exploit...

2. The days of every city having a hub is over. DEN used to support 3 hubs, now it supports about 1.5. DFW is down to 1 hub. I think the development of new focus cities is fine, but a new banked hub seems to be way too much.

3. Costs of running a hub at DEN are very expensive... If the merged US-HP should somehow acquire F9 and operate an extra hub at DEN, they should re-open PIT too... Then the combined company could have an extra hub at a high cost airport in both the east and west!

[post="268095"][/post]​

So you would have somebody who lives in SEA, PDX, SLC, YVR, or any of the dozens of markets in between, and who wants to go to DCA or LGA or BOS or PWM fly south 2 or 2-1/2 hours, then fly NE to their destination? I just don't see a lot of people willing to do that when they can take NWA through MSP or DTW, or CAL through EWR? Or AAor UAL through an albeit croweded ORD?

While I don't necessarilly disagree with them routing throuhg PHL, we do have the philly factor still and a lot of our FFs already try to avoid it.

In addition, we would have the DEN market that F9 has already tapped into, where we can fly into LGA and DCA (provided the combined carrier can keep F9's DCA-DEN exemption). We can serve DEN with lower costs than UAL (they are still struggling to control their costs). And we can be in place in the event of a UAL demise. The combine carrier would then be poised to benefit the most from life without UAL because we would have a mid-continent hub and STAR affiliation. I'm not saying it's the perfect solution to all of our ills, but shoring up DEN would make us a little stronger.

As for bringing back PIT... whatever!

 

[funguy2]

My PIT remark was facetious... I should have used a smiley face.

People already connect in PHX from the NW to the East on HP anyways... So I don't see a problem with it.

In just looking at their website booking engines...

UA offers a SEA-DEN-BOS routing leaving SEA at 6:00am on May 24 and arriving BOS at 4:07pm

HP offers a SEA-PHX-BOS routing leaving at 5:40am and arriving in BOS at 4:57pm... About 1.5 hours longer in total... Not the end of the world...

And by the way, UA's website actually offered a cheaper flight routed SEA-LAX-BOS.

For comparison... US offers a SEA-PHL-BOS leaving at 7:05am and arriving at 5:57pm.

I don't think a DEN hub is central enough to be effective for a combined HP-US. Particularly since I don't think it will draw enough passengers to support itself and will likely destablize the other western hubs (think PIT-PHL).

And, its not what I would have people do... It's what they are willing to purchase... Many people will buy bizarre routings to save a few bucks... Most people won't fly CLE-PHX-TPA... But some folks will fly CLE-PHL/EWR-TPA, even though EWR/PHL is almost due east of CLE. This is much like the fact that people are often willing to drive 2-3hours to an airport with low-fare service...

As I said earlier... I think a hub on the northern part of the Mississippi River, or near L. Michigan would be good for the combined company, however its extremely unlikely to be developed. In the meantime, I would think strengthening the existing hubs would be the goal.

 

[DCAflyer]

My PIT remark was facetious... I should have used a smiley face.

People already connect in PHX from the NW to the East on HP anyways... So I don't see a problem with it.

In just looking at their website booking engines...

UA offers a SEA-DEN-BOS routing leaving SEA at 6:00am on May 24 and arriving BOS at 4:07pm

HP offers a SEA-PHX-BOS routing leaving at 5:40am and arriving in BOS at 4:57pm... About 1.5 hours longer in total... Not the end of the world...

And by the way, UA's website actually offered a cheaper flight routed SEA-LAX-BOS.

For comparison... US offers a SEA-PHL-BOS leaving at 7:05am and arriving at 5:57pm.

I don't think a DEN hub is central enough to be effective for a combined HP-US. Particularly since I don't think it will draw enough passengers to support itself and will likely destablize the other western hubs (think PIT-PHL).

And, its not what I would have people do... It's what they are willing to purchase... Many people will buy bizarre routings to save a few bucks... Most people won't fly CLE-PHX-TPA... But some folks will fly CLE-PHL/EWR-TPA, even though EWR/PHL is almost due east of CLE. This is much like the fact that people are often willing to drive 2-3hours to an airport with low-fare service...

As I said earlier... I think a hub on the northern part of the Mississippi River, or near L. Michigan would be good for the combined company, however its extremely unlikely to be developed. In the meantime, I would think strengthening the existing hubs would be the goal.

[post="268118"][/post]​

I figured as much on your rehubbing PIT comment, you just caught me at a MIB (moment of incredible bitchiness) because I was reading on the AWA board all the messages from UAL folk and AA folk trying to stir poop about seniority over there. Why is it that the only people who seem to have an issue with DOH when it comes to UAIR/AWA seniority intergration is people on the UAL and AA payroll?

But I digress.

I don't disagree with your comment on DEN not being central enough, I just think it's less of an issue than you do. The benefits, I believe, outweigh the that it's not 600 or 700 miles east... we would have a ready-made hub or focus city, centralized geographically north/south, and would not have to build a hub from the ground up. There are benefits, also to not puting a hub where SWA already has a stronghold (STL/MCI, etc). And, as I mentioned, being positioned to strike in the event of a UAL liquidation.

Regards,
DCAflyer

 

[funguy2]

I got you DCA flyer...

If UAL liquidates... ORD is the bigger prize in my opinion.

HP has learned to deal with WN at PHX and LAS over the years... So absent a change by WN, I don't see a problem with it. On the other hand, the prize of DEN in a scenario including F9 and a UAL liquidation comes at the cost of fighting UAL's "burning of the furniture" along the way. That is to say, BK (or nearly so) carriers are known for extremely irratic pricing moves, etc. So, if UAL is going to liquidate (I still think that is unlikely), UAL will inflict pain on those carriers with which it has a lot of overlap (like Frontier). Although, I appreciate your thinking on US-HP becoming the major LCC in places where WN is not (like CLT).

Under the right circumstances, it can probably be done... Particularly if the focus is on O&D traffic...

I just tend to think the odds of a three-way merger being successful are even worse than the already bad odds for a two-way merger

 

[BoeingBoy]

In regard to the report 60 aircraft could be removed. As I indicated before and the WSJ reported today, those aircraft would come from the combined fleet with both America West and US Airways losing aircraft.

Meanwhile, US Airways has announced within the past couple of months a potential fleet reduction of 59 aircraft. The two GE agreements will reduce 10 A319s and 21 B737s from the fleet;

[post="267728"][/post]​

That's 31...

as well as the 10 aircraft announced last week that will be taken out of the inventory will be B737s.

[post="267728"][/post]​

That's brings us to 41....

In addition, up to 28 EMB-170s could be transferred to Republic,

[post="267728"][/post]​

Now we're at 69, instead of....

thus that equals 59 jets that could be removed from US Airways with an orderly transfer.

Regards,

USA320Pilot

[post="267728"][/post]​

I'm not sure of what you're attempting to say here, unless the 59 planes you're claiming are to be removed from the US fleet correspond to the media reports of GE wanting to reduce the combined US/HP fleets by 60 planes.

Only trouble is your numbers don't seem to add up....

The GE deal removes 25 planes (10 A319's & 15 B737's) unless there's some new deal within the last few days that I haven't seen - not the 31 you mentioned (10 A319's & 21 B737's). Then there's the 11 B737's removed this month (actually the lease rejections are from mid-April to mid-June according to BK filings). That's 36 so far. Add the 10 announced for August (presumably B737's also) and we're up to 46. If you want to count the Emb-170's (25+3*), that brings it to 74.

The problem is that not all these are GE's birds. The 25 in the GE "global settlement" obviously are, and 15 of the Emb-170's are, for a total of 40 that GE controls. The May planes are not GE's and time will tell who holds the leases on the August removals, but even if those belong to GE we're still 10 short of the reported 60.

So if the media reports prove to be accurate, there will be at least 10 and as many as 20 more planes leaving the US/HP fleet that haven't been announced yet.

Jim

*Those last 3 Emb-170's appear to be becoming more problematic. The Embraer agreement called for US to take delivery by March 31 with a "drop dead" date of June 30 (IIRC). We're already paying penalties for not taking delivery by March 31 - $2 million in the 1st quarter - when the financing was supposed to be all set up in the agreement. Whether MDA will ever get these 3 planes is becoming a valid question. If we don't accept delivery, not only will we continue to pay penalties until June 30 but the former deposits/progress payments applied to these 3 planes per the Embraer agreement will be forfeit.

 

[USA320Pilot]

BoeingBoy:

You’re right – my math was wrong. Let me clarify. On November 26 US Airways announced it had reached an agreement with GE to remove 10 319s and 15 B737s. The retirement schedule is as follows:

A319s

 February through August – 1 A319 per month
 September – 3 A319s

B737s

 15 Boeing 737-300s in 2006 and 2007. It is my understanding 10 of these aircraft will be removed in early 2006 and 5 in 2007.

See Story

Then on February 25 the company announced that it will remove 11 more B737s, which per pilot permanent bid 05-02A will all be removed in May.

See Story

On May 4 US Airways said that effective with an August schedule change, it will reduce its mainline fleet by an additional 10 aircraft.

See Story

It is my understanding these aircraft will be B737s.

US Airways started the year with 281 aircraft and has announced the removal of 10 A319s and 26 B737s, and 10 other aircraft, which I have been told are B737s. That’s a total of 46 mainline aircraft that will reduce the mainline fleet to 235 aircraft in 2007.

In addition, US Airways has reached an agreement with Republic that could transfer 25 current EMB-170s and 3 aircraft yet to be delivered, for 28 more jets.

See Story

Thus, the total number of aircraft that could be removed from US Airways’ books is 74 aircraft.

Meanwhile, it is my understanding the America West strategic transaction will be announced shortly and that both companies will lose aircraft.

Regards,

USA320Pilot

 

[AAviator]

Bob,

Think

thank you sir, may i have another