- Nov 9, 2003
- 16,512
- 5,865
Republic, Rivals Could Grab Us Air Reins
- Thread starter BoeingBoy
- Start date
......."Going forward, US Airways could become more of a brand than an airline," said aviation analyst Michael Boyd of the Boyd Group of Evergreen, Colo. "It's like when you book a room in a Sheraton hotel. Sheraton is the brand name on the hotel, but someone else owns and operates the hotel."
"Republic could go from a 50-seat regional line to a mainline carrier flying for US Airways," Boyd said.
Are you listening AAA MEC? It's time to draw a line in the sand or soon enough you will no longer be US Airways. Everybody else will be. Today it's the E170s(NOT an RJ), tomorrow the Airbusses?
"Republic could go from a 50-seat regional line to a mainline carrier flying for US Airways," Boyd said.
Are you listening AAA MEC? It's time to draw a line in the sand or soon enough you will no longer be US Airways. Everybody else will be. Today it's the E170s(NOT an RJ), tomorrow the Airbusses?
It was the same thing with the 50 seat RJ's, the AAA mec did not care to keep those AC as they were beneath them, and or they wanted 100 seat rates for the 50 seat AC. So they allowed them to be flown by the same companies soon to own U. Even if they have learned from this, their position is not the same as it was when they guarenteed Mesa, Chautauqua, and others cost plus.
TBONE, I see that the same paragraph stuck out to both of us. The Sheraton hotel analogy is ominous for mainline employees and sounds very plausible.
US Airways emphasis on the small 's'
Would U be interested in contracting all flying operations, and basically be a ground services company, offering, web, res and airport ground functions?
Would U be interested in contracting all flying operations, and basically be a ground services company, offering, web, res and airport ground functions?
Yeah... I had commented on this possible scenario in various threads about a week ago. As I said then, while it still seems unlikely (read: probability 49% or less), it seems more and more probable every day.
I liked Cordle's comment too: "It looks like the tail wagging the dog. It's not happened before," said Vaughn Cordle, president of Airline Forecasts LLC of Washington, D.C. "In the past, it's always been the parents who dictated the terms for the feeders."
This is exactly what I was referring to in one of those other posts, when I refered to this changing the industry. Also, I spoke of how the legacies, with some help from unions and scope clauses, may have unwittingly changed the balance of power between the legacies and regionals by offering guaranteed profits.
Boyd seems to think that the real advantage here for Republic is the reward for US Airways' failure: Boyd described the takeover of the Embraer 170s as "a smart strategic move" by Bedford. Republic could wind up controlling the all-important slots if US Airways eventually collapses. Republic then could sell or lease the slots to a large carrier, Boyd said.
I would add that Republic could shop itself around as a Regional partner to the highest bidder if US Airways collapses, or even try a FlyI/DCAir type situaiton.
RowUnderDCA: I had speculated about this on another thread. What makes this situation a bit different from a traditional retail franchise is that US Airways would continue to collect all the revenue and presumably continue to guarantee profit to the operators. That is, afterall, what the regional's are trying to protect - their guaranteed profit. I would do the same.
I do have a few problems with the whole situation, though:
1. What does US offer Mesa? Clearly AirWisc was enticed by a backup plan to their UAX contract. Republic/Chautauqua gets EMB-170 aircraft/orders + slots + some control over its future. What does Mesa get? I would think that Orenstein, being the wheeler-dealer he seems to be, would not settle for less than what Republic is getting.
2. How does this work going forward? What happens when these three companies cannot get along down the line? Surely they all have an interest in seeing US Airways succeed, but I can see problems arising when Mesa feels AirWisc is being given an advantage or vice-versa. Seems like it could cause problems down the road when/if there comes a time to expand or shrink the fleet. It will become a competition among the three owners. If you have ever worked in a small business with multiple owners with different strategic directions as I have, you know this can become a problem quickly.
I liked Cordle's comment too: "It looks like the tail wagging the dog. It's not happened before," said Vaughn Cordle, president of Airline Forecasts LLC of Washington, D.C. "In the past, it's always been the parents who dictated the terms for the feeders."
This is exactly what I was referring to in one of those other posts, when I refered to this changing the industry. Also, I spoke of how the legacies, with some help from unions and scope clauses, may have unwittingly changed the balance of power between the legacies and regionals by offering guaranteed profits.
Boyd seems to think that the real advantage here for Republic is the reward for US Airways' failure: Boyd described the takeover of the Embraer 170s as "a smart strategic move" by Bedford. Republic could wind up controlling the all-important slots if US Airways eventually collapses. Republic then could sell or lease the slots to a large carrier, Boyd said.
I would add that Republic could shop itself around as a Regional partner to the highest bidder if US Airways collapses, or even try a FlyI/DCAir type situaiton.
RowUnderDCA: I had speculated about this on another thread. What makes this situation a bit different from a traditional retail franchise is that US Airways would continue to collect all the revenue and presumably continue to guarantee profit to the operators. That is, afterall, what the regional's are trying to protect - their guaranteed profit. I would do the same.
I do have a few problems with the whole situation, though:
1. What does US offer Mesa? Clearly AirWisc was enticed by a backup plan to their UAX contract. Republic/Chautauqua gets EMB-170 aircraft/orders + slots + some control over its future. What does Mesa get? I would think that Orenstein, being the wheeler-dealer he seems to be, would not settle for less than what Republic is getting.
2. How does this work going forward? What happens when these three companies cannot get along down the line? Surely they all have an interest in seeing US Airways succeed, but I can see problems arising when Mesa feels AirWisc is being given an advantage or vice-versa. Seems like it could cause problems down the road when/if there comes a time to expand or shrink the fleet. It will become a competition among the three owners. If you have ever worked in a small business with multiple owners with different strategic directions as I have, you know this can become a problem quickly.
funguy2 said:
Cordle's comment about the "tail wagging the dog" are the exact words which came to my mind when thinking about the proposed equity investments from AWAC and RJET. With a majority of the reorganized company's shares in the hands of the regional affiliates, one has to imagine that protecting the interests of the affiliates would become one of the company's primary goals. Why expand (or even maintain) mainline flying on routes under 1500 miles when those can be flown by the regionals controlling the company?
Exactly my thought. 113 E-170-sized slots at DCA (and 28? planes from MAA) would be more than enough to run an operation focused on O&D traffic at the airport. The LGA slots would allow them to provide near-hourly service between LGA and DCA, though they might have to use ERJ-145's for that. I don't doubt that pretty much every one of the other legacy carriers would jump at the opportunity to pick up a focus city at DCA, though.
And, moreover, if US fails to reorganize, Republic gets to keep all those assets for its $110 million, without having to drop $125 million into the company. To some degree, I'd think that Republic is better-off if US sells the planes and slots to them and then fails to emerge from bankruptcy. It would not surprise me if one of the other network carriers had an undisclosed agreement wih Republic in this eventuality.
I suppose perhaps a more apt comparison might be a cooperative along the lines of your typical farmers' coop or Ocean Spray, where the goal of the company is to maximize the return to the cooperative shareholders -- for example, by optimizing the return paid to AWAC, Republic, Mesa, etc. for their flying. The one rub in this scenario is the interests of the minority shareholders.
I suppose the short answer in regard to Mesa is that they get to preserve the portion of their business related to US Airways. The long answer, of course, depends on what happens with respect to the UAL regional flying; if Mesa gets the nod from UAL to replace AWAC, they really don't need US Airways at all. Then again, if US Airways were to sweeten the deal, perhaps by selling PSA and possibly Piedmont to Mesa for a near-fire-sale price, or even offering some sort of codeshare on 737's, you might see Mesa jump in, limited by what amount of their roughly $200 million in cash they can afford to invest.
Agreed. Not to mention the inherent conflict of interest here between the mainline and the affiliate-owners. Long-term, it makes sense for them to keep the mainline's profits as low as possible (removing profits through the affiliate agreements) in order to keep the profits to themselves and resist future pressures from US Airways' remaining unions to share the wealth.
sfb said:
I am assuming that preserving the current business will not be enough... It was not enough to Republic. Although, preserving US Airways and getting to grow UAX at AirWisc's expense might be enough for Mesa. Although, how do you partner with AirWisc at US Airways and replace them at UAL at the same time? Another conflict of interest - Its in AWAC's best interest to keep UAL and expand at US Airways if possible, and vice-versa for Mesa (Mesa would expand at UAL and maintain US Airways).
The Mesa/ALG/PDT is interesting. Throw in a some LGA slots (if there are any more) and that might be more than enough to bring Mesa into the fold. IIRC, Mesa and PDT/ALG operate Dash-8's, and I think Mesa has even acquired some former PDT Dash-8's... So there must be a reasonable fit there. Throw in PSA's CRJ-700's (which Mesa already operates) and perhaps there is a similar deal brewing for Mesa... All very interesting.
funguy2 said:
We have a winner!
I think that US Airways failure is EXACTLY what Republic is hoping for. What a dowry for new marriage!!! New E-170s and LGA&DCA slots.Even if she is the ugliest girl at the debutante ball...if everyone at the dance knows that she has a major fortune as a dowry, she's also usually the first debutante to become engaged.
Republic would have no problem at all finding a new mainline partner. Might even have ideas of transforming itself into something more than a regional/feeder airline.
markkus757
Veteran
- Jul 26, 2004
- 598
- 1
I think Mesa has to give something in order to keep flying. If Republic and Air Wisconsin take US out of BK, they can toss Mesa's contract out the window and keep all of the flying to themselves. They have forced Mesa to pay for nothing essentially. If Republic gets the slots, what else is there when you would liquidate US Airways(if it happens)? I thought they pretty much do not own anything else substantial. Maybe, if the regionals are looking to sell off the ground, maybe Aramark or World Wide Flight would be interested? Have fun at those wages.. :huh:
funguy2,
Just as a minor point, Allegheny no longer exists; it was merged into Piedmont. The one hold-up I'd see with Mesa buying Piedmont is the fact that all the existing prop agreements are revenue-sharing, not fee-for-departure. But given the valuation put on the MDA assets, I could see PSA being worth somewhere in the neighborhood of $50 million. I don't know how many US-Airways-held commuter slots at LGA are unaffected by the Republic transaction, but it should be noted that there is a pending phase-out of LGA slots (though I doubt this will actually come to pass in reality). Perhaps we'd see Mesa buying PSA and agreeing to kick in, say, $75 million while Trans States puts in $25 million (I don't believe TSA can afford much more).
The most serious threat to US Airways would be if United were to reject its AWAC contracts AFTER US was locked into agreements with Mesa and Republic (TSA is small enough to not really be strategic). This could happen, for example, in the event of Independence returning to the United Express fold. US would then be forced to find somewhere to fly an additional 70 CRJ's, and that would not be easy.
I expect that at this point, United is going to play a waiting game in order to see what happens at US Airways. They don't have GE driving them to get out of bankruptcy quickly, so they can afford to wait and see what develops.
Just as a minor point, Allegheny no longer exists; it was merged into Piedmont. The one hold-up I'd see with Mesa buying Piedmont is the fact that all the existing prop agreements are revenue-sharing, not fee-for-departure. But given the valuation put on the MDA assets, I could see PSA being worth somewhere in the neighborhood of $50 million. I don't know how many US-Airways-held commuter slots at LGA are unaffected by the Republic transaction, but it should be noted that there is a pending phase-out of LGA slots (though I doubt this will actually come to pass in reality). Perhaps we'd see Mesa buying PSA and agreeing to kick in, say, $75 million while Trans States puts in $25 million (I don't believe TSA can afford much more).
The most serious threat to US Airways would be if United were to reject its AWAC contracts AFTER US was locked into agreements with Mesa and Republic (TSA is small enough to not really be strategic). This could happen, for example, in the event of Independence returning to the United Express fold. US would then be forced to find somewhere to fly an additional 70 CRJ's, and that would not be easy.
I expect that at this point, United is going to play a waiting game in order to see what happens at US Airways. They don't have GE driving them to get out of bankruptcy quickly, so they can afford to wait and see what develops.
What people need to realize is that US Airways intends for itself to be a publicly traded company with new equity/stock after it emerges from bankruptcy this summer. Thus, the Board has a fiduciary responsibility must act in the best interests of the corporation, e.g. US Airways (not Republic or Air Wisconsin).
Separately, virtually all of the company's tangible assets are collateral to the ATSB, the business plan/POR must project a near-term profit including current energy prices, and the unsecured creditors committee must approve the POR.
From an operational point of view the affiliate carriers are small in comparison to US Airways and they need to our company as much as we need them. I like to call this "mutual support" because many of their passengers connect to our long-haul flights to Europe, the Caribbean, Latin America, Florida, and the West Coast. Without US Airways and its current footprint these companies could fail too.
Moreover, each if the affiliate companies are competitors and none of them will control US Airways.
US Airways has the sole right to file its POR and could reconstitute the board just like it did during the last bankruptcy. Thus, the board could have 19 members and for example the affiliates could 9 seats and other parties 10 seats.
Off the top of my head, there are a number of possibilities here that include:
-- Air Wisconsin placing its current fleet of 70 50-seat regional jets into US Airways’ system replacing Mesa and TSA if its agreement with United Airlines is not affirmed.
-- Air Wisconsin publicly indicated they want to expand their flying as part of US Airways’ network, regardless of its agreement with United, which could replace Mesa and/or TSA.
-- Do not be surprised if a private investor outbids Mesa to provide equity and then Air Wisconsin replaces the Phoenix-based airline in US Airways’ network. US Airways is trying to reduce its 50-seat RJ flying and replace it with 70-seat & 90-seat RJ’s per LOA 93 and the Republic deal.
-- Could Air Wisconsin order CRJ-700/900s for US Airways Express and Mesa see its "fee for service" contract rejected, but maintained on a month-to-month basis during the transition?
-- Would US Airways sell PSA/Piedmont to an affiliate carrier to boost liquidity, which may prevent US Airways from selling MDA and the 137 East Coast commuter slots? The second part of the Republic deal to obtain another $110 million is not a forgone conclusion and US Airways has the option, but not the requirement to divest of MDA and the slots, which is sort of like a liquidity safety relief valve.
-- US Airways could see private equity appear, now that the airline is on more solid ground with other key investors.
Bruce Lakefield and David Bronner desire to see the mainline as big as possible that can generate as much revenue as possible. The want as many jobs as possible and the company can survive as an independent business enterprise or to merge.
US Airways has taken two huge steps to boost exit financing during the past couple of weeks when both American and Delta have said they have no access to the capital markets. The company has proven the critiques wrong (even Vaughn Cordle ahs changed his tune) and investors want and have to decided to invest in US Airways.
I have a tremendous amount of faith in Bruce Lakefield and in my opinion, he has worked magic to give our airline more than a fighting chance to survive in light of horrible fuel prices and revenue -- with the entire industry struggling like never before.
Regards,
USA320Pilot
Separately, virtually all of the company's tangible assets are collateral to the ATSB, the business plan/POR must project a near-term profit including current energy prices, and the unsecured creditors committee must approve the POR.
From an operational point of view the affiliate carriers are small in comparison to US Airways and they need to our company as much as we need them. I like to call this "mutual support" because many of their passengers connect to our long-haul flights to Europe, the Caribbean, Latin America, Florida, and the West Coast. Without US Airways and its current footprint these companies could fail too.
Moreover, each if the affiliate companies are competitors and none of them will control US Airways.
US Airways has the sole right to file its POR and could reconstitute the board just like it did during the last bankruptcy. Thus, the board could have 19 members and for example the affiliates could 9 seats and other parties 10 seats.
Off the top of my head, there are a number of possibilities here that include:
-- Air Wisconsin placing its current fleet of 70 50-seat regional jets into US Airways’ system replacing Mesa and TSA if its agreement with United Airlines is not affirmed.
-- Air Wisconsin publicly indicated they want to expand their flying as part of US Airways’ network, regardless of its agreement with United, which could replace Mesa and/or TSA.
-- Do not be surprised if a private investor outbids Mesa to provide equity and then Air Wisconsin replaces the Phoenix-based airline in US Airways’ network. US Airways is trying to reduce its 50-seat RJ flying and replace it with 70-seat & 90-seat RJ’s per LOA 93 and the Republic deal.
-- Could Air Wisconsin order CRJ-700/900s for US Airways Express and Mesa see its "fee for service" contract rejected, but maintained on a month-to-month basis during the transition?
-- Would US Airways sell PSA/Piedmont to an affiliate carrier to boost liquidity, which may prevent US Airways from selling MDA and the 137 East Coast commuter slots? The second part of the Republic deal to obtain another $110 million is not a forgone conclusion and US Airways has the option, but not the requirement to divest of MDA and the slots, which is sort of like a liquidity safety relief valve.
-- US Airways could see private equity appear, now that the airline is on more solid ground with other key investors.
Bruce Lakefield and David Bronner desire to see the mainline as big as possible that can generate as much revenue as possible. The want as many jobs as possible and the company can survive as an independent business enterprise or to merge.
US Airways has taken two huge steps to boost exit financing during the past couple of weeks when both American and Delta have said they have no access to the capital markets. The company has proven the critiques wrong (even Vaughn Cordle ahs changed his tune) and investors want and have to decided to invest in US Airways.
I have a tremendous amount of faith in Bruce Lakefield and in my opinion, he has worked magic to give our airline more than a fighting chance to survive in light of horrible fuel prices and revenue -- with the entire industry struggling like never before.
Regards,
USA320Pilot
what value does PSA/Piedmont really have? Dash-8s and a bunch of leased cl200s dont spring to mind as being of any value.
OP
- Nov 9, 2003
- 16,512
- 5,865
- Thread Starter
- #14
"US Airways has the sole right to file its POR and could reconstitute the board just like it did during the last bankruptcy. Thus, the board could have 19 members and for example the affiliates could 9 seats and other parties 10 seats."
It would take a sizable investment by a third party to accomplish this. The AirWis agreement, and by reference the Republic agreement, is pretty specific on board seats.
Someone would have to put in well over the additional $100 million called for in the Republic agreement to control more seats than either AirWis or Republic.
Jim
It would take a sizable investment by a third party to accomplish this. The AirWis agreement, and by reference the Republic agreement, is pretty specific on board seats.
Someone would have to put in well over the additional $100 million called for in the Republic agreement to control more seats than either AirWis or Republic.
Jim
Similar threads
