What's Next for US?

[Richard]

Reminder folks--discuss labor issues ONLY to the point of their effect on future transactions. Do NOT start arguing the issues here.

 

[Hope777]

Good Read, how UAL Used USAirways..... And CO came Running

http://blogs.wsj.com/deals/2010/05/03/what-sealed-continental-united-deal-jealousy/?mod=yahoo_hs

 

[LD3]

Can US stand alone? Probably, maybe, I think they can, but what do they need to do....

#1 Provide a good product at a decent price.
#2 Same as above
#3 Same as #1

 

[TBONEJ4J]

Institutional investors and mutual funds own 79% and care about one thing and one thing only - a profit on their investment and preferably sooner rather than later. The don't care about US per se - the airline, the employees, the long term future. All they care about is their investment making a profit and if a merger will provide that profit they're happy.

Jim

Therein lies the greater problem of the current business mindset. Short term return is the only goal.

Managing an entity with an eye to the medium or long term just doesn't matter anymore, or at the very least takes a distant second to the short-term give the shareholder a return right now philosophy.

The long term future success of an enterprise and the environment in which it operates should trump a scramble for short term returns. Unfortunately it doesn't. So everything is made in China and the US Airline industry is the envy of nobody.

I still think LCC investors would achieve higher returns via a well run standalone entity with at least 8% market share. But that would require somebody to run the place as a competitive airline.

 

[US1YFARE]

Good Read, how UAL Used USAirways..... And CO came Running

http://blogs.wsj.com/deals/2010/05/03/what-sealed-continental-united-deal-jealousy/?mod=yahoo_hs

If Dougie had no idea this was coming, then US is in big, big trouble.

 

[ChockJockey]

I hope US looks inward and focuses top down on it's own issues before attempting another ill-fated stab at consolidation. First and foremost, this pilot seniority integration issue has to be resolved. I don't know how much, if any, influence management has toward brokering a resolution, or if it really wants to, but this dispute is definitely slowing this company down. As one who is not in the pilot work group I don't feel that it's appropriate for me to weigh in too heavily on this ongoing dispute other than to say that as a member of one of many work groups that work for this company, and that has a stake in the future of this company as a going concern, the time has long come to put this acrimonious seniority integration battle in our corporate rear view mirror. Some pilots will tell other work groups to mind their business, but obviously this impasse is the business of every man or woman who punches a clock in this company.

As I have digested the broad outline of the dispute I can see both sides. As an east employee, I have worked with pilots who are frustrated with the whole process and who do not exempt their union leadership of culpability in this fiasco. I also know first hand of the sacrifices that our pilots and the rest of us have made to keep this company in business. At the end of the day, we may no longer have our pay, benefits, work rules and pensions, but as the dusk prevails and we come to find that we no longer have our seniority which is the only currency that lends itself to a relatively bearable existence in this industry in these times, then it's only natural to fight as long and as hard as we can to maintain what is left of that currency. But to fight to the death? When I think of the consequences to all involved it's not worth it.

If, and once the pilot issue is resolved then I hope we focus on delivering a good product. It would be great if management focused on raising morale and rededicated itself to the internal customer. It's no secret: The happier we are the happier our external customer is. The external customer is really pulling for us because they know that when we feel that Tempe is behind us then it'll make their journey that much better. There obviously has been some positives in terms of improving our customer service metrics. But we need to do more. We have to focus more on what makes us more attractive to the customer as opposed to what makes us more attractive to a potential merger partner. If we can accomplish that in action and in perception, then I believe the rest will take care of itself.

Let's face it folks: If we don't already know it then we need to realize that the rest of the industry wants us to fail. It was no secret that Delta at one time based their convalescence on our demise. It has been mentioned more than once that the best thing for the industry is if we shriveled up and died. Our competitors don't want us as people, but they want our assets as a company. We all have airline friends in other companies who love and care for us. And if we go under--and lose our seniority--they'll do what they can for us to get on with their companies to maintain our careers if we so desire. But we also know they won't be losing sleep if we tank. It's the nature of the beast. Long before United and Continental got together UA coveted our assets. We still have a valuable product. And great people executing this product from east to west. It's US vs. them now. And I don't mean east vs. west. We all need to hunker down and develop a bunker mentality to do what we have to do to not just survive, but more importantly to thrive. That to me is our mission as employees of this company.

We are a small airline now. We have to get stronger, bigger and better. We have to put our best foot forward from top to bottom. If we do so and things don't work out, then we all can hold our heads up and say we fought a helluva fight. Pulling together as a company will go a long ways toward ensuring our long term survival. Pulling against each other will hasten our demise. I hope before Tempe attempts to consolidate again elsewhere, that it leads an effort to fully consolidate right here.

Excellent post, my hat is off to you. 🙂

 

[back2CLT]

If Dougie had no idea this was coming, then US is in big, big trouble.

Of course he did. The interesting question that will never be answered is, if CO didn't respond like expected, would UA have actually consumated the deal?

A merged UA/CO still is consolidation, which Parker has been preaching. There will be come capacity reductions (Cleveland mostly, though overlap in hub markets) which should benefit US.



The most important thing to consider in my opinion is the huge opportunity to gain defective CO business travelers. I hate AA, DL and UA and I preferred CO, NW (pre merger) US and B6). Everyone has their quirks and a lot of CO loyalist who despise UA will be willing to give US at least 1 try. This is US time to shine. For a person like me, all my preferred legacy carriers have been merged out of existance except US.

What US needs to do at this point is focus on profitability, and secondly on developing a route structure that appeals to business travelers. I still contend a merger with B6 is the best answer, but absent that, the LGA/DCA swap would be a huge step forward, as well as expanding in Europe and South America. Ignore Asia for now, simply because they don't have a logical hub. Philly makes sense, but not until the A350-800 comes onto property in 7 years. Use that time return the airline to legitamacy.

Key destinations in my opinion BEFORE Asia.

Geneva
Stockholm
Moscow
Cairo
Vienna
Copenhagen
Bogota
Lima
Sao Paulo
Buenos Aries

Finally, US needs to come to terms with who they are. They don't have a glamorous fleet, and their hubs aren't in glamorous cities, BUT they can be a very profitable airline. PHL needs to be marketed correctly. Charlotte (the region) just needs time to grow organically. DCA will be a goldmine that needs nothing except investment in airport infrastructure. PHX...I don't know, downsize it and make a run at San Jose as a hub? 🙂

 

[jimntx]

Can US stand alone? Probably, maybe, I think they can, but what do they need to do....

#1 Provide a good product at a decent price.
#2 Same as above
#3 Same as #1

NO. NO. It can't be that! That's too simple. How do I know? That's what we keep telling the accountants that run AA, and they insist that is not the answer. Cutting costs (translated into the English--cutting front-line employee pay) is the only possible answer to the question, "How do we stay in business?"

(You must be some kinda communist if you think the customer should count in this equation?)

 

[wings396]

If Dougie had no idea this was coming, then US is in big, big trouble.

In a way, I'm sure that he did. Either way he got the consolidation ball rolling, so lets see how this all plays out. It MAY force further consolidation, and it may not. Some capacity will be taken out of the industry, and that will benefit everyone regardless of size. Let's not forget, that IF the CIC issue could have been worked around, that UA and US would have made a similar announcement a few weeks ago. It was not meant to be, and that is a shame. I have stated many times that I would have preferred to merge with UA instead of anyone else. None of this is within our control either way, so hang on and ride along until it stops.....

 

[nycbusdriver]

It will not be a sad day if it inspires Doug et al. to change strategy from looking anywhere for a deal to actually running an airline.

That's a scary prospect because I don't think Doug et al even KNOW how to actually run an airline. LCC functions mostly due to inertia and front-line employees who know what to do with NO supervision from Tempe.

In a way, I'm sure that he did. Either way he got the consolidation ball rolling, so lets see how this all plays out. It MAY force further consolidation, and it may not.

Just a thought....

Given the decades of competition between UA and AA to be the biggest carrier, I wonder if now AA will be able to even entertain the notion that they are a distant third in the game behind UA and DL. If I recall correctly, AA acquired TW rather suddenly after the second UA/US deal was announced in 2001. Some conjectured that AA made the move because they didn't want a combined UA/US to outpace them. Their deal was quickly approved since TW was in bankruptcy and death throes. Of course we all know that the DOJ nixed the UA/US deal.

I'm sure KOAT will now weigh in on this idea.

 

[FWAAA]

Dunno exactly why Don Carty decided to buy TWA, but here's a couple of reasons, in addition to simply "keepin' up with UA:"

1. TWA called AA, out of money and out of options with a big debt payment due in several days. Better to buy the entire company at the right low price if you hope to keep many or most of the customers. Let them go to Ch 7 and you may not be able to grab and keep the core customer base.

2. ORD was out of space and the Mayor was insisting that there was no need to reconfigure the runways (as is now occuring). STL had lots of runway space - great place to connect lower-fare passengers, freeing up ORD for more higher-yielding O&D.

AA had already agreed with UA and US to be a part of the UA/US marriage by taking half ownership in the NE Shuttle, transferring many AA F100s to the proposed DC Air and taking delivery of unwanted US 757s.

I don't see Arpey jumping to buy US now just to keep up with UA/CO. He sat on the sidelines while DL married NW (and obtained the NW NRT hub). He sat on the sidelines and made no serious play for CO. He made no move on UA while it was in Ch 11 (the best place to buy a money-losing airline). He made no move on UA over the past 3-4 years. I just don't see him all of a sudden thinking that buying US is a great idea.

 

[mweiss]

Some capacity will be taken out of the industry, and that will benefit everyone regardless of size.

That's often said, but I don't believe it to be true, based on the analyses I've done in the past.

Now, there are certainly markets for which yields could rise with this merger, though all of the connections between UA hubs and CO hubs have serious LCC (not US) competition. Any capacity reduction in those markets should, based on past experience, be soaked up by increased LCC capacity in those markets. It doesn't happen overnight, but it happens pretty quickly.

I'm curious what evidence exists that merger-related capacity reductions translate to increased yields in any significant 21st century markets. (n.b., I understand that there are some short, thin outpost markets that were served by two pre-merger hubs and are only served by one post-merger hub...but these don't have impacts that are significant to an airline the size of the current megacarriers.) Could anyone uncover something in BTS that I missed? I'm happy to be proven wrong here.

 

[goodgirl37]

Dunno exactly why Don Carty decided to buy TWA, but here's a couple of reasons, in addition to simply "keepin' up with UA:"

1. TWA called AA, out of money and out of options with a big debt payment due in several days. Better to buy the entire company at the right low price if you hope to keep many or most of the customers. Let them go to Ch 7 and you may not be able to grab and keep the core customer base.

2. ORD was out of space and the Mayor was insisting that there was no need to reconfigure the runways (as is now occuring). STL had lots of runway space - great place to connect lower-fare passengers, freeing up ORD for more higher-yielding O&D.

AA had already agreed with UA and US to be a part of the UA/US marriage by taking half ownership in the NE Shuttle, transferring many AA F100s to the proposed DC Air and taking delivery of unwanted US 757s.

I don't see Arpey jumping to buy US now just to keep up with UA/CO. He sat on the sidelines while DL married NW (and obtained the NW NRT hub). He sat on the sidelines and made no serious play for CO. He made no move on UA while it was in Ch 11 (the best place to buy a money-losing airline). He made no move on UA over the past 3-4 years. I just don't see him all of a sudden thinking that buying US is a great idea.

I think you are right, and especially so since US has its own labor issues in addition to AA. What could happen though, is this, AA could very possibly file BK, and void all contracts. Start talks with Dougie prior to doing this , with the agreement to use the BK to cut costs of the carriers and merge them. Cut all the fat, lean it up, take away all the workers benefits and work rules and then marry. Very likely possibility, otherwise, AA really cant compete for the corporate customers as well and will lose, with high labor costs and employees banging at the door for their money back (and rightfully so)..

 

[Hope777]

I think you are right, and especially so since US has its own labor issues in addition to AA. What could happen though, is this, AA could very possibly file BK, and void all contracts. Start talks with Dougie prior to doing this , with the agreement to use the BK to cut costs of the carriers and merge them. Cut all the fat, lean it up, take away all the workers benefits and work rules and then marry. Very likely possibility, otherwise, AA really cant compete for the corporate customers as well and will lose, with high labor costs and employees banging at the door for their money back (and rightfully so)..

USPA + APA = TROUBLE

NOT going to Happen. Just as the East Pilots Put USAir behind the 8-ball with Their Scope Issues as far as Piedmont Expansion (Yup Mesa and Fronteir-oops Republic got it all) the USPA will cause more trouble to the other 23000 Employees..........

 

[mweiss]

What could happen though, is this, AA could very possibly file BK, and void all contracts.

My recollection is that the Lorenzo law took care of this a couple of decades ago...you can't do that anymore.