UAL/CO in merger talks

[Hopeful]

Anyone think AMR won't want to be left out in the cold?

Maybe AMR/NWA next.


http://biz.yahoo.com/ap/061213/airline_con...tion.html?.v=11

 

[FA Mikey]

With a strong route network and a large cash position AA may find itself the target of an acquisition. Either through a buyout by a group like TGP or some other carrier looking for a strong cash position.

 

[jimntx]

Mikey, did you mean acquisition? I wouldn't worry too much about a UAL/CO merger at this point. Remember, NW still has the "golden shares" in CO that give it the power to block any merger/acquisition activity vis-a-vis CO.

UAL would probably have to give up more than they are willing to give--money and/or routes--to get NWA to approve the merger.

 

[FA Mikey]

Why yes I did mean acquisition.

 

[AirwAr]

...
I wouldn't worry too much about a UAL/CO merger at this point. Remember, NW still has the "golden shares" in CO that give it the power to block any merger/acquisition activity vis-a-vis CO.
...

Unless AA is part of their solution and takes over NW, then I think that negates the Golden Share.

 

[eolesen]

Mikey, did you mean acquisition? I wouldn't worry too much about a UAL/CO merger at this point. Remember, NW still has the "golden shares" in CO that give it the power to block any merger/acquisition activity vis-a-vis CO.

UAL would probably have to give up more than they are willing to give--money and/or routes--to get NWA to approve the merger.

Not necessarily, Jim.

This was discussed in PlaneBusiness either last week or the week before, and there is a change of control provision in it which may have already negated NWA's veto power.

From a NWA SEC filing:

Section 4: Master Alliance Agreement

iii Additional Termination Rights

(a) In the event of a NW Change of Control, each of CO and NW shall have the right to terminate the Master Alliance Agreement on 6 months' prior written notice, without liability or penalty to the other party.


(d) For purposes of this term sheet, a "Change of Control" with respect to either NW or CO shall mean any merger, reorganization, share exchange, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving NW or CO, or any sale or disposition of all or substantially all of NW's or CO's airline assets on a consolidated basis, involving, or the acquisition of beneficial ownership of 25% or more of the equity securities or voting power of NW or CO by, a third-party air carrier or carriers with annual passenger revenues in any such carrier's most recently completed fiscal year in excess of $1 billion, or an affiliate of any such third-party air carrier(s), or the execution of definitive agreements in respect of any such transaction.

So, we know NWA is going thru a Ch.11 reorganization, and if the stock is cancelled, a recapitalization event takes place. Either event gives CO the right to terminate the agreement without penalty, and I think it's just a matter of time before they invoke that clause in the agreement.

 

[jimntx]

I didn't know that. However, NWA could still delay any UAL/CO merger by at least 6 months until the notice of cancellation from CO took effect. I don't think any of those outs--stock exchange, reorg, etc.--would be "official" until NWA actually emerges from BK, would they?

 

[eolesen]

They're already in a reorganization -- that's the entire point of Chapter 11, and it's more or less inevitable there will be a recapitalization at some point. I can't think of a single bankruptcy proceeding where the debtor emerged on their own without having some form of investor getting an ownership stake in exchange for cash or debt forgiveness.

So, as I see it, CO could give notice now if they haven't already done so, and the burden of proof to rebut their claim would fall on NWA. Call me a cynic, but it's entirely possible that CO has already given notice, but it hasn't been made public by either party. Failing that, I'm sure that the six months notice period could be waived by NWA in exchange for a small payoff penalty.

 

[jimntx]

Granted. The more I think about it, I think you are right that the notice has already been given. Otherwise, I doubt it would have been made public that CO and UAL are even exchanging Christmas cards, much less in preliminary merger talks.

 

[FWAAA]

Anyone think AMR won't want to be left out in the cold?

Maybe AMR/NWA next.

Count on it. About time the long-needed and long-awaited industry consolidation took place.

AA with 747s once again. How sweet is that?

Well, until AA can replace them with new 777s.

 

[ThirdSeatHero]

Count on it. About time the long-needed and long-awaited industry consolidation took place.

AA with 747s once again. How sweet is that?

Well, until AA can replace them with new 777s.

And UAL will probably end up with your 747s when you dump them, just like we ended up with some of your classics after you disposed of those many moons ago. Just don't send'em through a third party this time. 🙄

 

[TWU informer]

I think AMR will purchase NWA and then as with TWA and AirCal sell off most unwanted pieces for cash.

This move will be only to improve the AA int'l position.

American Eagle will be the new small aircraft domestic growth side of AMR.

AA will become strictly International And Coast to Coast long haul carrier. Eagle will handle most all of future domestic travel.

It doesn't take an industry guru to see that for sometime now AA domestic RPM's have consistantly decreased while Eagle has consistantly made likewise gains in domestic RPM's.

Industry Consolidation will not likely change this strategy but rather accelerate the strategy.

Just my humble opinion.