traderjake
Veteran
Tired of someone smarter than you pointing out your mistakes?
These 3 Airlines Will Benefit From AMR's Bankruptcy
- Thread starter USA320Pilot
- Start date
traderjake
Veteran
from page 3
The potential for a merger with US Airways is no more or less likely (and no more attractive) than before the filing. While US Airways is a well-managed carrier, the comments by some financial types that there would be a strong fit between AA and US are essentially veneer analysis. Because of enormous pressure to do a deal, do expect, however, on some activity in this regard.
BoeingBoy
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- Nov 9, 2003
- 16,512
- 5,865
I.e., expect Parker to make an offer...
What happens after that is completely up to AMR management and the creditor's committee.
Boyd's analysis seems pretty accurate to me. Dump a lot of 50-seat and under RJ's, negotiate lower lease payments on the MD-80's to offset the fuel burn penalty (dump any where the leasor won't go along), tweak the network, terminate the DB pensions, modify health care plans (maybe drop retiree health care), modify contracts, reduce debt.
Jim
SparrowHawk
Veteran
- Nov 30, 2009
- 7,824
- 2,707
Blah, Blah, Blah Bullshite!
Anybody ever take notice that the first four letters of ANALyst spell ANAL as if full of shite? As in A-Hole, As in windbag etc etc?
Frankly, If you can fog a mirror and have more then 2 brain cells firing at a time you'd know that when a company the size of AA flips a chapter that the rest of the industry is going to be looking for a competitive advantage. Merge, pick up core assets, whatever! The buzzards are circling and at this stage it's all speculation.
What's to prevent WN or any number of carriers from submitting a bid for the sole purpose of driving the price to US upwards? The airline business ain't for sissies. IMO hardball is about to be played and there will be no shortage of hot air from analysts trying to buff up their image and "Street Cred". Let the games begin!
usfliboi
Veteran
- Aug 20, 2002
- 2,070
- 270
signals
Veteran
As in any Merger Wolf Season, US is counting their eggs before they hatch...nothing new
You're right about those ANAL know it alls that get paid to speculate. Since this is my first BK in the airline world, I'm just learning. From what I learned-The airline's creditors decide if an airline can be put up for purchase. Otherwise the airline is deemed capable to Re-Structure itself.
US is just speculating as usual. Happens every time a merger rumor or BK happens. Hawk, the real discussions are at the AA boards.
SparrowHawk
Veteran
- Nov 30, 2009
- 7,824
- 2,707
As in any Merger Wolf Season, US is counting their eggs before they hatch...nothing new
You're right about those ANAL know it alls that get paid to speculate. Since this is my first BK in the airline world, I'm just learning. From what I learned-The airline's creditors decide if an airline can be put up for purchase. Otherwise the airline is deemed capable to Re-Structure itself.
US is just speculating as usual. Happens every time a merger rumor or BK happens. Hawk, the real discussions are at the AA boards.
Yeah but over here we put the "Fun" back in Dysfunctional
just one big Whining, Biotching, Lawsuit happy family led by an ex AA employee with several alcohol related scrapes with the law. How could the AA board be more fun?
1AA
Veteran
Excerpt from the Boyd report about the USAir and AA merger.
Q: Will this bankruptcy accelerate a merger with US Airways?
A: There is the misconception that AA must merge with somebody, simply because other airlines have done so. In many corners of Wall Street, that is the only reason and the total depth of the analysis regarding an AA merger. The fact is that US Airways would not bring much to the table – in fact, it has very little synergies with American.
Some have suggested that US Airways could be the domestic operation for AA, while the international would be operated by AA mainline. By all means, do not take anything seriously from such analysts. They obviously have no understanding whatsoever of the issues of fleets, unions, hub operations, maintenance programs, etc.
Sheer size is not a true metric for airline health. But it seems that the AMR bankruptcy has created a whole garden industry of self-anointed airline industry experts. One quote from a Bloomberg article was particularly telling. Lamenting the fact that American is no longer the largest airline in the US, the writer confidently told readers: “
This factoid, which the “analyst” dug up, is meaningless. It is also incredibly ignorant of the airline industry. What is missed is that American today faces essentially the same competitive levels from Delta as it did when it faced a separate Delta and a separate Northwest. What this veneer expert doesn’t recognize is that NW and DL before the merger were code-sharing and had interchangeable frequent flyer programs.
US Airways, a fine operator, does not offer much to the AA system. The Phoenix hub is not particularly additive to AA, the PHL hub is competitive with the AA JFK operation, and CLT would mainly offer access to more small markets – which are difficult to serve economically. AA already as access to traffic at most mid-size and larger markets in the Deep South. As for feed – much of the international markets at CLT would compete with AA service at ORD, JFK, and MIA. The argument that CLT “would give AA access to the South” sounds appealing, but is largely bogus.
There are no guarantees, however, that a shotgun marriage could not be arranged for the two carriers. Enormous amounts of money can be made in such deals, whether they make sense or not for the airline entities involved. If such a transaction were arranged, it would entail enormous amounts of additional “moving parts” and challenges for the
combined entity to resolve issues such as labor contracts, re-structuring of entire
revenue flows, and rationalizing fleets. There would be no near-term benefits.
Q: Will this bankruptcy accelerate a merger with US Airways?
A: There is the misconception that AA must merge with somebody, simply because other airlines have done so. In many corners of Wall Street, that is the only reason and the total depth of the analysis regarding an AA merger. The fact is that US Airways would not bring much to the table – in fact, it has very little synergies with American.
Some have suggested that US Airways could be the domestic operation for AA, while the international would be operated by AA mainline. By all means, do not take anything seriously from such analysts. They obviously have no understanding whatsoever of the issues of fleets, unions, hub operations, maintenance programs, etc.
Sheer size is not a true metric for airline health. But it seems that the AMR bankruptcy has created a whole garden industry of self-anointed airline industry experts. One quote from a Bloomberg article was particularly telling. Lamenting the fact that American is no longer the largest airline in the US, the writer confidently told readers: “
This factoid, which the “analyst” dug up, is meaningless. It is also incredibly ignorant of the airline industry. What is missed is that American today faces essentially the same competitive levels from Delta as it did when it faced a separate Delta and a separate Northwest. What this veneer expert doesn’t recognize is that NW and DL before the merger were code-sharing and had interchangeable frequent flyer programs.
US Airways, a fine operator, does not offer much to the AA system. The Phoenix hub is not particularly additive to AA, the PHL hub is competitive with the AA JFK operation, and CLT would mainly offer access to more small markets – which are difficult to serve economically. AA already as access to traffic at most mid-size and larger markets in the Deep South. As for feed – much of the international markets at CLT would compete with AA service at ORD, JFK, and MIA. The argument that CLT “would give AA access to the South” sounds appealing, but is largely bogus.
There are no guarantees, however, that a shotgun marriage could not be arranged for the two carriers. Enormous amounts of money can be made in such deals, whether they make sense or not for the airline entities involved. If such a transaction were arranged, it would entail enormous amounts of additional “moving parts” and challenges for the
combined entity to resolve issues such as labor contracts, re-structuring of entire
revenue flows, and rationalizing fleets. There would be no near-term benefits.
NYCDelta
Senior
Yes, although I don't agree with everything he says; he's usually pretty spot-on. I'm not sure about the part of Eagle having only 56 jets when all is said-and-done.
OP
USA320Pilot
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OP
USA320Pilot
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USA320Pilot
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- Thread Starter
- Thread starter
- #27
American Airlines, Labor Leverage, US Airways and Chicken Little.
From: www.swelblog.com
Labor Leverage and Other Thoughts
Since American’s filing for bankruptcy protection last week, I’ve received many notes asking why I am not writing about American - about a potential combination with US Airways or what I expect the company to win from the unions. I haven’t written because, frankly, I already talked about the potential consequences of bankruptcy for the airline, unions and the industry in my most recent piece.
On Monday, I intended to write about leverage and how the Allied Pilots Association was seriously misjudging the leverage it thought it had. Tuesday’s filing kind of made that point moot. As the Sections 1113 and 1114 negotiating process wends its way through a court supervised restructuring, the pilots and all unionized employees will either reach consensual agreements with the company or the company will look to the court to terminate the existing agreements. Whichever outcome, the new contracts will look nothing like the potential deals the unions could have negotiated at various times over the past five plus years.
I know, I know… “American could have reached a deal if it wanted.” It does take two to tango, but in this round of negotiations, American and its unions were listening to vastly different music. American’s offers provided cost benefits that would be realized over the long-term while still maintaining what can only be described as an industry-best benefits package. That wasn’t going to sit well with analysts and Wall Street types who fervently believed the airline needed immediate gains to remain viable.
The unions, seemingly, wanted everything to magically return to past patterns and routinely called for restoration of the pay and benefits they conceded in 2003 to stave off bankruptcy. A common refrain has been no union members have seen substantial increases in wages since 2001. Peers at other airlines did get raises, but American’s employees were – and are - still better off. It’s a simple, provable truth and it meant there was no going back to 2003 or 1993. It’s a different industry and a different world.
That’s key to understanding there is no leverage for either side in this round of negotiations. (Are you listening, United pilots?) It’s also why this negotiations cycle has been so difficult. Few agreements have been struck. American will likely get deals well before we see contracts – or even tentative agreements - at United and US Airways. As the bankruptcy process plays out, the American pilots and flight attendants will no longer have industry leading contracts among the network legacy carriers – Delta will.
And guess who comes up next for negotiation – the Delta pilots. Like American’s management over the past five years, Delta’s management will have to negotiate improved terms and conditions on the highest cost labor contract in existence. All the while, the United/Continental pilots will spend more time asking who is on first than they will spend at a negotiation table. Looks to me like all of that “leverage” being created by the United pilots alleging poor safety policies by management is NOT moving the parties quickly toward a deal.
While I expect the Delta pilot negotiations to be complicated and difficult for the company, at least the pilots enjoyed some benefit following the merger with Northwest and the bankruptcy agreements that preceded it. Delta’s pilots will have the richest compensation package in the industry after American completes its bankruptcy negotiations. That means they won’t have any leverage over the company even as pilots squawk about the liberal scope clause in the current agreement.
In this process, there is a different kind of “trickle down” theory. Case in point: The TWU employees at American. Talk about no leverage. The more removed from the flight deck, the more leverage dwindles. American’s below-the-wing employees currently earn a total compensation package of roughly $25 per hour. That work can be outsourced for 40 cents on the dollar. Add the fact American outsources the least amount of maintenance work in the industry, and that it has more ground workers than any other airline, well, you get the feeling things are going to change. If you’re a TWU worker, that’s probably no comfort.
All This Talk About A Merger With US Airways
I am surprised – no, blown away - by just how much attention the US Airways – American merger possibility is getting. In the first 36 hours after AA filed for protection it seemed the world was suggesting a merger with US Airways was the only viable exit strategy. I don’t believe it. American will have the exclusive right to file a Plan of Reorganization (POR) for 180 days – a right that is typically extended multiple times by the presiding judge.
Keep in mind, all three of American’s unions were appointed to the unsecured creditors committee. Any plan of reorganization by a party other than AA will have to convince the committee their plan is better for all stakeholders. Given the messy labor situation that remains at US – six years after its merger with America West – I sincerely doubt anyone would find a US bid credible… especially American’s unionized workforce.
That’s why, at least right now, I simply don’t see a merger happening, despite industry analyst Vaughn Cordle’s contention that, “regardless of the ugly nature of merging two suboptimal business models and different unions, American's best option is to merge with US Airways.” My first question is, why would you even think of merging two suboptimal business models in the first place? So that you can compete directly against balance sheet and network rich United and Delta?
There is another option I don’t think many analysts have considered. I could see a competing plan led by British Airways and other oneworld partners that would have the potential to win if the AA case gets to the point where outside parties are free to submit alternative PORs – even at today’s 25% foreign ownership limit. If you believe AA will become a smaller entity over the coming months, the one sure thing is AA’s network will be optimized to maximize revenue generation with its new joint venture partners. That’s precisely what STAR is doing through United and SkyTeam with Delta.
The Sky Is Not Falling
Over at Terry Maxon’s AirlineBiz blog is a letter from TWU President Jim Little decrying American’s filing with $4.1 billion in cash and thus a near term ability to pay its current obligations. I urge you to read the letter in full and the lack of reasoning throughout. What did Little expect the company to do when he refused on numerous occasions to step-up and tell his TWU members the cold truth that something is better than nothing? He has had a number of opportunities over the past five years to negotiate an agreement with American that the company could afford.
The bottom line is bankruptcy is not a big deal. This is not the industry’s first rodeo. American’s problems are bigger than a check labor could write outside of bankruptcy, but sadly, the employees will pay much more inside of bankruptcy. As APA President Dave Bates told The Wall Street Journal, "Sometimes in life it's easier to have something imposed upon a person than have them agree to it voluntarily." Sad commentary indeed.
From: www.swelblog.com
Labor Leverage and Other Thoughts
Since American’s filing for bankruptcy protection last week, I’ve received many notes asking why I am not writing about American - about a potential combination with US Airways or what I expect the company to win from the unions. I haven’t written because, frankly, I already talked about the potential consequences of bankruptcy for the airline, unions and the industry in my most recent piece.
On Monday, I intended to write about leverage and how the Allied Pilots Association was seriously misjudging the leverage it thought it had. Tuesday’s filing kind of made that point moot. As the Sections 1113 and 1114 negotiating process wends its way through a court supervised restructuring, the pilots and all unionized employees will either reach consensual agreements with the company or the company will look to the court to terminate the existing agreements. Whichever outcome, the new contracts will look nothing like the potential deals the unions could have negotiated at various times over the past five plus years.
I know, I know… “American could have reached a deal if it wanted.” It does take two to tango, but in this round of negotiations, American and its unions were listening to vastly different music. American’s offers provided cost benefits that would be realized over the long-term while still maintaining what can only be described as an industry-best benefits package. That wasn’t going to sit well with analysts and Wall Street types who fervently believed the airline needed immediate gains to remain viable.
The unions, seemingly, wanted everything to magically return to past patterns and routinely called for restoration of the pay and benefits they conceded in 2003 to stave off bankruptcy. A common refrain has been no union members have seen substantial increases in wages since 2001. Peers at other airlines did get raises, but American’s employees were – and are - still better off. It’s a simple, provable truth and it meant there was no going back to 2003 or 1993. It’s a different industry and a different world.
That’s key to understanding there is no leverage for either side in this round of negotiations. (Are you listening, United pilots?) It’s also why this negotiations cycle has been so difficult. Few agreements have been struck. American will likely get deals well before we see contracts – or even tentative agreements - at United and US Airways. As the bankruptcy process plays out, the American pilots and flight attendants will no longer have industry leading contracts among the network legacy carriers – Delta will.
And guess who comes up next for negotiation – the Delta pilots. Like American’s management over the past five years, Delta’s management will have to negotiate improved terms and conditions on the highest cost labor contract in existence. All the while, the United/Continental pilots will spend more time asking who is on first than they will spend at a negotiation table. Looks to me like all of that “leverage” being created by the United pilots alleging poor safety policies by management is NOT moving the parties quickly toward a deal.
While I expect the Delta pilot negotiations to be complicated and difficult for the company, at least the pilots enjoyed some benefit following the merger with Northwest and the bankruptcy agreements that preceded it. Delta’s pilots will have the richest compensation package in the industry after American completes its bankruptcy negotiations. That means they won’t have any leverage over the company even as pilots squawk about the liberal scope clause in the current agreement.
In this process, there is a different kind of “trickle down” theory. Case in point: The TWU employees at American. Talk about no leverage. The more removed from the flight deck, the more leverage dwindles. American’s below-the-wing employees currently earn a total compensation package of roughly $25 per hour. That work can be outsourced for 40 cents on the dollar. Add the fact American outsources the least amount of maintenance work in the industry, and that it has more ground workers than any other airline, well, you get the feeling things are going to change. If you’re a TWU worker, that’s probably no comfort.
All This Talk About A Merger With US Airways
I am surprised – no, blown away - by just how much attention the US Airways – American merger possibility is getting. In the first 36 hours after AA filed for protection it seemed the world was suggesting a merger with US Airways was the only viable exit strategy. I don’t believe it. American will have the exclusive right to file a Plan of Reorganization (POR) for 180 days – a right that is typically extended multiple times by the presiding judge.
Keep in mind, all three of American’s unions were appointed to the unsecured creditors committee. Any plan of reorganization by a party other than AA will have to convince the committee their plan is better for all stakeholders. Given the messy labor situation that remains at US – six years after its merger with America West – I sincerely doubt anyone would find a US bid credible… especially American’s unionized workforce.
That’s why, at least right now, I simply don’t see a merger happening, despite industry analyst Vaughn Cordle’s contention that, “regardless of the ugly nature of merging two suboptimal business models and different unions, American's best option is to merge with US Airways.” My first question is, why would you even think of merging two suboptimal business models in the first place? So that you can compete directly against balance sheet and network rich United and Delta?
There is another option I don’t think many analysts have considered. I could see a competing plan led by British Airways and other oneworld partners that would have the potential to win if the AA case gets to the point where outside parties are free to submit alternative PORs – even at today’s 25% foreign ownership limit. If you believe AA will become a smaller entity over the coming months, the one sure thing is AA’s network will be optimized to maximize revenue generation with its new joint venture partners. That’s precisely what STAR is doing through United and SkyTeam with Delta.
The Sky Is Not Falling
Over at Terry Maxon’s AirlineBiz blog is a letter from TWU President Jim Little decrying American’s filing with $4.1 billion in cash and thus a near term ability to pay its current obligations. I urge you to read the letter in full and the lack of reasoning throughout. What did Little expect the company to do when he refused on numerous occasions to step-up and tell his TWU members the cold truth that something is better than nothing? He has had a number of opportunities over the past five years to negotiate an agreement with American that the company could afford.
The bottom line is bankruptcy is not a big deal. This is not the industry’s first rodeo. American’s problems are bigger than a check labor could write outside of bankruptcy, but sadly, the employees will pay much more inside of bankruptcy. As APA President Dave Bates told The Wall Street Journal, "Sometimes in life it's easier to have something imposed upon a person than have them agree to it voluntarily." Sad commentary indeed.
Yes, one of these days........ LOL
Once upon a time there was a 320pilot who wasn't full of crap. It was just for one day.. And it was long time ago!
Stand back! he's on a tear now!!!!!!
Did you know the author is a college student?
He thinks AA should abandon JFK for PHL!!!! From the link.... Bottom of the page.
LOL!!!
"
With regard to a LCC-AMR tie-up, I think Charlotte is very complementary to the AA network (Miami is largely a U.S. to Latin America/Caribbean hub) and Phoenix would provide a better presence in the West (LAX is AA's smallest hub). I agree that JFK and PHL don't complement each other; what I was arguing was that the combined carrier could focus on PHL (which LCC already dominates). They could then sell most of the JFK slots (probably worth somewhere between $500 and $800 million if I had to take a guess) or trade them for more desirable assets."
Being retired means that boeing boy has years of experience in the airline business.He has seen eastern,midway,twa and other airlines go off the map.I also am retired and while I make a post now and then,I don't spend hours on Airline forums.Its just a way to keep in touch with a line of work that was a part of my life.
Keep posting jim,I enjoy your insight along with many others. :
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