New Merger Rumor

[will fix for food]

I wouldn't be surprised if there was a post emergence merger.

I would be surprised if it was with USAirways.

My guess would be Jetblue and maybe Alaska.

Does anybody know who got Jetblue's E190 delivery slots?

 

[JFK Fleet Service]

I still think it will be US,with B6 potentially joining OW.

It is about mass and breadth of nerwork and a stand alone AMR lacks both.

Parker has people doing the DD,they aren't merely going to show up with a suitcase full of promises and cash and skip out holding AMR's hand.

 

[robbedagain]

WT I agree that I dont think US and AA should merge but I believe that there is something in the works regard the merger between the 2 companies I do not believe that DL/AA would pass the DOJ And secondly I think DL would break AA up and take what they want. As for the statistics I dont understand them a whole lot

 

[WorldTraveler]

Parker's media machine will continue to crank out information saying that there is something going on between AA and US but other than politely listening to what US has to say (which AA does have an obligation to do, though not necessarily at this point), the only "something" is between AA and US.
Everything that is said in the media should be understood within that context.
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There is no more of a potential antitrust issue between DL and AA than there is between US and AA. Both DL and US put themselves in the position of having antitrust issues in a potential AA merger/acquisition BECAUSE Of the slot swap. The resolution for either a DL or US merger with AA would be the same - divestiture at either LGA/JFK or DCA. The difference is only one of scale but the process is the same and neither merger could move forward w/o divestitures or selling off part of AA's assets.
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The statistics simply show that US is neither a network carrier in the likes of AA, DL, or UA or a low fare/low cost carrier. US has yet to explain how it is going to change what it is now into something along the lines of what AA is simply by acquiring AA. It is far more likely that attempting to combine AA with US will only bring down what AA is or can be as a result of its restructuring.

 

[eolesen]

There is no more of a potential antitrust issue between DL and AA than there is between US and AA.

Wrong.

It is about mass and breadth of nerwork and a stand alone AMR lacks both.

Also wrong. AA has the breadth of network. What they need is more connecting of dots, and less reliance on backtracking thru ORD & DFW...

Here are number of destinations served by the respective standalone and combined entities...

DL     AA     UA     US       WN     AADL     AAUS     AAB6AS
317   277    390    200      104     400      340      339

When you start looking at overlaps, DL/AA still presents more issues than AA/US do. And the argument for an AA-B6-AS merger starts to make more sense than an AA-US merger.


If you start looking where AA isn't... there's not a lot left to cover organically...

depcity DL          AA          UA          US          WN          AADL        AAUS        AAB6AS
------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
ABE     7           0           11          8           1           7           8           0
ALB     10          0           17          16          13          10          16          0
AVL     12          0           8           8           0           12          8           0
BOI     9           0           14          3           11          9           3           16
BTV     8           0           17          12          0           8           12          5
BUR     3           0           9           5           50          3           5           9
BZN     9           0           9           0           0           9           0           3
CAK     8           0           3           8           15          8           8           0
EUG     2           0           14          0           0           2           0           6
GEG     8           0           6           2           11          8           2           23
ILM     7           0           0           15          0           7           15          0
ISP     0           0           2           6           16          0           6           0
LGB     4           0           0           5           0           4           5           36
MHT     8           0           15          14          20          8           14          0
MYR     7           0           2           7           0           7           7           0
OAK     9           0           2           5           108         9           5           20
PHF     6           0           5           12          0           6           12          0
PVD     11          0           12          18          24          11          18          0
PWM     10          0           13          13          3           10          13          5
ROA     10          0           8           14          0           10          14          0

Arguably, some of these aren't worth serving (e.g. AVL & BZN), or are close enough to other airports that they don't need to be dual served (e.g. BUR & LGB). Others would be better served with RJ's, and we know that's an issue that can be addressed with modifying the scope clauses...

 

[luvthe9]

Parker has people doing the DD,they aren't merely going to show up with a suitcase full of promises and cash and skip out holding AMR's hand.

You are right, they are going to bend you over and screw you like nothing you can imagine so get ready for it. We are hoping on our side this merger does not happen.

 

[JFK Fleet Service]

Horton and Company are already plotting that,Doug will have to take sloppy seconds...

 

[WorldTraveler]

E,
your disagreement with the antitrust issue is incorrect because it is based on faulty logic.

1. There is no size limit in any anti-trust legislation that specifically says above which a merger cannot happen because the combined entity is too large.
2. There is no antitrust legislation that says that market share must be evenly divided between any number of competitors.
3. There is no antitrust legislation that says that a given number of competitors must exist in any market.

Practically,
sure from an antitrust perspective the notion would be that an AA/B6 merger would present less overall size that would create antitrust issues, but even an AA/B6 merger would leave the combined entity far larger at JFK than anyone else with the likely requirement that a certain amount of slots would have to be divested.
There is nothing that says a so-called low fare carrier is less exempt from anti-trust enforcement than any other carrier.
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AS would be the best solution, but the whole notion of AA combining w/ someone else is predicated on the fact that AA would not be able to restructure on its own and another airline would have to absorb AA in order to provide a lifeline to ensure AA's survival. If AA can make it on its own, they will be looking for merger partners POST BK and in that case AA likely would be the surviving entity.
But until AA has fully emerged and has demonstrated that it can make it on its own to the satisfaction of its stockholders (current creditors), AA will be the one that will be THE ACQUIRED.
A smaller company is just not going to take on the acquisition of a larger company that uses a different business model.... the fastest way for AS or B6 to end up in BK itself and fail would be to take on a business model they don't know and one that quite frankly is not at all solid with AA.
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Thus, a merger or asset acquisition involving AA this side of emergence will involve another network carrier - one that has the resources and the similarity of business models to ensure that they are not taken down by acquiring AA or even its most valuable parts, which is driven by their int'l operations.

 

[AAviator]

WT, First you say:

1. There is no size limit in any anti-trust legislation that specifically says above which a merger cannot happen because the combined entity is too large.


Then you say:



Sure from an antitrust perspective the notion would be that an AA/B6 merger would present less overall size that would create antitrust issues, but even an AA/B6 merger would leave the combined entity far larger at JFK than anyone else with the likely requirement that a certain amount of slots would have to be divested.

Required by who?

 

[WorldTraveler]

It is BOTH TRUE that there are no requirements in US antitrust laws regarding the size of a specific company and the repeated practice of the US government which has been to require divestitures in LIMITED ACCESS markets...
AA/B6 would still have the problem of raising the combined entities size in the JFK market which is a restricted access market. Recent mergers/asset exchanges that have involved EWR and LGA have required divestitures to increase the presence of new entrants. There is no reason to think that AA/B6 would not be subject to the same requirements.
Again, if you wanted a partner for AA that had virtually no overlap and no potential antitrust issues, it would be AS... but if AS and AA ever merge, it will be AA doing the buying AFTER they emerge if the situation still exists for them to do so. It is highly unlikely that AS or any other smaller low fare carrier would acquire a network carrier - even in BK - because those smaller carriers are profitable using their existing model.
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Of another network carrier will acquire AA in whole or in parts during BK.
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But for now the only known and still most likely scenario is that AA will restructure and emerge on its own, dependent on achieving what it needs to restructrure and that does include participation by labor in the restructuring process.

 

[AAviator]

So, AA and B6 can merge, but not be any bigger than DAL (or of a size yet to be determined in the limited access market) i.e. JFK. Right?

 

[eolesen]

Looking at other mergers which were turned down (Southern Pacific Rwy + Santa Fe Rwy, T-Mobile + AT&T) there are tests other than what you're alluding to (edited by moderator).

You can argue what you want, but I don't see even the most liberal DOJ approving a merger that results in that much market share landing with a combined entity, especially if the intent is to eliminate the competitive lift altogether.

 

[WorldTraveler]

I know the prospect of receiving retiree communications from Delta Air Lines is enough to make you wet your pants, but you're getting way too worked up about a full-fledged merger when it is highly unlikely that will happen with anyone.
If AA can be acquired as a whole, the chances are quite high they can emerge from BK on their own.
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Thus, the far more likely outcome which I have noted multiple times is that if AA is sold in BK it will be in parts.
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And while you are fixated about the overall size of a DL-AA combination instead of others, you and others want to forget about the fact that US is already at the maximum 50% of slots at DCA the DOJ said is of concern to them.
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But you and others don't seem to want to accept the reality that fuel prices are the biggest threat to AA's reorganization. If AA finally gets around to cutting the capacity it needs to cut, they will be a much smaller airline than they are today.
If they don't cut, they will never succeed at the revenue part of their restructuring and the creditors will have no choice but to start looking for alternatives to an independent AA.
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AA so far seems to think that it is going to rewrite airline restructuring by not reducing the capacity that has been a key part of every airline's turnaround - and they are right in being reluctant to do so because they cannot afford to give up the mass they need to compete with DL and UA.
But if they don't cut capacity, they will continue to watch their revenue performance suffer - just as it has relative to DL and UA for a couple years now - and the creditors will come to the conclusion that AA's assets will be better used by someone else.
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And at that point, the creditors will not care whether AA is sold off as a whole or in pieces.
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I still believe that AA has a good chance of emerging on its own but some major pieces have to start falling into place very quickly.
We will see in the next couple weeks how other carriers are doing which will be a key barometer of what AA should probably be doing if it were running its business outside of BK and with the same financial objectives of the rest of the industry in mind.

 

[TWU informer]

dupe

 

[johnny kat]

Fuel prices are going to be the great unknown here. AA has some advantages in the world of classic airline BK. But with fuel on the rise it is a real tight rope act that AA will have to master. How do you shrink enough to cut costs? How do grow enough to produce revenue? What are your competitors doing? These are just a few questions that could probably be answered given time. But with fuel on the rise and political events around the world, any shock could make the whole BK/merger topic moot. Fuel could quite literally ground AA and US. Then what would become of the airline industry in the United States? I don't think there would be any question that it would all become a political issue. As Robert Crandall mentioned in the Rose show interview the congress should be forced to deal with the issue of policy once and for all. So to assume any particular outcome for AA or US is premature.

If reregulation were to occur I think the three major airline scenario would be preferred by regulators and consumers alike.

But if things continue as they are then I have to agree with WT. In some ways it would be very beneficial to DL if US were taken out of the picture before AA emerges from BK. To do so would deny AA the chance to acquire any meaningful revenue enhancement and virtually assure AA would be the distant third competitor to AA and UA for years to come. And the same would apply if UA acquired US or if US were to be busted up between the two. So, once again the question becomes "What about US?" Many of you will say, oh they will fail on their own...that may be true. But how much time do the other airlines have to sit around and hope US fails on its own? If DL has the checkbook, maybe they need to get around to using it real soon or the chance to mortally harm AA will be lost.

If DL acquired most of AA then UA would surely have to have a response, not to mention WN, B6, AS...So, once again the same pesky question...."What about US?

Is it in the interest of AA to spurn US?