Unsubstantiated rumor--merger talks in Dallas

[notquiteUS]

More merger rumor talk... *yawn*

 

[jimntx]

...but look at AA's track record with non-ORD/DFW hubs: SJC (twice), BNA, RDU and STL.

Not to mention Reno. I've been told that Reno had a couple of hundred (or more) departures a day from Reno at the time AA purchased them. Now, I think we have something like 5 or 6 per day--either to DFW or ORD. We no longer even have LAX or SFO departures--well, we do, but not mainline.

Why anyone would think merging with any part of AMR would be a good thing is beyond me. Lord knows, we've done our part to reduce the industry overcapacity. Unfortunately, it has been at the expense of people at the bottom of the industry. But then, that's pretty much true of mergers in any industry.

 

[Poug Darker]

In 1996, AA and Boeing reached a 20 year agreement that AA would buy mainline airplanes exclusively from Boeing; later, so did DL and CO. In return, AA received very favorable terms, including pricing and production positions. When Boeing merged with M-D, the EU required that Boeing not hold any of the three to the exclusivity parts of their agreements. Of course, the EU can't make AA (or DL or CO) buy Airbus planes.

Thanks for the reply. So, its a very old agreement without any teeth, and would not preclude acquiring AB airframes in a merger situation, n'est pas?
I appreciate the explanation, thank you.
Cheers

 

[Poug Darker]

No, they don't. TPG has a packet of money. If they had wanted to give it to AMR for any purpose they would have done so long before now. They were only interested in getting a piece of AMR and OneWorld in return for helping OneWorld keep JAL. The money that AMR was going to put into the deal was minimal, relatively speaking.

Dude, the credit is out there, and AMR has gotten the approval stamp on the load app. So, big deal, the company that is purchased changes, the money is still there.

Evidently, you haven't seen the various press releases from AMR--specifically, the AA member of the family--regarding their plan "going forward" to concentrate on their major "corner post" hubs (their term, not mine)--LGA/JFK, MIA, ORD, DFW, LAX--and reduce flying in the other "minor" major locations--such as SFO, STL, DCA, BOS, and RDU.

So, if AMR is reducing RDU and DCA, this could be a positive merger signal - US is strong in CLT and DCA. I guess BOS is outta luck.

Do you know for a fact that the slot swap between LCC and DL has been approved? Last I heard, the DOJ or the DOT was putting up some requirements that would make the deal less than attractive to DL if they have to be implemented.

The DOJ said OK with conditions, it remains to be seen what will happen: a renogiation with the DOJ (most likely), go with it as is (eh?), or a cancellation of the deal (not likely).

Just between DFW, ORD, MIA, and STL, AA has over 30 departures a day for DCA, and an equal number of return flights. If you add BWI and IAD to the mix, there is another 10 or more, and that is only mainline. We also have American Eagle flights to the three DC area destinations. And, instead of increasing these flights there is some talk of cutting back and utilizing the a/c on more lucrative destinations.

You're looking at DCA as a destination - US looks at it as an ORIGINATION point, where people want to go more places than 4 or 5.

These rumors have been around for years. If that vaunted cash pile mentioned in your talking point #1 were real, don't you think that AMR would have established a SE hub long ago (assuming that they even want one. I've been here 10 years and I don't see that much fascination with the Southeast coming out of Centreport--HDQ).

Yo, dude, only 10 year? Remember RDU. Howabout BNA?

And, yes there was some interest in the shuttle previously. The operative word being previously. There was some interest in Fokkers and Airbusses at AMR previously, but not anymore.

don't kid yerself, the shuttle is still a valuable asset, but only if you have a network to support it.

Beats the heck out of me, but do you see anything new being bought at AA that isn't made by Boeing?

Some other poster explained the agreement - it seems it would not be an impediment to a merger.

I know nobody wAAnts to be involved in AAnother merger, but I'm not suggesting it is a good ideAA, just that recent events seem to point towAArds a scenAArio wherein everyone's keyboAArd will double and capitAAlize every A at LCC.
Cheers.

 

[ROACLT]

Some other poster explained the agreement - it seems it would not be an impediment to a merger.

I know nobody wAAnts to be involved in AAnother merger, but I'm not suggesting it is a good ideAA, just that recent events seem to point towAArds a scenAArio wherein everyone's keyboAArd will double and capitAAlize every A at LCC.
Cheers.

Maybe the West to Republic, East to AA rumor is finally coming true!

 

[aafsc]

Since the first two words of this thread is "Unsubstantiated rumor" here is another one: In 2001 when AA decided to purchase TWA's assets, it was rumored that an AA executive by the name of Gerard Arpey objected to this deal, or at the very least thought it was a very bad idea. If true, he was absolutely correct. At that time he was not the CEO but held a title just below it (VP of operations I believe), Don Carty was the CEO then. If in fact Arpey had the insight to know TWA was a bad deal for AA, he will know that a deal with US would be just as bad.

 

[N965VJ]

You are correct about the airlines' HQ's; but the meeting was in Dallas for a reason. It was keeping the AA people away from speculation.

Well that plan didn't work very well now, did it?

More merger rumor talk... *yawn*

Don't you mean *yAAwn*?

 

[wings396]

Since the first two words of this thread is "Unsubstantiated rumor" here is another one: In 2001 when AA decided to purchase TWA's assets, it was rumored that an AA executive by the name of Gerard Arpey objected to this deal, or at the very least thought it was a very bad idea. If true, he was absolutely correct. At that time he was not the CEO but held a title just below it (VP of operations I believe), Don Carty was the CEO then. If in fact Arpey had the insight to know TWA was a bad deal for AA, he will know that a deal with US would be just as bad.

Please keep in mind that US is not the same as TWA, nor is US in the same condition as TWA was when purchased by AA. Other than the STL hub, TWA had already been stripped of all of it's assets. AA purchased TWA to eliminate a competitor, not to strengthen it's route structure in parts of the country where AA was lacking. Here again, we can get into the debate of the CLT hub, DCA, PHL, and the shuttle.

 

[Poug Darker]

AA's hq is in Fort Worth, not Dallas. Southwest's hq is in Dallas. Maybe US and WN are doing a deal? 😀

You know, y'all are abit touchy down there in the metroplex, especially about differentiating between Dallas and Fort Worth.
God forbid you call DFW "Dallas", not "Dallas Forth Worth".
To most people, if you fly into DFW, you're in Dallas - no matter where you go in a one hour radius of the airfield.
So if you flew into and back from DFW, and you say the meeting was in Dallas...hey, it might have been in Fort Worth---but who really cares?
Close enuf.

 

[FrugalFlyerv2.0]

Please keep in mind that US is not the same as TWA, nor is US in the same condition as TWA was when purchased by AA. Other than the STL hub, TWA had already been stripped of all of it's assets. AA purchased TWA to eliminate a competitor, not to strengthen it's route structure in parts of the country where AA was lacking. Here again, we can get into the debate of the CLT hub, DCA, PHL, and the shuttle.

While US may not be in as rough of a shape as was TWA (down to petty cash, close to shutting the door), lets take a closer look. Other than DCA ops, US has been stripped of many assets (i.e. not much left at BOS, LGA terminal gone to DL). With the proximity of JFK, there would be reduction in ops in PHL. Carribean ops from CLT would probably be cut in favor of more flights from MIA. CLT could be a shadow of itself (another RDU?). Also, where is the value of competing head-on with SW from PHX and LAS?

What about the labor integration? AA unions would rightly demand a staple job.

IMHO AA would no doubt love to get the DCA ops, large parts of the PHL hub and eliminate large parts of the CLT hub (a la STL or RDU). AMR management might also love the opportunity to have the leverage of threatning to grow the US part of the ops vs. the AA part (or vice versa) to get more concessions out of employees, but it is a gamble for which the current AMR management doesn't have the balls to go for.

No doubt there are parts of US which I'm sure AA covets, but I doubt they have the balls to deal with the ensuing labor integration problems as well as taking on more debt to do the deal (not just the purchase but the $$$ needed to assimilate US into the AA operation). At least not right now.

 

[BoeingBoy]

The labor integration, at least for unionized groups, would be done in accordance with the law passed by Congress unless the same union represented the equivalent employees on both sides (then that union's merger policy would apply). So the AA employees could demand all they wanted, but it wouldn't change anything (although another reason for labor unrest is the last thing AA needs).

The merger could be done via a stock swap, so no money needed there. However, AA would take on US' debt/obligations. Plus, as you said, the cost of the integration. Those would represent a sizable amount of money, mostly the debt/obligations. Would AA want, for example, all the CLT/PHL/PHX facilities that US is committed to? The Airbus orders? Without US being in bankruptcy, AA couldn't just walk away from those.

Of course, that brings up one possible explanation - that Parker sees bankruptcy as not only inevitable but coming sooner rather than later and is looking for a believable plan of reorganization which would maintain at least parts of US that would be absorbed by AA.

Or a high level meeting, if it actually occurred, was for some completely unrelated purpose...

Jim

 

[Dog Wonder]

Or a high level meeting, if it actually occurred, was for some completely unrelated purpose...

Jim

AA wanted to pump Parker's brain for his customer service initiatives.

 

[Poug Darker]

While US may not be in as rough of a shape as was TWA (down to petty cash, close to shutting the door), lets take a closer look. Other than DCA ops, US has been stripped of many assets (i.e. not much left at BOS, LGA terminal gone to DL). With the proximity of JFK, there would be reduction in ops in PHL. Carribean ops from CLT would probably be cut in favor of more flights from MIA. CLT could be a shadow of itself (another RDU?). Also, where is the value of competing head-on with SW from PHX and LAS?

What about the labor integration? AA unions would rightly demand a staple job.

IMHO AA would no doubt love to get the DCA ops, large parts of the PHL hub and eliminate large parts of the CLT hub (a la STL or RDU). AMR management might also love the opportunity to have the leverage of threatning to grow the US part of the ops vs. the AA part (or vice versa) to get more concessions out of employees, but it is a gamble for which the current AMR management doesn't have the balls to go for.

No doubt there are parts of US which I'm sure AA covets, but I doubt they have the balls to deal with the ensuing labor integration problems as well as taking on more debt to do the deal (not just the purchase but the $$$ needed to assimilate US into the AA operation). At least not right now.

I agree about PHX. LAS is already gone. CLT is positioned to compete with DL in ATL, and due to its cost per pax, would be very cheap to maintain or grow.
Lots of business in the Carolinas need transportation, and closing CLT would not be a good strategic move.
Paring down ops in PHL would be a good move as on most days US stuffs about 50 pounds into that 10 pound bag and expects it to work.
Hey, if AA is reducing BOS ops, who cares about US's BOS ops, other than the shuttle.
Its still a good fit, and staple jobs are not legal in this country anymore. The clandestine meetings (yes, more than one) in the Dallas area have people seeing eagles and thunderbolts in their future......
Cheers.

 

[aafsc]

Please keep in mind that US is not the same as TWA, nor is US in the same condition as TWA was when purchased by AA. Other than the STL hub, TWA had already been stripped of all of it's assets. AA purchased TWA to eliminate a competitor, not to strengthen it's route structure in parts of the country where AA was lacking. Here again, we can get into the debate of the CLT hub, DCA, PHL, and the shuttle.

I would say that US IS the same as TWA in terms of the number of trips through bankruptcy, the value of it's assets, and the fact that the employees of both airlines yearned (and are yearning) for a transaction as a means to salvation and the advancement of their moribund, stagnant careers (in terms of pay and international widebody flying opportunities) at the expense of the employees of the other airline. A quick analysis of US's assets with respect to AA:

BOS- AA pulled flights out.
LGA- AA wanted to actually return slots to the government if they would annul them forever; So why would they need US's. Also, aren't most if not all of US's slots commuter slots?
PHL- To close to JFK and not needed. In the event of US liquidating, AA could easily fly the routes it wanted with it's own metal.
CLT-AA has shown no recent interest in having a hub in the Southeast because AA feels it does not need one. In the event of US liquidating, AA could, like in PHL, fly the routes it wants with its own metal. If they did want a SE hub, Airtran would be the remedy, bigger city, smaller airline, and easier to integrate workforces.
PHX-Not needed. AA could add a few flights on it's own metal if warranted.
The shuttle- AA might want it but it is not as valuable as it used to be.
DCA- I think AA would want this for sure but not at the extreme expense and integration headaches that would result in an acquisition/merger of US.

Other points to consider are fleet compatibility, service standards, and AA's relation with it's own employees.
Some will say "Look at DL/NW, they have a diverse fleet." That is true because DL obviously does not care; however, I can assure you AA DOES. Management goes on and on about how the greatly simplified fleet saves millions in terms of parts, training, and scheduling to the point were sick of hearing it. US's fleet is by far very different from that of AA. In terms of service, AA goes out of it's way to cater to higher paying passengers while US has done nothing but defecate on them. Last but not least is the effect on the moral of the AA's employees. At present AA employees are, to put it nicely, not at all happy with management. We would regard a merger with US as an assenine business move (like TWA) and slap in the face; this would make our blood boil over and kill the remaining moral that still exists as well making it near impossible to reach labor agreements.

The question is, do the value of US's assets far exceed the costs and headaches of integration? The answer is clearly NO. AA should just wait until it dies and cherry pick what it wants, DCA, shuttle, etc. And if US is able to continue as an independent or merges with someone else like republic, then no big deal, AA hasn't lost anything.

 

[FrugalFlyerv2.0]

The labor integration, at least for unionized groups, would be done in accordance with the law passed by Congress unless the same union represented the equivalent employees on both sides (then that union's merger policy would apply). So the AA employees could demand all they wanted, but it wouldn't change anything (although another reason for labor unrest is the last thing AA needs).

I know that these boards are not representative of AA employees, but I think there is a good possibility that the nAAtives would 'burn the place down' if they did not get something close to a staple job.

The merger could be done via a stock swap, so no money needed there. However, AA would take on US' debt/obligations. Plus, as you said, the cost of the integration. Those would represent a sizable amount of money, mostly the debt/obligations. Would AA want, for example, all the CLT/PHL/PHX facilities that US is committed to? The Airbus orders? Without US being in bankruptcy, AA couldn't just walk away from those.

One way to make the AA - US deal plus the subsequent resulting entity ultra competitive would be for both companies to go through the US bankruptcy court system. This would get rid of the 'crappy' contracts/obligations for both companies. However, can you just feel & see the love from labor as more concessions are extracted?