New Merger Rumor

[TWU informer]

lets buy US air so we can staple cactus to the bottom just to hear him cry about the injustice of it all!

You are such an intelligent and compassionate human, could you just claim to be from another work group so we are not associated with you and our work group is not seen through your eyes?

 

[CactUS4Ever]

lets buy US air so we can staple cactus to the bottom just to hear him cry about the injustice of it all!

Buy US Air? AA doesn't even have enough cash to go window shopping. Wake Up!!! AArogance

 

[AAviator]

With so much at stake for US and AA I think both managements and the unions will have to seriously consider a merger. Whether one happens is yet to be seen.
<snip>
I see Kirby has taken the Cheap Trick lyrics to heart: I want you to want me!

Why on Gods green earth would anyone from AA WANT to merge with LCC? If someone can explain, rationally, how this is for the betterment of AA, I'm listening.. LCC is the lowest compensated workgroup, with the highest operating costs in the industry. CLT if profitable... so they say. How profitable is it when you overlay industry average employee compensation? What does that do to CLTs profiability? What parts of LCC will be shed, (IF Parkers pipe dream comes to fruition) and which work group should take the hits? LCC has been walking around hiking her skirt up for as long as I remember looking for a bed to hop in to, and there hasn't been a taker. Not one. johnny kat, I'm going to roll you into the USA320PILOT camp.. Camp We're good for you!



jk said: What would happen if AA does a second BK?


AAviator replies: Well, if that happens, then we didn't get it right the first time. Still better than dealing with an LCC integration....


jk said: And AA will be great again one way or the other.

AAviator replies: You can say that again brother!





jk said: And the question that still has yet to be answered from the 1996 book "Hard landing" is what will happen to US? It always boils down to that question. It would be utter insanity to let a 13 B dollar yrly revenue producer go away entirely.

AAviator replies: In a competative market place, the market dictates what hapens. In case you haven't noticed, LCC just traded away the NYC market because they couldn't make money there.. Think about that. Have you seen the loads on the shuttle lately? That 13 billion is meaningless to AA when one considers the price AA and its employees would have to pay to have it.

LCC + AA? No way. Stick it Kirby, you won't get support from us... You'll never get AA labor on board with this, given what LCC really has to offer AA. AA is far better of by itself, or with other, more sensible merger candidates (if thats in the near future)

Good luck.

 

[johnny kat]

I agree AAviator... The market place will decide. Good luck to you as well.

 

[WorldTraveler]

WT, with all due respect, if US is as inconsequential as you say they are, then why do you wear your typing fingers down to the knuckles everytime something is said about a US/AA combination? Could it be that there is this unknown variable about these two that you don't understand? It may just boil down to egos in the end. It has happened many times before.

Do you honestly think that just because DL is in a great position at the moment that the other airlines are just going to let you run away with all the goodies? What may be great for DL may not fly with regulators. With so much at stake for US and AA I think both managements and the unions will have to seriously consider a merger. Whether one happens is yet to be seen. If one happens it will sure put water in DL's wheaties. If not then I am sure the competitive reponse to DL will be just as robust from both carriers.
What would happen if AA does a second BK? Don't you think your employer would be looking to cut labor costs even further. What happens if UA decides to pickup the pieces
of US and use them to further squeeze DL's position. You are so naive to think there is no value to US and even more so if you think AA will just shrink away and have no bearing on what is going to happen at DL in the future.

At any rate DL is a great airline. And AA will be great again one way or the other. And the question that still has yet to be answered from the 1996 book "Hard landing" is what will happen to US? It always boils down to that question. Like it or not, just like NW, US has to be placed somewhere in order to optimize the value of the slots and strategic hubs to the surviving partner. It would be utter insanity to let a 13 B dollar yrly revenue producer go away entirely.

No, there is no evidence that US or AA or any other entity "has to be placed somewhere"... history is full of plenty of examples of companies including airlines that were no longer to effectively compete and were overtaken by far more effective competitors.
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A little review of history might serve to confirm that the marketplace will indeed decide who lives and who dies, and there could be alot of people negatively affected if airline X or Y is unable to justify its continued existence in the marketplace.
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Other airlines didn't get a chance to vote on whether WN aggressively grew when it had fuel hedge benefits and a much stronger balance sheet a few years ago. Other airlines didn't have much control over the fact that CO had a solid business plan, a motivated workforce, and the financial resources necessary to become a high quality serious competitor in NYC as well as in international markets around the world.
The definition of a competitive advantage is that a company has the resources and ability to do things which other carriers cannot do.
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Who knows how long it will last but for now DL does have an advantage over most of the rest of the US airline industry, including its network carrier peers, in both revenue production (growing its revenues faster and better than the average) and in cost control including fuel.
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The notion that AA and US or any other airline can simply whip up a merger that won't deliver the ability to successfully compete with the most successful mergers in the industry is just not reasonable.
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I continue to address the issue of AA/US because there continue to be people who believe that a merger between the two can occur even while defying all types of business logic.

 

[signals]

AA Blue US 😀

Hey what did B6 have to do with it?

 

[johnny kat]

WT wrote:
No, there is no evidence that US or AA or any other entity "has to be placed somewhere"... history is full of plenty of examples of companies including airlines that were no longer to effectively compete and were overtaken by far more effective competitors...

Absolutely, the likes of TWA and Eastern to name a few. In the future AA and US may very well be on the list. But for the sake of argument let's assume that AA does not necessarily want a merger with DL. And management feels that they can go it alone until such time as the company makes it or has to reorganize because of the strength of DL WN and UA. If AA were to make it as a stand alone they would still be at a huge revenue disadvantage and become smaller and less relevant. So, AA would naturally have to seek to become larger by itself which would be very difficult or find a merger partner. And if AA files a second time the same smaller less relevant scenario applies. IMHO, these scenarios would be untenable for management and the employees.

If AA decides after going it alone to look for a merger partner, then who makes the most sense to merge with? There is only one airline with the size and revenue generating capability to propel AA into one of the big guys. Guess who?

But the above scenario assumes that it is all about AA. What happens if US management makes a better proposal and buys out AA? Then as your post above mentions other airline companies don't get a chance to speak about how the pecking order shakes out. So for all of your assumptions, they really have no bearing on how things will eventually work out. And the same is true if US gets taken out in a buyout by DL, UA or anyone but AA. Once again, as always, the one question since deregualtion started is what becomes of US?

While you always speak of the ultimate demise of US, it has yet to happen and even in todays environment, US is far away from bankruptcy (profit sharing checks went out yesterday). So for all the talk about the New York market and all of the larger cities that AA, DL, and UA dominate US seems to be making a mockery out of the assumption that the other airlines have embraced. And instead has focused on staying out from under the feet of the dinosaurs by hubbing where the other guys ain't. This strategy is a time tested one that worked well at predecessor airlines.

So, for anyone to pronounce US a failure, they are dead wrong.

 

[WorldTraveler]

Glad you replied, Kat, but I need to clear up a couple things.
First, I have never said US is dead or finished…. I have said that they do not have what they need to have to make it long term – and US execs have said that for years as well. Not too many moons ago they said they thought they didn’t need to merge and were demonstrating financial results on par with their peers… and then this little exercise in buying domain names pops up, confirming that they are not as certain about their ability to make it long term on their own after all.
US is a junior-sized network carrier competing in a part of the market alongside much larger network carriers and lower cost low fare airlines. US is squeezed from both sides and is doing nothing superior to either segment. It is far from realistic to think that US is going to turn that position around, even with a merger with AA. More significantly, AA is slipping into the exact same position as US… overshadowed by larger network carriers who are stealing some of AA’s best revenue and yet at the same time attacked from below by more nimble low cost carriers.
AS is a network carrier that has created a niche for itself and is delivering results as good as or better than its network peers. Figure out what AS does well and then ask yourself why US hasn’t been able to replicate that same success.
Second, when I say that other carriers didn’t get to vote, it meant that individual carriers BASED ON THEIR OWN COMPETITIVE ACTIONS were free to do what they wanted to do in markets because of the competitive advantage those carriers had. WN didn’t have to ask anyone’s position (including the government) for permission to beat up on F9 and UA in DEN; they just did it.
There is a big difference, however, when carriers decide to merge… and that is
Point the Third. EVERY US major airline is publicly traded. As such they are required to do what is in the best interest of their shareholders. Even in BK, the company is not free to do what it wants w/o considering the competitive landscape – the interests of the creditors determine the future of the company.
There is NO OPPORTUNITY for two US airlines to negotiate deals between themselves w/o considering the competitive environment. If bids come in for AA, then AA’s board (or creditors if they are still in BK) MUST consider if the US offer is the best that can be obtained – and failing to do so can subject the officers of the company to SEVERE punishment, and possible termination of the inferior deal in favor of one that yields better returns for the stockholders (or creditors if still in BK).
The bottom line is that AA will not be sold – in whole or in part – without a competitive bidding process.
Given that US is the smallest network airline, has the weakest balance sheet, and generates financial results less than its peers, the likelihood that US could submit a superior bid to any other network airline – and a number of low fare carriers – ranks right up there with belief in the tooth fairy.
Doug Parker and co. are going to try to convince every one in the world that they can make a viable bid for AA but the simple reality is they will never be able to compete against DL or UA, if either of those two decide to bid. The fact that Dougie’s PR machine is spinning as fast as it can shows how desperately they must reach to try to convince people they can make a valid bid – but the reality will become very apparent when US’ bid, should it materialize, is compared against DL’s or any other bid that comes in.
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DL may or may not ultimately be interested in buying AA in whole or in part, although I suspect if an asset sale came around, DL would whip out its check book mighty fast.
DL probably will be ok if AA continues to exist as a standalone company… after all, DL has gained a lot of revenue in key AA markets over the past couple years – but then that is true about DL vs. US as well.
But what you can count on with both hands and all 10 toes (assuming you have them all) is that DL will ENSURE that US does not have the opportunity to acquire AA. If DL has to, it will make a bid for AA just as soon as US does.
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Given that there can be no secret agreements between US and AA without considering what DL or others might offer and given that DL has the financial resources to outbid US in ANY circumstance, it is nothing but fancy to think that US will succeed in a bid against DL for AA.

 

[Duke787]

http://www.marketwatch.com/story/us-airways-employees-share-12-million-in-profit-sharing-2012-03-14

US Airways Employees Share $12 Million in Profit Sharing


US Airways was the only airline included as one of the 50 best companies to work for in the U.S.



Maybe being with USair won't be the worst thing to happen to AA employees. It seems like USair thinks highly of their employees and doesn't think of their employees as bricks or as an unworthy expense.

 

[damajagua]

http://www.marketwatch.com/story/us-airways-employees-share-12-million-in-profit-sharing-2012-03-14

US Airways Employees Share $12 Million in Profit Sharing


US Airways was the only airline included as one of the 50 best companies to work for in the U.S.



Maybe being with USair won't be the worst thing to happen to AA employees. It seems like USair thinks highly of their employees and doesn't think of their employees as bricks or as an unworthy expense.

$12 million what does that come out by employeees?
Maybe $350 each.

 

[FWAAA]

Maybe being with USair won't be the worst thing to happen to AA employees. It seems like USair thinks highly of their employees and doesn't think of their employees as bricks or as an unworthy expense.

It might not be the worst thing to happen to AA employees, but I'd caution you to look at the numbers before becoming giddy over a tiny profit sharing check.

In 2010, average employee wages at US were $55,800; at AA, average employee wages were $63,900. AA's average wages are $8,100 higher than at US.

In 2010, average pilot wages at US were $110,200; at AA, average pilot wages were $139,900.

In 2010, average FA wages at US were $40,400; at AA, average FA wages were $50,500.

Benefits? In 2010, average benefits per employee at US were $16,900; at AA, average benefits were $31,400.

That's what three bankruptcies will do to wages and benefits. And even with bargain basement wages, the best US could do last year was a tiny profit in 2011 of just $111 million, of which the employees earned $12 million in profit sharing, or an average of $375 per employee. Considering wages that are thousands less than AA wages, on average, that $375 doesn't begin to make a dent in the wage deficit at US. It's a very low-wage airline. Their employees aren't thought of as bricks - their substandard pay is what made AA's employee wages look so high by comparison. The prior bankruptcies have made the US employees as light as a feather compared to the heavy burden of AA wages and benefits.

Merely integrating the pilots would increase US pilot wages enough to more than wipe out last year's meager profit of $111 million.

 

[Duke787]

It might not be the worst thing to happen to AA employees, but I'd caution you to look at the numbers before becoming giddy over a tiny profit sharing check.

In 2010, average employee wages at US were $55,800; at AA, average employee wages were $63,900. AA's average wages are $8,100 higher than at US.

In 2010, average pilot wages at US were $110,200; at AA, average pilot wages were $139,900.

In 2010, average FA wages at US were $40,400; at AA, average FA wages were $50,500.

Benefits? In 2010, average benefits per employee at US were $16,900; at AA, average benefits were $31,400.

That's what three bankruptcies will do to wages and benefits. And even with bargain basement wages, the best US could do last year was a tiny profit in 2011 of just $111 million, of which the employees earned $12 million in profit sharing, or an average of $375 per employee. Considering wages that are thousands less than AA wages, on average, that $375 doesn't begin to make a dent in the wage deficit at US. It's a very low-wage airline. Their employees aren't thought of as bricks - their substandard pay is what made AA's employee wages look so high by comparison. The prior bankruptcies have made the US employees as light as a feather compared to the heavy burden of AA wages and benefits.

Merely integrating the pilots would increase US pilot wages enough to more than wipe out last year's meager profit of $111 million.

Great points, AA isn't so bad after all. Hopefully other employees realize this before thinking a consensual agreement is the worst thing going.

 

[ord78]

It might not be the worst thing to happen to AA employees, but I'd caution you to look at the numbers before becoming giddy over a tiny profit sharing check.

In 2010, average employee wages at US were $55,800; at AA, average employee wages were $63,900. AA's average wages are $8,100 higher than at US.

In 2010, average pilot wages at US were $110,200; at AA, average pilot wages were $139,900.

In 2010, average FA wages at US were $40,400; at AA, average FA wages were $50,500.

Benefits? In 2010, average benefits per employee at US were $16,900; at AA, average benefits were $31,400.

Good argument but I gotta ask how and or where did you arrive at these averages?

 

[FWAAA]

Good argument but I gotta ask how and or where did you arrive at these averages?

Sorry about that - forgot to include the link to Bob Herbst's site:

http://www.airlinefinancials.com/airline_data_comparisons.html

There's one workgroup where US wages are not far behind AA's wages: mechanics and related. That looks to me like a testaement to just how worthless the TWU has been for AA's mechanics. US slashed the pay of all of its employees in its two bankruptcies (and HP years earlier in its Ch 11) yet the AA TWU-represented employees were not able to negotiate higher pay during the years of Section 6 negotiations (other than the failed TA, which had plenty of concessions to match its pay raises).

 

[john john]

Sorry about that - forgot to include the link to Bob Herbst's site:

http://www.airlinefinancials.com/airline_data_comparisons.html

There's one workgroup where US wages are not far behind AA's wages: mechanics and related.

Have you compare the passenger service groups at US and AA pay benefits scope and work rules.