Who wants a merger with US?

[737823]

AA has a presence in PHL and CLT. If PHL was such a great market why do you see WN cutting back? They e ended the BOS and other New England routes (MHT & PVD) and downsized significantly. Even 700UW agreed US Air is "a pig with lipstick" and basically America West dba US Air. It's truly an abysmal carrier that doesn't offer real cutlery and glassware in first class, sub par meals are only served on flights exceeding 4 hrs, no IFE (limited wifi), recliner seats in many international flights, no first class, and oh did I mention they have a very limited route network? Charlotte maybe a fast growing metropolitan area and on paper BAC may have their HQ there but many of the execs live and work in the Boston and New York area and simply commute in. It should be no surprise BofA owns the Ritz Carlton located within their HQ building. I just don't see what CLT really contributes. AA isn't going to cut flights in MIA or DFW to retain CLT as a hub it just won't happen.

Josh

 

[wings396]

I do have a question for you when it comes to AA's labor costs with the 2 billion number. Given that UA, CO, DL, etc suffered losses over the years with bk filings, what would have made AA profitable during those times that the others weren't if they had equal labor costs?
I don't put much faith in that 2 billion comparison if AA had US costs.

 

[WorldTraveler]

The focus on equal costs misses the point that growing revenue is what will make the difference in whether AA can survive as a standalone carrier or if AA/US will generate revenue sufficient to improve their financial returns.
What has been clear after a decade of horrific airline restructuring is that costs eventually reach equilibrium with all other players - if they get out of whack, the nasty reset button gets hit and before long the "problem" is fixed.
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There is no reset button for revenue - BK doesn't change a thing w/ respect to revenue.
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It is also clear that revenue growth between carriers coming out of BK has been very different - and the biggest difference can be shown to be due to size - unless the carrier has a very specific market strategy that protects its markets from other carriers - as AS does.
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Otherwise, size rules. That's why AA/US is no more likely to solve the revenue deficit problem that US currently has any more than WN was able to compete against US in PHL and why WN is shrinking -not growing its presence in ATL. Furthermore, the slot swap changed a huge amount in the NE - but NYC is still a much higher value market than WAS and DL gained many more slots than US... thus there will be a disproportionate amount of revenue shifted to DL both because of the size of the DL operation and the impact the slot swap has on DL's ability to compete in markets like IAH, DFW, and CLT, all markets that had service basically only by the hub carrier. Throw in another large network competitor in those markets and it is very likely revenue shares (not just boarded passengers) will look a lot different in the fall and beyond after the effects of the slot swap and other capacity cuts that have to take place due to fuel prices take effect.
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AA/US still doesn't provide a large enough presence in Asia or continental Europe to likely be able to move revenue share in those regions. Remember that if US moves to oneworld, many of US' current continental Europe flights no longer work w/o an alliance partner on the other end.
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AA's creditors are going to look for hard evidence regarding revenue performance, esp. the ability to grow revenue to match the increase in fuel levels. They will have to see solid performance to justify any strategic move; it does them no good to agree to a merger and then watch the value of the stock the creditors receive drop.

 

[700UW]

US does offer real glassware in first class and has for a while.

WN is pulling out cause it cant make money against US in PHL.

And saying AA has a presence in CLT and PHL is like saying US has a presence in DFW and ORD.

US has WiFI on all the A321s and is currently installing it on the E190s and the rest of the Airbus family aircraft.

BOAs HDQs in in CLT and there is no Ritz-Carlton in it.

 

[737823]

US does offer real glassware in first class and has for a while.

WN is pulling out cause it cant make money against US in PHL.

And saying AA has a presence in CLT and PHL is like saying US has a presence in DFW and ORD.

US has WiFI on all the A321s and is currently installing it on the E190s and the rest of the Airbus family aircraft.

BOAs HDQs in in CLT and there is no Ritz-Carlton in it.

It wasn't offered on my recent flights, although I'm taking the shuttle to DCA Wednesday so we'll see. The official headquarters for BOA is in Charlotte however many of the investment decisions and senior leadership are in New York and Boston. I know people in senior management who commute to CLT every week from MA and have stayed in the Ritz-Carlton in their headquarters.

Josh

 

[luvthe9]

Sound familar.... http://www.thestreet.com/_yahoo/video/11486163/they-just-dont-get-us-airways.html?cm_ven=YAHOOV&cm_cat=FREE&cm_ite=NA&s=1

 

[700UW]

F/C meals are not on Shuttle flights.

I took the shuttle last Monday from LGA-DCA and it was only a 45 minute flight.

 

[signals]

I knew the DL fanboy wouldn't be Able to resist this thread. Please tell US all what your fascination is with bashing US on a daily basis is. Being that DL is the superior airline of the world, why does it thrill you to chime in about how a possible merger with AA will never happen, and how bad it woukd be. I honesty think that you fear that if would be a serious threat to DL.

So...how did Parker's hostile take.over go?

 

[eolesen]

why WN is shrinking -not growing its presence in ATL

If growing by 1800 seats a day is shrinkage, I'd hate to see growth.

WN+FL April Schedule: 185 departures @ ATL
WN+FL June Schedule: 203 departures @ ATL
WN+FL July Schedule: 204 departures @ ATL
WN+FL Sep Schedule: 197 departures @ ATL
WN+FL Oct Schedule: 197 departures @ ATL

~25,000 daily seats offered last week, >~26800 seats on Oct 29

If you only look at the difference between the summer & fall schedule, sure, there's a net loss of 5 flights a day. DL by comparison drops by about 30 flights a day between summer & fall schedules.


As for PHL, yes, WN's down considerably from where they were pre-recession. They're also up about the same number of flights in the NYC area, presumably at PHL's expense.

 

[FWAAA]

I do have a question for you when it comes to AA's labor costs with the 2 billion number. Given that UA, CO, DL, etc suffered losses over the years with bk filings, what would have made AA profitable during those times that the others weren't if they had equal labor costs?
I don't put much faith in that 2 billion comparison if AA had US costs.

I'm not sure what you're asking. I brought up the $2.2 billion wage expense difference between US and AA to rebut the juvenile "well, US is profitable and AA is in bankruptcy" nonsense (not posted by you - but by someone else). US has reported some modest profits since its merger with HP, but only because its wages are so very low compared to AA's wages (with the highest labor costs). And yes, if you subtract $2.2 billion in costs from AA's financials each of the past six years, AA would have been, overall, very profitable.

And that doesn't even take into account the possible revenue improvements from relaxed scope - just the reduced labor expenses. US has been modestly profitable over the past several years because its employees are so very poorly paid. Remedy that and US loses money on the scale of AA.

 

[700UW]

AA employes more than US and has a bigger fleet, you cant compare the $2.2 billion in costs.

 

[xUT]

I'm not sure what you're asking. I brought up the $2.2 billion wage expense difference between US and AA to rebut the juvenile "well, US is profitable and AA is in bankruptcy" nonsense (not posted by you - but by someone else). US has reported some modest profits since its merger with HP, but only because its wages are so very low compared to AA's wages (with the highest labor costs). And yes, if you subtract $2.2 billion in costs from AA's financials each of the past six years, AA would have been, overall, very profitable.

And that doesn't even take into account the possible revenue improvements from relaxed scope - just the reduced labor expenses. US has been modestly profitable over the past several years because its employees are so very poorly paid. Remedy that and US loses money on the scale of AA.

Yes of course, AA's failing is the sole responsibility of labor costs. AA management was brilliant and would have made billions if it wasn't for pesky labor costs.
Yes, I think we get your meaning.

B) xUT

 

[FWAAA]

AA employes more than US and has a bigger fleet, you cant compare the $2.2 billion in costs.

You're smarter than that, aren't you?

The comparison is that AA's annual labor costs would be $2.2 billion less if AA paid its employees what US pays its employees and if AA enjoyed the US contracts and work rules. Although there are exceptions, most US employees earn substantially less than comparable AA employees. Hell, US East pilots are lower-paid than B6 pilots on the A320 and E190. Every AA captain is higher paid than US A330 captains. Every AA first officer is higher paid than US A330 first officers. The list goes on.

By the logic in your post, you could never compare two different airlines' labor costs unless the two airlines were of identical size and flew identical fleets. Like I said, you're smarter than that, right?

 

[FWAAA]

Yes of course, AA's failing is the sole responsibility of labor costs. AA management was brilliant and would have made billions if it wasn't for pesky labor costs.
Yes, I think we get your meaning.

No, that's not what I posted. AA's failings are many and management is to blame for many of the problems. Were it not for management's failings, AA's profit each year might have been $4 billion each year if it had enjoyed the $2.2 billion in labor cost savings compared to US' labor costs. But with AA's poor management, it would have been profitable with just the $2.2 billion.

AA's labor costs are by far the highest in the industry. That's not opinion, that's fact. Even AA's unions and their consultants have admitted it. That's not the "fault" of labor - it's management's fault for agreeing to the higher costs in the first place and then wishing, hoping and praying that the other airlines' labor costs would rise faster than they did. Arpey understandably believed that US pilots would not spend years and years earning substandard pay. Same with the US FAs. It was reasonable to believe that organized labor would successfully organize DL once NW employees were added. But none of that happened.

 

[WorldTraveler]

If growing by 1800 seats a day is shrinkage, I'd hate to see growth.

WN+FL April Schedule: 185 departures @ ATL
WN+FL June Schedule: 203 departures @ ATL
WN+FL July Schedule: 204 departures @ ATL
WN+FL Sep Schedule: 197 departures @ ATL
WN+FL Oct Schedule: 197 departures @ ATL

~25,000 daily seats offered last week, >~26800 seats on Oct 29

If you only look at the difference between the summer & fall schedule, sure, there's a net loss of 5 flights a day. DL by comparison drops by about 30 flights a day between summer & fall schedules.


As for PHL, yes, WN's down considerably from where they were pre-recession. They're also up about the same number of flights in the NYC area, presumably at PHL's expense.

On a year over year basis (the way capacity is normally reported), the combined WN/FL schedule at ATL is smaller than it was a year ago - by October 2012, WN/FL will offer about 1000 less seats per day than they did in the same period last year.


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FWAAA,
the sheer fact that AA's assumptions that it would be fine based on the failings at other carriers is a major management. But let's be clear that part of those assumptions led to AA mgmt failing to right size the AA workforce in the 2003 cuts believing they would be able to grow into their new capacity. When no other airlines shut down but instead reduced their costs below AA's, AA had no choice but to halt its growth - and stalled growth ALWAYS translates into higher CASMs because employees keep moving up the pay scales and aren't replaced by new workers at the bottom of the scale.
The reality is that AA mgmt was not near as aggressive in getting costs down in 2003 and it left the company in a position where they couldn't be competitive.... because they were so slow in realizing it (NW was the last major to exit BK and they did in 2007) and addressing it, AA spent several years losing its ability to compete.
AA mgmt had full control of those decisions - and because of both of those major mistakes, the price AA employees will have to pay to get the company turned around is much, much higher than if larger cuts were made one time - or even if they had to come back for a round two but had done it 3 years ago or more.
Given that AA has to be turned around or be sold in such a way that every one gets something at least as good or better than what they could get on a standalone basis, there isn't a whole lot of value in continuing to beat the "who was at fault" horse...