New Merger Rumor

[tech2101]

How about American Airways?

US vs THEM AAIRLINES

 

[tech2101]

I know the prospect of receiving retiree communications from Delta Air Lines is enough to make you wet your pants

Huh?

I get those communications from them and all it does is make me angry. :angry:

 

[Barfbag]

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?

The economist Alfred Kahn and President Jimmy Carter are the failed architects in what has become a race for the bottom with no end in sight, aka Airline Deregulation.

Less service: Most passengers surveyed would rather be in a Dentist chair than in Main Cabin.
Less competition: creating Frankenstein Airlines out of dead corpses.

 

[brokenwrench]

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.

What was the payout for the union groups?
Oh yeah! they care so much that they do not share profit sharing with ALL employees.
Care about employees my butt!
How much of a raise did did Parker have planned for the folk if he got a hold of Delta?

 

[brokenwrench]

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.

There has NEVER been an airline merger not approved while both carriers were active in there lobby efforts.

 

[WorldTraveler]

well said Kat. AA supported deregulation years ago. Hard to argue for protection now when others hv succeeded.
there r 3 viable large US airlines incl WN. AA DL and UA r not all strong in the same intl markets...cud consolidate to 2 global US airlines.
DL wud be happy if UA takes US and DL takes chunks of AA. creditors might get more from splitting AA.

 

[Mr Red]

The economist Alfred Kahn and President Jimmy Carter are the failed architects in what has become a race for the bottom with no end in sight, aka Airline Deregulation.

Less service: Most passengers surveyed would rather be in a Dentist chair than in Main Cabin.
Less competition: creating Frankenstein Airlines out of dead corpses.

ProblemsAlong with a 40% drop in airfares since deregulation in 1978, airline employees have seen up to a 40% drop in income, affecting approximately 545,000 American workers.[17] Although the gains of economic liberalization have been substantial for the traveling public and airline executives,[18] fundamental problems brought on by deregulation continue to plague the industry and its workers. Even though it's been thirty years since deregulation some of these massive adjustments imposed at the end of a half century of regulation are still being considered transitional problems in their effect. Before deregulation, airline oligopolies received returns on capital that were profitable for executives and employees, but these returns factored in high costs that would not necessarily exist in a competitive market[citation needed]. For example, the airlines' unionized workforce, established and strengthened under regulation and held in place by the Railway Labor Act (RLA), protected worker salaries commensurate to level of education, experience, risk-factor and time away from home. Corporate interests considered these labor costs non-congruent to what they construed as inefficient work rules when compared with what they would theoretically expected in a competitive market[citation needed]. Deregulation problems remain in today's market, especially with the legacy airlines.(See also the US Centennial of Flight Commission [11]) Thus, former airline pilot and hero of The Miracle on the Hudson Chesley Sullenberger has argued before the United States Congress that the U.S. is beginning to realize an industry wide brain drain from the occupation of airline transport pilot.[19
From WIKIPEDIA

 

[eolesen]

There has NEVER been an airline merger not approved while both carriers were active in there lobby efforts.

That's right. I forgot that US Airways and United successfully merged, and spun out DC Air...

The reason that the carriers backed off of that one were that they had been told in no uncertain terms what would be required of them.

I have no doubt that DL won't mind parting out AA the way they've been doing with NW. And the guys in Atlanta & Fort Worth know that's exactly what would happen.

 

[AAviator]

.So, once again the same pesky question...."What about US?

Is it in the interest of AA to spurn US?

The short answer is
YES.

AA is in the hospital undergoing surgery. It is a risky surgery. A doctor in the industry has been wanting to try his revolutionary medication Its called LCC-acaine. He promotes the idea that it cures all forms of ailments from network strength to pricing power. To date, no others have taken up this quacks offer. No one. Based on independent study LCC-acaine has been PROVEN to cause low wages, low morale, questionable network strength, and other forms of incurable ailments. Its long term results are a big unknown because none of the models suggest an improvement in paychecks, because in its raw form, bigger paychecks are proven not to happen because of its chemical makeup. AA would surely suffer a long painful and debilitating recovery if this quack were considered, if it was able to recover at all....

There is the "safe" way... Then there's the "poke and hope" way... (which is nothing more than convenience to carriers other than AA)

The "safe" way for AA is to stay away from LCC. Let LCC languish on its own. Despite what Parker says, LCC has been cannibalizing itself to competitive irrelevance, and circling wagons in what's left of its strongholds

It strikes me as odd that no one is considering the other options out there beside the same old stale -Delta will rule the universe- and US will buy AA because Parker said so mania.

 

[WorldTraveler]

cute AAviation,
and largely true.
The reason why other options aren't on the table is because none have been mentioned to date.
US piped up saying it wanted a shot at AA and DL chimed in and said it would enter the ring as well if need be....
DL for now is content to let AA move through the restructuring process but is not about to let US grow into the 3rd major network carrier. US has struggled to succeed at either the network or LFC model and DL does not want to see US have the opportunity to further screw up pricing in the industry - which would have a devastating effect on DL.
Thus, DL is willing to do what it has to do to block US - and if the opportunity arises to buy some of the non-overlapping parts of AA, DL will move. The airline industry is about mass - AA's plan to grow is predicated on it returning to a position alongside DL and UA where the three were fairly comparable for years but is not out of balance with the DL and UA mergers.
US will not succeed at acquiring AA as much as some would like to believe simply because DL has deeper pockets and a better track record of delivering on the financial goals it established. AA's creditors don't care how the industry consolidates if it does; they want the best return on their investment.
DL doesn't want to rule the universe... but it does want to serve as many markets as it possibly can - and AA has a number of key assets which would round out DL's portfolio.
UA needs a different set of assets.
UA was forced to move on the CO acquisition in order to not allow DL to pass UA - and now DL has a competitive advantage in being able to steer the next round of consolidation. It is just smart business sense to control the evolution of the industry to suit your own needs. By moving first w/ NW, DL does indeed have the opportunity to set the pace for the next round of consolidation.
While you would like to turn the conversation into a divisive DL-NW discussion, the simple fact is that DL has retained more of NW's assets than any other merger it has conducted over 50 plus years. The simple fact is that NW built an incredibly valuable franchise that lacked only in the mass that was needed to compete in an era of megacarriers. The fact that DL has pulled down CVG and MEM almost equally - and CVG was a larger hub before - tosses out any notion that DL is picking on one carrier over the other. Throw in the fact that DL added a nice sized handful of its own aircraft to build DTW's int'l operation makes your claims even more ridiculous.
.
The industry has consolidated and will continue to do so - because the deregulation model didn't account for the fact that capacity would have to be removed as fuel prices went up and demand decreased. Most of the mergers of the last decade simply helped to restore market share that was lost as carriers shrunk. As the next round of cuts kicks in, it will be those carriers that can expand their networks as individual level market demand decreases that will win.
The US does not need and cannot sustain four large network carriers (WN included) in addition to several smaller niche players at $3.50 and up fuel prices - and they will keep climbing.
By removing capacity, carriers have the best chance of pricing the product so that customers pay for the fuel increases and not employees as has been the case for a number of years.
The best argument that can be made as to why returns to creditors will be higher if AA is "parted out" comes from the fact that alot of unnecessary capacity in the industry can be removed.
If most of AE's current capacity alone is parked using planes that largely cannot make money in this environment, the industry would all benefit enormously.
.
The next phase of consolidation - and AA's future - will be governed by the same people who largely support the rest of the industry. It has been apparent for years that AA is the weakest large link in the system (but not the only one) and the same people who sit on AA's creditors committee will do what they have to do to improve the chances of return for all of the industry.
And ultimately airline employees (those that survive) will be better off as capacity is better matched with demand and fare increases cover increased costs - instead of employees.
Notably, in the face of the recent runup in fuel prices, DL has generated the best increase in revenues and the best overall financials. The quarter ends in a couple weeks and we will see how the industry has coped - and that will give us indications of how the next phase of the industry will develop.

 

[johnny kat]

AAviator wrote:
It strikes me as odd that no one is considering the other options out there beside the same old stale -Delta will rule the universe- and US will buy AA because Parker said so mania.....

OK AAv, just what are the other options?

 

[will fix for food]

SCOPE and codeshare provisions are relaxed.

American shrinks significantly for the short term. Jetblue and maybe Alaska pick up flying to backfill.

Eagle sheds all the 135's and ATR's. Short term, Eagle keeps some of the 140's and 145's and of course all of the CRJ's.

135's, 140's, and 145's are traded in to Embraer for E-Jets.

Eventually all or nearly all of the 50 seat and under flying is sent out to other operators.

Eagle flies all or nearly all of the 51 - 88 seat aircraft.

American flies all of the over 88 seat aircraft.

Post emergence A/A merges with Jetblue and regains the routes that were ceded to them. Alaska may join.

American rebuilds it's fleet with the aircraft order.

AMR ends up with an A scale at American with aircraft 89 seats and up, a B scale at Eagle with 50-88 seats and a contracted out C scale for 50 seat and under feed.

The next flight schedule change will be the start of the process.


Just a guess though.

 

[WorldTraveler]

SCOPE and codeshare provisions are relaxed.

American shrinks significantly for the short term. Jetblue and maybe Alaska pick up flying to backfill.

Eagle sheds all the 135's and ATR's. Short term, Eagle keeps some of the 140's and 145's and of course all of the CRJ's.

135's, 140's, and 145's are traded in to Embraer for E-Jets.

Eventually all or nearly all of the 50 seat and under flying is sent out to other operators.

Eagle flies all or nearly all of the 51 - 88 seat aircraft.

American flies all of the over 88 seat aircraft.

Post emergence A/A merges with Jetblue and regains the routes that were ceded to them. Alaska may join.

American rebuilds it's fleet with the aircraft order.

AMR ends up with an A scale at American with aircraft 89 seats and up, a B scale at Eagle with 50-88 seats and a contracted out C scale for 50 seat and under feed.

The next flight schedule change will be the start of the process.


Just a guess though.

and the simple question is who wins in this scenario, what do current AA stakeholders gain by supporting it, and do these steps give AA what it needs to turn its business around and compete effectively again? (ok so several questions)

 

[AAviator]

AAviator wrote:
It strikes me as odd that no one is considering the other options out there beside the same old stale -Delta will rule the universe- and US will buy AA because Parker said so mania.....

OK AAv, just what are the other options?

How about re-reading post 33 in this thread. (gotta wonder about these LCC binders so many of you like to wear)

And if you're going to bother to reply, explain what none of "U" can seem to answer... The problems listed with LCC's structure, revenue(lowest average fares in the industry),highest costs in the industry, LOSS of UAL Codeshare revenue if LCC and AA merges(nothing to sneeze at) integration costs, LCC hub closures... How does this all help AA? And at what cost TO AA EMPLOYEE'S!


And please... Come up with something better than AA can't get a passenger from Richmond to JAX as easily as LCC!
And please, throw in how LCC would address AA's shortfall in JFK and the Pacific/LAX area..

C'mon.. And to quote "Waterboy" Yooo can Dooo-eeeet!! AND- honestly answer this question: Are there better merger candidates out there for AA than LCC that address a sizable portion of AA's needs without all the baggage LCC would bring?? (pssssst. somebody posted a link on the LCC board. its an audio file from Holly Hegeman, implying that a merger may happen this year...)

Anxiously waiting your USA320Pilot-esque reply... (not)
😀 B)

 

[delldude]

i hope no to merger but if I had to guess the name....American Airline run by US mgmt using AA as the name and the US name disappears

Keep it as AA was Allegheny Airlines.