For the Creditors to accept an 8.5 billion deal in an all stock deal in the "new" merged company, they would be taking a pretty big risk IMO. Now, if it were a CASH deal, that offer would look quite different.
If I were on the creditors committee, I would be thinking how big of a risk it would be to acutally, someday, realize any real value for the airline stock, when hisorically, airline stocks generally are so risky and vulnerable to "market conditions".
Throw in the labor integration issues of America West (not yet fully merged after 7 years) US Airways whose f/as can strike at any time once released from the NMB, and AA pensions, while frozen, basically still on the books for AA, and ALL of US Airways employees having had their pensions dumped,
and America West who never had a defined pension...
you have what most would call a real "cluster #%$k" lasting years if not decades in litigation in seniority and labor integration issues.
Then, throw in the AA pension plan liabilities...I see all of US Airways labor never agreeing to pay for 50-60,000 employees pension plans as part of their merged contract.
As a stock investor, I would never even consider the stock, except maybe to "short it".
I think that labor is going to be a huge problem for AA and USAIr, whether they remain seperate or merge.
While low labor costs may look good on paper to the bean counters the reality will leave them scratching their heads. Its one thing when a new company goes out and hires a bunch of people at low wages, its another when an old company slashes the wages of the workers they have. A combined USAIR/AA group would be the oldest workforce in the industry, and the lowest paid, two strikes against productivity. Combine that with integration issues and its over.
Niether carrier will be able to attract or retain talent, so they will be training pilots and mechanics for other carriers. As other carriers who also have older workers see their guys leave they will be the first choice of kids coming out of school as well as older experienced workers from AA.
Here's how I look at it. I'm not old enough yet to collect a pension but in a few years I will be. So I'm almost an older worker. With all these concessions whther I stay at AA or leave I will likley have to work until 65 anyway, maybe more.
If I start collecting my pension at 55 I will get around $25,000/year. I no longer use AA's medical and our pension is frozen.
Working for AA as a toped out mechanic I'll be earning around $70,000. So after I reach retirement age I'm basically working for $45,000 a year. So if I left AA I would only need to earn around $22/hr to make what I',m making at AA. Anything more than that and I'm ahead. Some people may say "what about all the PTO you earn after having all those years. Well our PTO sucks.
After 25 years I have the MAX vacation allottment of 5 weeks , or 200 hours. My Holiday package is worth another 20 hours and my 5 day sick package is worth 36 hours, so after 25 years my PTO is worth just 256 hours. As a new hire in most other places I could expect to start off with two weeks vacation, (80 hrs), ten paid holidays (80hrs) and 12 sick days, (96hrs), or 256 hrs. then expect that every five years it increases by 40 hours/yr. So I really would not lose on PTO.
What my years do give me is job security, its unlikely that I will get laid off, and my choice of hours when I work. Well even after 26 years I still have to work the holidays, cant normally get Christmas Holiday vacation, and cant get the whole weekend off.
Airports are usually remote. They arent someplace that you want to live near, so commuting is another factor to be weighed in. My commute is 96 miles. Figure the commute is around another $3/hr paycut I could take off that $22/hr (not even counting the 2 hrs a day in lost time) , knocking it down to $19/hr if I found employment close to home.
So anyone who is over 55 and has the years and another source for medical benefits should not have a hard time leaving, Medical is really the only anchor, and familiarity.
For young workers without any time at AA who are junior and only get 1 week of VC (40hrs) plus our inferior Holiday and sick package their PTO is awful, at 96hrs, Nearly 160 hours less than what they would make in most other places that employ people with similar skills. The PTO package cuts the value of what they earn by another $2.60/hr. In other words even if they are topped out at AA because of the Flex rates that allow AA to hire them at a higher wage, if they left and took a $2.60/hr pay cut they would be even due to the value of the holidays, vacation and sick time they would pick up. If they got a better Medical, such as at the MTA, that could be worth around $5/hr more.
So right now, its only people like me who are stuck, too old to just start at the bottom without some other income coming in and not old enough to get the pension which would supply the other income. Needless to say being in such a situation isnt going to motivate anyone to help make AA "best in class".
So thats what AA and USAIR will be, whether they merge or remain seperate. Low wage training grounds where the only people who stay will be those who feel stuck, too old to start at the bottom and not old or healthy enough to leave. Does that sound like the ingrediants to best a "best in class airline"? Is that where you would invest your portfolio? "Yea but the labor is so cheap".