AA and JetBlue?

[eolesen]

While I don't think anything is off the table at this point in time, IMHO UA would have to be broken up or be the "acquired" airline in order to leave Star. They've got the LH anti-trust immunity and "founding member" status in the alliance. I don't know what the process is for Star to vote UA off the island but I can't imagine UA going quietly, even if LH runs the alliance.

CP was a founding member of oneworld. Varig was a founding member of Star. Both eventually left.

If LH decides to start steering more of its connections onto B6 and US, UA can cry foul, but the net result is that they still won't be getting a cut of those tickets. At some point, Star could be more of a drag on UA than it's worth.

Airtran's 717s could be up for grabs soon enough. They're losing cash just as quick as anyone else, and they don't have a whole lot of assets they can try to monetize.

 

[whlinder]

Did CP leave oneWorld before being acquired by AC?

Star started with UA/LH/SK/AC/TG and RG joined later the same year. I don't know if they were a "founding member" or not.

LH might be able to route eastbound traffic (EU origination) on to B6/US but with UA controlling UA/LH westbound fares they'll be able to route all US-originating traffic on their metal.

 

[FWAAA]

I think AA might just do it for the JFK slots, the terminal and the EJets. The A320's are a nice plane and a nice bonus provided they want them, if not, lots of people would be very happy to take them off of their hands.

I don't see AA's need for another JFK terminal. AA just built a $1.3 billion edifice to replace the old terminals 8 and 9 and it was downsized by almost half after construction began. Apparently, the streetside concourse can be expanded on each end (as the downsizing consisted of shortening the check-in and main concourse areas).

 

[Barfbag]

I don't see AA's need for another JFK terminal. AA just built a $1.3 billion edifice to replace the old terminals 8 and 9 and it was downsized by almost half after construction began. Apparently, the streetside concourse can be expanded on each end (as the downsizing consisted of shortening the check-in and main concourse areas).

Building T8/9 was a construction logistical nightmare, both passengers and employees suffered. It was built using different contractors, many problems exist in T8 not being addressed. Whereas T5 is being built separately, looks great from the Airtrain that circles JFK.

Got an hour or more to kill at JFK take the Airtrain Terminal side, it's free. Stop in at Terminal 4
( Emp. Discounts apply, just wear ID, ) Lower level ( 24/7 ) Sparos Pizza and Beer, Great coffee shops, no need to TSA, or check in. Everything at T8 shuts down at 2200 hrs. ( except for the newstand )

Need to send a prayer to the Big Guy in the Sky, three denominational churches also located at T4.

 

[FrugalFlyerv2.0]

Did CP leave oneWorld before being acquired by AC?

IIRC, when AC bought CP (PWA Corp.?), CP ceased to exist and became a part of AC and therefore a part of *

When AMR along with Onex were initially trying to merge CP and AC, the plan was to have AC (the surviving name) leave * and join 1-world. AC (Robert Milton, an American I believe) challenged the take-over in court (in Quebec) which ruled that the AMR-Onex control of AC would be unlawful (too much foreign control). AMR-Onex walked away, forcing CP to sell itself to AC. Ofcourse AC should have done the business-smart thing and just let CP die but instead AC did the politically-smart / business-stupid thing and purchased CP and subsequently integrated it into AC (not without a year or so of HUGE operational problems that forced to lose focus and resulted in Westjet growing faster than it should have).

 

[ual777fan]

I don't see AA's need for another JFK terminal. AA just built a $1.3 billion edifice to replace the old terminals 8 and 9 and it was downsized by almost half after construction began. Apparently, the streetside concourse can be expanded on each end (as the downsizing consisted of shortening the check-in and main concourse areas).

1) Expanding the terminal would probably involve a significant capital expenditure, not to mention shutting down sections of the brand new terminal, which AA could avoid just by using the new Terminal 5. It would also prevent another airline from getting and going to the politicians and demanding slots just because they have facilities.

2) The is a hugely long waiting line for the E170/E190 jets. If AA purchased JetBlue they could get 50+ E190's and would have orders for an additional 50 more. Many of those E190 orders could probably be easily converted to E170 orders which would dramatically expand Eagles 70+ seat fleet (which AA would probably love to do with oil prices being what they are).

2.5) JetBlue also has a significant amount of A320's and a large number of A320 orders that have yet to be filled. This could allow for an accelerated MD80 retirements. Furthermore many of those A320 orders could be changed to A319 orders allowing for further fleet flexibility. Many airlines already fly both A320's and 737's and having such a large A320 fleet would reduce, if not eliminate, any extra operation costs associated from operating both fleet types. AA could even divest itself of many of the A320 orders, make a good bit of money doing it and partially pay for the transaction this way.

3) With JFK about to be slot controlled (it already is to a certain extent in the afternoons) buying JetBlue would give AA a ton of new JFK slots from which to expand from the airport both domestically and internationally.

4) Buying JetBlue would allow for American to have a significant domestic and international operations out of one airport in New York for the first time ever. This would allow for AA to finally turn JFK into a proper hub and would allow for much more effective feeding of the rapidly growing JFK European operation. Furthermore, it would finally provide real competition to the only real hub in the NYC metro area, Continental out of Newark.

4.5) Having to compete with a UA/CO combination out of EWR and an expanded Delta presence out of JFK (which includes an effective domestic feeding system for their European operations combined with the extensive DL/AF and NW/KLM parternships), AA would probably be looking at a way to effective compete with them out of New York, internationally. Buying JetBlue would help solve this problem.

5) JetBlue started up after the last major round of hiring at AMR. This means absolutely zero issues regarding seniority as all of the JetBlue employees would fall to the bottom of their respective employee group seniority lists. With respect to costs, AA's starting wages are competitive with JetBlue's wages (just looking at the starting pay scales), so there probably wouldn't be a significant cost increase to the JetBlue operationally with AA takeover.

Arguments against:
1) 55% of JetBlue's capacity runs what we would affectionally call, the Snowbird routes (i.e. Northeast to Florida). The yields on these markets are extremely poor. Many would look at this and wonder if American's JetBlue takeover would simply by PanAm/National redux, especially since PanAm did this expressly to help feed their European operation.

--Counterpoint: There weren't really connecting hubs or feeding operations that we know of today back in 1979 when PanAm took over National, so there was no real effective model for feeding passengers from one flight to another. AA would create the first modern hub with its massive DFW expansion and operation in the early 1980's.

--Counterpoint 2: There was significant labor discord during and after the PanAm/National merger with seniority list integration, flying assignments, international routes, pay scales, a generally since of arrogance amongst the PanAm employees that they shouldn't even be dealing this a lowly carrier like National. American is not PanAm and there wouldn't be the seniority integration, et al. that helped to drive the bitterness between the PanAm and National

--Counterpoint 3: PanAm grossly overpaid for National and tried to justify by claiming that National owned most of their planes. Unless JetBlue suddenly and dramatically increases in value, I would think that 1 billion dollars (and that's for every single share) for lots of planes and a brand new terminal, and a domestic feeder system which will aid in European service expansion (by getting connecting passengers to JFK) would be a fair deal. AA could probably try to acquire JetBlue for significantly less.

 

[FWAAA]

Couple of points:

I've never seen a tender offer for a majority interest (let alone all) of a target at market price. Count on a 30% to 60% premium to get control of B6 - at today's market cap of $1.18 billion, B6 might cost more like $2 billion.

APA's scope clause doesn't permit Eagle to fly 190s or 170s, so they'd have to be placed at AA mainline - and AA has had ample opportunity to order them and do that. And it hasn't. Every other airline seemingly has ordered them and placed them in service.

How many billions of dollars do ya think the APA would demand to permit Eagle to fly them? Gotta add that to your calculations of B6 purchase price. B)

If AA's gonna go buy an airline, NW actually offers something of limited supply that AA can't create organically: Several daily routes to China.

 

[eolesen]

Add to FWAAA's comments... JBLU has been selling aircraft lately. If they were really concerned, and received an offer for existing E190's or future deliveries, they'd probably jump at it.

What I have heard is they're spinning off LiveTv, which will no doubt generate some short term income.

 

[FrugalFlyerv2.0]

Although it would be nice (for AA) to buy Jetblue and shut it down (eliminate a competitor), in today's economic environment it is better to just let it die its own natural death. Unless a group of investors is willing to give JB $$$ to survive hard times.

Also, given that AA is a legacy carrier and the hatred of legacy carriers by many members of Congress, I can easily see AA being forced to forfeit many if not most of Jetblues JFK slots in would obtain. And also with the APA scope clause all those E-jets are more or less worthless.