Worldspan Sold

Finally, some indisputable proof that at least part of the TWA transaction resulted in a profit for AMR.
ATLANTA, Mar 4, 2003 /PRNewswire via COMTEX/ -- An agreement was signed today by Travel Transaction Processing Corporation, newly formed by Citigroup Venture Capital Equity Partners L.P. and Teachers'' Merchant Bank, to purchase Worldspan L.P. from its three airline owners. The transaction, scheduled to close in mid- 2003, is subject to financing, governmental and regulatory approvals, and other customary conditions the satisfaction of which may not be guaranteed.
This is a momentous day for Worldspan''s customers, suppliers, and employees, said Paul J. Blackney, president and chief executive officer of Worldspan. Through our new relationship with Citigroup Venture Capital and Teachers'' Merchant Bank, Worldspan will continue to enjoy ownership that is committed to helping Worldspan increase growth prospects, continue in our relentless pursuit of excellence, and lead the travel technology industry in innovation.
Worldspan recently completed fiscal year 2002, in which revenues and profits grew during a very difficult year for the travel industry overall, Blackney said. This performance is testimony to the effective business models Worldspan has created, our successful partnerships with a wide range of travel industry leaders, and the dedication and commitment of our gifted staff. Worldspan has invested many, many millions of dollars in its network, systems, people, and product developments over the past five years, providing the company and its customers with the broadest, most technologically advanced platforms and product line in the industry. Worldspan is well positioned for the future.
About Worldspan
Worldspan is the leading travel technology resource for travel suppliers, travel agencies, e-commerce sites and corporations worldwide. Utilizing the fastest, most flexible and most efficient network and computing technologies in the industry, Worldspan provides comprehensive electronic data services linking thousands of travel suppliers around the world to a global customer base. The company offers industry-leading Fares and Pricing technology such as Worldspan e-Pricing(SM), hosting solutions, and customized travel products, including Worldspan Travel Button®. Worldspan enables travel suppliers, distributors and corporations to reduce costs and increase productivity with best-in-class technology like Worldspan Go!® and Worldspan Trip Manager®. Headquartered in Atlanta, Georgia, Worldspan is owned by affiliates of Delta Air Lines, Inc. (DAL) , Northwest Airlines (NWAC) and American Airlines (AMR) . Additional information is available at www.worldspan.com.
 
Let me add some more indisputable proof, yesterday AA market cap was 400 million, Worldspan is being sold for about 1 billion, that means AA will walk away with 260 million (26% Stake), that comes out to 65% of AA's current market cap. Now add to that the value of the slots AA got in the northeast which are valued at around 500 million and AA actually made money on the TWA buyout. Plus AA has been getting dividends from Worldspan for the past 2 years, yes, unlike AA worldspan has been profitable. TWA used to get in the neighborhood of 25-30 million annually from it's stake in worldspan. I really love when uninformed AA people tell me how TWA is a drag on AA, it looks like with the money from the sale of Worldspan, TWA might be the only thing keeping AA out of a chapter 11.
 
Those slots are about as valuable to AA right now as 300 acres of farmland in Kansas are to a real estate developer in California....

None of the other majors are looking to add capacity at LGA and DCA, and exception slots seem to be available for the new entrants who want them. That $500M value was quoted in 2001. They're worth something, but nowhere near that value today.

The upside to Worldspan is that there was no cost of ownership for AA, unlike taking on aircraft, employees, and retirees.
 
WORLDSPAN ownership

1. DELTA =40%

2. NWA =34%

3. TWA(AA)=26%

TWA as the third owner, had the least say. Every time there was an earnings report they would say how wonderful things are going to be when we sell Worldspan. Now that its happened its a non event. TWA was never able to harvest WORLDSPAN's value. AA is making money from TWA, but AA didn't acquire TWA for it financial performance. TWA was acquired for ST. LOUIS. Everything else was just part of the package. IT is TWA working the ST. LOUIS hub, maybe the results are different then TWA people would like them to be BUT they still have jobs, and complain. HOW UNGRATEFUL.
 
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On 3/5/2003 11:00:13 AM JFK777 wrote:

AA is making money from TWA, but AA didn't acquire TWA for it financial performance. TWA was acquired for ST. LOUIS. Everything else was just part of the package. IT is TWA working the ST. LOUIS hub, maybe the results are different then TWA people would like them to be BUT they still have jobs, and complain. HOW UNGRATEFUL.
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Here we bloody well go again.... sigh.

I can already smell the dead horse being brought in here to be beaten.

Peace, please?
 
JFK777:
Your assumption that TWA was only bought for the STL hub is absolutly incorrect. If the STL hub was the only reason, then why didn't AA sell the northeast slots to CAL when CAL wanted to pay 1/2 billion for them? STL hub was only a part of the story, the key slots in the northeast played a very big role in buying TWA. AA needed the same presence as US and DAL in the northeast lucrative market, and got that capability with the TWA buyout. Also your forgetting that in the 21/2 years in the Caribbean, TWA became the number 2 carrier behind AA, remember the brand new terminal PR government built for TWA in SJU. This action alone was pulling down AA yield, so with the buyout AA once again became untouched in the caribbean. AS for your silly remark about people still having jobs at TWA and being ungrateful, lets look at some numbers, When TWA was acquired there were nearly 21,000 employees, that number was down to just over 10,000 at the end of the 2nd Q of 2002. That number is now at toughly 8000 and will be just under 7000 by the end of this year. That is a whopping 66.6% of the TWA employees gone by the end of this year. So your assumption of being grateful to have a job is hardly true. I find it amazing that whenever I bring up cold facts, the AA people have no answer, just some empotional outburst, like yours.
 
Its easy to point the finger else where when things are not going the best for us isn't it? I think accepting things and moving on has a lot of merit. The road ahead looks scary for all of us.
 
And if AMR hadn't pissed away $1B+ on TWA all 21000 would be looking elsewhere for work and AMR would still be sitting on $3.5B with a Ch. 11 filing much less likely.
No emotion---just some cold, hard facts.
 
Red:
you typify the uninformed. AA spent roughly 700 million on the TWA purchase not 1+ billion, I don't know where your getting your numbers. Lets see 500 million the value of northest slots and 260 million from worldspan, not to mentions the 30 million or so in dividends and you have 790 million, numbers don't lie, AA actually made money on the transaction, not lose money. Add to these numbers the goodwill tax rightoff and the TWA losses carried forward for tax purposes and AA came out smelling pretty good on this deal. Certainly no drag as some F/A has suggested in MIA.
As for your assumption that all 21000 would be on the street, once again that is false, CEO Bill Compton testified in front of congress and the courts that the BK was AA's idea in order to shed itself of the Icahn ticket agreement and other unwanted contracts. So would TWA have been out of business, your guess is as good as mine, maybe, maybe not, AA did receive over 100 million in government grants after 9/11 for TWA's market share. However, one thing is certain, you just have to look no further than other majors, if there was no TWA purchase, then the bottom 30% of the AA senority list at all it's unions wouldn't be around either. Has AA and it's unions benefited from the TWA transaction, absolutely.
 
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On 3/5/2003 1:03:49 PM flyboymd8 wrote:

Red:

you typify the uninformed. AA spent roughly 700 million on the TWA purchase not 1+ billion, I don't know where your getting your numbers. Lets see 500 million the value of northest slots and 260 million from worldspan, not to mentions the 30 million or so in dividends and you have 790 million, numbers don't lie, AA actually made money on the transaction, not lose money. Add to these numbers the goodwill tax rightoff and the TWA losses carried forward for tax purposes and AA came out smelling pretty good on this deal. Certainly no drag as some F/A has suggested in MIA.
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At one point after 2Q2001, I sat down and did a cursory analysis of what I expected the financial performance of the TWA LLC arm of AMR to be, as they weren't putting out specific #s. I don't recall all of my assumptions, but there were a few:

1) TWA LLC would be paying going AMR rates for leases.

2) TWA LLC would be paying going AMR rates for fuel

3) TWA LLC would be paying the AMR rates for labor, but would also see improvements in productivity (this doesn't capture the fact TWA's force was on average significantly older, but it does capture some of the effect that TWA workers, while paid significantly lower rates, were also still some of the most expensive in the industry as a result of productivity)

4) TWA LLC would be pulling in lower yields than AA (I assumed some of the downturn in yields was because of TWA, some was the economy - but that TWA yields still improved thanks to the elimination of Karabu).

The fact is, that after applying 1) and 2) to TWA's prior financial performance and to the numbers they posted in 1Q2001 and 2Q2001, TWA LLC would have pulled a fair profit. Add in the yield improvements and the labor costs, and it appeared at the time that the TWA operation would have been marginally profitable.

Now, after 9/11, things clearly got worse... At this point, I would say TWA became more of a drag on AA, as the purchase weakened AA's balance sheet. The real question is how badly this has impacted AA in the end. I would guess that all this has done is sped up the inevitable - that AA is a month or two (max) closer to bankruptcy than they would have been without the TWA purchase. So, for AA employees to claim that the TWA purchase is why they are in bad shape I would say is far from the truth. Has it hurt? Sure, but the reason why it has hurt could not have been predicted at the time of the purchase. Had the economy not tanked, the decision may still have been a positive one.
 
Whatever, with any luck AA will make enough on the deal to cover what they paid out for executive management country club memberships in January. What was that amount again......oh yeah.... $400,000.00 !!!!!
 
So, anyone...how much more time will this sale give AA before heading to BK? Is this the shot in the arm AA needs at this point re: cash?..or was this all figured in with the time table and figures b4 the sale...just wondering?