What's Next for US?

[goodgirl37]

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

They could dump the pensions, get DEEP concessions, stiff creditors and come out much better than now, much much better. As it stands now, AAs costs are only going to rise, and they are at the top for labor costs. BK would right size them and US would make them bigger with more revenue than pevious. IF Arpey were to just file for BK, AA would like be taken over, possibly by US or dismantled by the others.

 

[ChockJockey]

PHX...I don't know, downsize it and make a run at San Jose as a hub? 🙂

What's wrong with PHX? If an AA/US combined carrier wants to compete in the West against DL in SLC and UA in LAX, SFO, and DEN then a hub in the west will be necessary because the 30 or so destinations AA flies out of their focus city ops in LAX probably wouldn't cut the mustard.

PHX has rapidly developing potential, currently serves about 80 destinations, is improving facilities, has plenty of gates, room for expansion, great flying weather and a tight operation. Why surrender it to SW and Allegiant?

 

[wings396]

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

There is a way around pretty much everything. AA could file for BK, then US could buy them out as part of their reorganization plan as HP did with US. Then US could dodge the COC language in the pilots contracts, and keep the AA name while imposing the lower wages and contacts of the US workforce upon everyone. I know, it sounds crazy, but these bean counters know how to screw the workforce from all angles.

 

[767jetz]

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

Actually, if you read the press release, there will be almost no capacity reduction as a result of the new United merger. All cities currently served by both companies will continue to be served. There is VERY little overlap. There may even be a bit more capacity added to account for hub to hub flying.

The only benefit I can see to other carriers is that consolidation brings a little more pricing power for everyone. For STAR members it brings more passengers into the fold and brand loyalty due to frequent flier programs. But let's face it, Delta didn't merge with NW to help the competition out, and neither did United and CO.

 

[wings396]

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.

I think that just about everyone including those from CO and UA agree that CLE is toast as we know it today. While I'm sure the combined airline will not bail out of IAD, I can see it being downsized a bit over time in favor of the markets served out of EWR. Even with the combination of CO & UA, they still lack a southeastern hub to compete with DL over in ATL. Just the thought of having 2 of your major hubs in the ATC nightmare cities of EWR & ORD are enough to send passengers in search of other routes to travel. Heck, those places make the delays in PHL look good.......

 

[BoeingBoy]

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

At the time, labor contracts were treated as any other contract - to be abrogated or kept at management's whim (with the judge's rubber stamp of approval). What changed was that labor contracts are now treated differently - there is a process that must be followed to abrogate a labor contract. But at the end of the day labor contracts can still be abrogated. That happened to the IAM contracts in US' BK2 before the membership ratified the company's offer - if the ratification hadn't happened the company offer would have become the new contract anyway.

Jim

 

[FutureUScapt]

Actually, if you read the press release, there will be almost no capacity reduction as a result of the new United merger. All cities currently served by both companies will continue to be served. There is VERY little overlap. There may even be a bit more capacity added to account for hub to hub flying.

DL sang the same tune 2 years ago, yet somehow CVG has less than half the flights it did two years ago, with more cuts likely if the DL/US slot swap goes through. This is all just political rhetoric at this point. You are right that there is little overlap and as a result there should be few reductions but there will be some - that's part of the synergies that come with a merger.

I think it will be interesting to see how well/how not so well IAD and EWR end up standing side by side when it comes to the international network particularly when it comes to some of the smaller destinations such as GVA or ZRH for example. IAD has the benefit of government traffic but EWR obviously benefits from an otherwise larger local market and I'm not sure they'd want to split the flow traffic between two gateways now that they are one airline. Time will tell.

 

[Dog Wonder]

What is next for US?

A period of angst, followed by a slow decline due to incursions into high-priced routes.

And perhaps, an epiphany about the law of diminishing returns.

 

[BoeingBoy]

DL sang the same tune 2 years ago, yet somehow CVG has less than half the flights it did two years ago

Yes, but how do you separate what was intended to occur when the merger was announced from the effects caused by the combination of the 2008 spike in oil and the 2009 global recession? Can one say with absolute certainty that the changes at CVG were intended all along but not revealed initially for political purposes, or were those changes a response to the double whammy of fuel/ecomony?

Jim

 

[floatingon9]

I would not call a merger with AA a merger in any sense of the word. Go ask 25,000 people from the former TWA what a merger means to them. American as a white knight to save your airline from the brink, hardly.

AA did not merge with TWA, it was an aquisition.

I think the AA/US deal would be great.

1. AA can dump the MD80 and replace them with US A319/320
2. AA will gain new widebody aircraft that is desperately needed with the A330
3. AA will gain new routes
4. Stronger NE Hub system with JFK & PHL
5. Major hub network with DFW, ORD, JFK, MIA, PHL, CLT and PHX
5. The deal would create a company that would rival the size of the UA/CO deal
6. I see jetBlue being bought out by AA too. They just switched to Sabre and the buzz in NY is it will happen

AA & US next?

 

[FA Mikey]

1. AA can dump the MD80 and replace them with US A319/320

They are doing that with a superior AC called the 737

2. AA will gain new widebody aircraft that is desperately needed with the A330

AA is not a fan of airbus and had a fleet of 787 coming on line. If AA desperately needed more widebody AC they could get some 777 to match the fleet they already have.

3. AA will gain new routes

To where? What routes does usairways have that AA could start service to at any time?

4. Stronger NE Hub system with JFK & PHL

Why on earth would you want JFK and PHL competing against each other. Its as goofy as having PIT and PHL as hubs or BNA and RDU. Lesson already learned.

 

[acmech]

AA did not merge with TWA, it was an aquisition.

I think the AA/US deal would be great.

1. AA can dump the MD80 and replace them with US A319/320
2. AA will gain new widebody aircraft that is desperately needed with the A330
3. AA will gain new routes
4. Stronger NE Hub system with JFK & PHL
5. Major hub network with DFW, ORD, JFK, MIA, PHL, CLT and PHX
5. The deal would create a company that would rival the size of the UA/CO deal
6. I see jetBlue being bought out by AA too. They just switched to Sabre and the buzz in NY is it will happen

AA & US next?

You are absolutly right. It was an aquisition.
25,000 people were dumped as well as most of the planes, facilities, and other assets.


That is what would happan to US in an aquisition. Then American and the rest of the industry will get what they want... the elimination of competition, a thorn in the side if you will.

 

[FutureUScapt]

Yes, but how do you separate what was intended to occur when the merger was announced from the effects caused by the combination of the 2008 spike in oil and the 2009 global recession? Can one say with absolute certainty that the changes at CVG were intended all along but not revealed initially for political purposes, or were those changes a response to the double whammy of fuel/ecomony?

Jim

That's a good point, but I'll point to the fact that CVG was already well off from its high, even back in 2008, and that the addition of DTW meant that it's purpose for flowing traffic over was greatly diminished/eliminated.

It sort of gets back to the same thing that happened in the years following 9/11. How many changes are you willing to say happened solely because of 9/11 vs changes that were inevitably going to happen anyways, but were perhaps accelerated by 9/11?

Why on earth would you want JFK and PHL competing against each other. Its as goofy as having PIT and PHL as hubs or BNA and RDU. Lesson already learned.

I don't really want to go down the avenue on speculating on specifics on a hypothetical AA/US but AA really has no room for expansion at JFK, absent the abolition of the slot program. Sure the new terminal may be state of the art, but AA can't really grow at JFK as it pleases. This summer, AA will have 100 departures at JFK whereas US will have 440+ from PHL. It would certainly be something worth considering - keeping PHL around as a traditional hub and treating JFK as more of an O&D oriented "focus city."

 

[SparrowHawk]

As a Customer I'm not all that ehthralled with ANY more mergers.

Competition is what makes companies lean and mean. Mergers in general mean LESS competition. Additionally, while seeking the ever ellusive "Synergies" the legacy carriers will see theii market share decline with business going to WN, B6, B9, NK, AS and others whose codes I don't know. It's a lot like the car business was in the late 70's & 80's. The then "Big Four" had 90% of the market and were turning out junk. Then lo and behold along came the Japanese and later Korean car makers and despite the significant improvement brought about by the increased competition still did nothing to stem the tide of the Asian car companies rising market share. Then 4 became three and recently three almost became one or two as their Asian competitors flourished.

Fast forward to the ailine business, WN is a great deal like Toyota. The domestic Big three could be compared to US, UA, AA & DL. The mergers will ultimately serve to DECREASE their overall market share as the LCC's step in and compete easily with their legacy competitors.

The common denominators for the Legacy's are:
Poor Customer Service
Poor Value for dollars spent
Horrid Labor Relations

It should come as no surprise that in general the LCC's perform much better in the areas mentioned above, the legacies have lost one critical tool domestically. They no longer have the pricing power now as the LCC's have grown enough market share wise that thye keep legacies honest with fares. So then the legacies gouge on their monopoly routes right up until the time that B6, Wn, or someone sees the yields and moves into the market and puts a stop to the price gouging and further squeezing the Legacy carrier. Why do you think the Legacy carriers have resorted to fee mania? Because their business model will not provide them with enough revenue to cover their bloated business model.

Mergers delay the inevitable march of the LCC business model. They have already reached "Critical mass" when it comes to pricing power. Next is more code shares amongst them,I could even foresee a LCC alliance world wide as things progress.

Mergers don't solve the problems legacies face they merely delay them. Not good for employees or customers.

 

[floatingon9]

They are doing that with a superior AC called the 737

AA is not a fan of airbus and had a fleet of 787 coming on line. If AA desperately needed more widebody AC they could get some 777 to match the fleet they already have.

To where? What routes does usairways have that AA could start service to at any time?

Why on earth would you want JFK and PHL competing against each other. Its as goofy as having PIT and PHL as hubs or BNA and RDU. Lesson already learned.

Um, AA really can't expand anymore at JFK. US Airways has over 400 departures per day at PHL. We will gain many routes to Europe AA does not serve, like:

1. Oslo
2. Tel Aviv
3. Athens
4. Stockholm
5. Amsterdam
6. Munich

I think the AA/US deal will be a reality sooner than later. Arpey can't stand the fact he is running the airline that was #1 and now is a distant 3rd.