AA and US merger?

[AAviator]

I just can't wait till they announce this transaction so we can shut people like WT and AAviator the F up .

A little desperate there etops1? I see you're hard at it on Airliners.net too! LOL!
ebgws, you need to forward your "nobody knows what is going on" memo to etops1

LOL!!!

 

[AAviator]

Dont be too sure. They would more likely be of assistance to a customer buying 260 planes with options on as many more, over someone buying a dozen or so with no near term interest in up dating their fleet. BK would be a time they could AX the airbus order.

If Oneworld wants a greater presence in JFK, can anyone think of a domestic carrier there with lots of slots who has 70 Airbii on order? Hmmm the Europeans have an interest here too!

My oh my, this road will have many twists and turns......

 

[damajagua]

I’ll not spend a whole lot of time addressing DL specific comments other than to say that I have been following the industry since when DL used to have multiple L1011 flights per day from IAH (which was then a pretty new airport) and ORD to show how much the industry has changed. After being one of the smaller but better run airlines of the regulated era, DL spent the first several decades of deregulation trying to figure out its future… and didn’t do much well. DL’s BK was a true soul searching experience and as I expected DL came out of BK hitting on all cylinders and moving from a regulated era also ran in terms of size and industry impact to one of the global leaders in the industry – and is doing what it does now with a precision and level of success that has been lacking in the US industry. Whether you like DL as a carrier or not doesn’t change the fact that they dramatically turned the company around on and are accomplishing far more today than anyone could have imagined just a few years ago, particularly in the darkest days when many said it was time to turn the lights out at DL’s HDQ’s in ATL.
AA is capable of making just as dramatic of a turnaround and there is no doubt that AA/AMR’s board and mgmt has carefully studied the BK cases in the industry and tried to glean out what works, as well they should. There have been some massively failed reorgs and there have been some incredible successes – I have no doubt that AA can and will create their own success story that will look different from other carriers.
For those who haven’t read, my brother works for AA and I lived for many years in Texas and know many AA people… I most definitely have interests in what happens to AA – which is why I have consistently fought for their turnaround.
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As to the questions raised above,
In short, the argument that consolidation is good for the industry may not apply any longer. Analysts note that for one of the few times in the deregulated era, airlines in the US are expected to be profitable during the lean winter quarters despite the US economy being in one of the worst shapes in decades and fuel being at record levels. Airlines DO in fact have pricing power because the industry has consolidated to the point where capacity is being pulled out across the board – by all carriers – and deep discounting is becoming harder and harder for consumers to find.
When you factor in that the weakest carriers financially are AA and F9 who are undergoing their own restructurings (BK or not), the rest of the industry looks quite healthy considering the environment. DL and UA and some low fare carriers have posted 10% operating margins, WN is quickly figuring out how to adapt its strategy to its new nationwide network in the midst of high fuel prices (where WN is paying the same prices as other carriers), and rationalization from the latest round of mergers (DL/NW, UA/CO, and WN/FL) is removing excess and unprofitable capacity.
So, no, there is no crying need for further consolidation…. The carriers that are performing the worst in the US industry would probably not fare better even if the industry was more consolidated. AA’s problems will not be solved by consolidation – they have too many people at too high of costs as well as assets for an airline of their current size and BK fixes that problem, not consolidation. F9 continues to be engaged in a losing battle for DEN that is leading UA to decide its strategy no longer requires a strong mountain presence because of its dual ORD/Texas option, ironically, the same central US strategy that AA has.
Consolidation won’t fix what remains to be done in the industry and AA could do fine without consolidation. AA WILL create a plan that makes AA viable as a standalone airline – that is what the creditors will require. The real question remains if AA will be large enough as it comes out of BK to compete with its network peers DL and UA.
So, let’s look at the strategic shortcomings of a potential AA-US merger…. AA/US would still be a distant #3 in Europe, including continental Europe and the situation would probably deteriorate because much of US’ continental Europe presence is tied to Star hubs and AA/US would undoubtedly move to oneworld. AA’s position in continental Europe is improving because of oneworld and the opportunities to connect AA and oneworld on the continent. In Asia, US can contribute nothing to AA’s position which is already a very distant number 3 and oneworld does little to change that… other than a few strategic routes that could be cost effective and logistically possible with the 773ER, there is no improvement on the horizon in Asia for AA or a merged AA/US. That leaves AA’s best performing int’l region as Latin America, right where it is today – and US contributes virtually nothing to AA’s ability to improve there and there is nothing that really limits AA’s ability to improve on its own Latin network by itself.
Turning to the domestic market, AA’s most at risk large markets are ORD and NYC. The slot swap has probably sealed AA’s fate in the NYC market where it will fall to a distant #3 to DL and UA, both of which have far stronger positions at LGA and EWR which are preferred business airports. Even if you play with slots at JFK and do something w/ B6, a single hub at JFK is now the least valuable hub when it comes to generating high value revenue, esp. since DL and UA both have their own longhaul hubs at JFK and EWR. DL’s advantage is that they have close-in high business revenue LGA as well as JFK while UA has it in one package at EWR as well as the necessary hub presence at LGA and JFK. New York City is the largest and most valuable market and AA’s position has eroded dramatically and an AA-US merger doesn’t fix that nor does any other strategic option anyone has suggested.
Chicago is the 2nd most valuable asset in AA’s network and AA’s position IS slipping both because of a more aggressive UA – which can tie NYC and CHI together in a way that previously only AA could do – and because of low fare competitors that are pounding away at the top revenue markets from CHI after years of being shut out of the market. Even if AA gains small jets, the level of competition at ORD will not change and the airport costs at ORD because of rebuilding the runways pose a serious threat to the ability of any carrier – UA included to hub there. Hubs do create mass that allows a greater market presence so it still is likely that one carrier could maintain a hub presence at ORD even with high airport costs because the local fares and low passenger percentages could grow to offset the costs of carrying higher cost connecting passengers, although there would be fewer overall connecting passengers. Bottom line, though, is that AA’s position is threatened at ORD far more by forces it cannot control – the UA/CO merger and the decision by Chicago to engage in a costly rebuild of the airport than any factor that AA can fix in BK. And US can certainly do nothing to help AA in ORD.
The west including DFW and PHX could see some consolidation but the real “loser” is PHX where the shotgun marriage of HP and US put HP’s operation which then couldn’t compete with WN and still can’t with US’ core southeast operation which is still where the majority of US’ profits come from – whether ex-HP people want to hear it or not. DFW is the crown jewel of the southwest and it is obvious that US wants to bail out of PHX in favor of a stronger DFW hub, which also helps deal w/ US lack of Midwest presence.
ON the east coast, US and AA both have their strengths but AA is holding its own without a SE hub – ala ATL or CLT. It is true that a combined AA/US would gain more advantages by combining their strengths on the east coast than either could obtain on their own, but particularly in the NE, AA/US would still be a distant #3.
From a network standpoint, there are very few advantages provided by an AA/US standpoint.
And more importantly, there is no evidence that revenue would improve in the key markets where competitors are moving revenue away from AA or US such as NYC, BOS, or CHI international.
From any rational assessment, an AA-US merger would provide little benefit and wouldn’t really address the size gap between AA and DL and UA.
While it is true that it is hard to determine whether there really is a size benefit for DL and UA as the megacarriers of the US now, they both say that they are moving corporate contracts away from AA because of the strength of their mergers and the fact that they are outperforming AA at revenue growth would appear to validate that AA is indeed losing corporate business to DL and UA – and unless there is any other explanation, the DL and UA mergers would appear to be doing what they said they would and what airline economics say happens – greater mass creates greater revenue generating opportunities.
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But let’s also address the thirst for plucking AA up when it is at its most vulnerable point – in BK. In reality, those type of acquisitions JUST DON’T WORK. Companies succeed AFTER getting cleaned up – which is why no one bid on AA before it went into BK. CO, DL, NW, and UA were all restructured, successful companies BEFORE THEY merged – and the result is that they are stronger together than they were apart. Putting two not restructured, not successful companies together does not result in one successful company. US’s restructuring and merger is NOT complete and as noted Parker is happy to keep it that way, in part because he really wants to rip out parts of the current US and replace them w/ parts from another airline… that type of merger/asset swap has never worked…
Creditors, who as Jim notes, control AA’s future, DO NOT LIKE RISK – and they are less interested in taking on risk w/ someone who has yet to prove that he can succeed at what they said they would do years ago which is merge two companies. The argument that the 10K pilots of AA will overshadow the East pilots and shut them up is hardly the recipe for successful labor-mgmt relations but that is the best way the US labor issue can be addressed.
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I could go on but won’t….
The simple fact is that Parker’s PR machine has been salivating for the day when Parker would have the opportunity to get its hands on one of the big boys…. All to piece together the airline he couldn’t build or acquire on its own. The US/Parker PR machine will continue to spit out noise advocating the value of US-AA merger but anyone can honestly see through the inaccuracies and media spin.
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There is no value to AA or its creditors in an AA-US merger.
What is more likely to happen –which is what Parker fears is that AA will recover to the point where US will be found to be the “one extra network carrier too many” – and Parker will have nowhere to go to cash out.
Call the US-AA merger proposals what they are: an effort to improve US at the expense of AA, yielding no benefit to AA and virtually none to the industry other than getting rid of the underperforming assets at US and AA which can be far more effectively disposed of without a merger – and which neither can replace anyway.

My interest in the whole merger issue is because many AA people are being told they have no control over what happens and believe that their future is shot now. BK is painful but it is not the end of the world - and making another mistake won't make the first one any better. A US merger w/ AA would be a mistake for AA people and AA's ability to successfully restructure. AA will restructure on its own.

Thank you WT . I have always enjoyed reading your posts. I tend to agree with a lot of what you write about.
For a long time you where an advocate that AA needed to get its house in order. Well the process has began.
I agree with you 100% a US/AA merger would do nothing for AA while it would immediately put US in a world map.
AA can go thru it's restructuring and come out a lean formidable competitor. I don't understand all the personal attack
from all the US people toward you. It seems that if one does not agree with their desire to merge at all cost, you are
either a chearleader for another company or you are just an arrogant AA employee. I have said it before and will say it
again this has nothing to do about wether one likes or dislike US employees, the reality is that AA/US won't work.
I will start my own slogan. KEEP AMERICAN, MY AMERICAN!!!!

 

[diamondcutter]

Again I will ask you WT....when did become friends with judge and creditors

 

[etops1]

A little desperate there etops1? I see you're hard at it on Airliners.net too! LOL!
ebgws, you need to forward your "nobody knows what is going on" memo to etops1

LOL!!!

I may know a little more than you think my friend .

 

[ebwgs]

Again I will ask you WT....when did become friends with judge and creditors

WT is the internet message board version of the Wizard of Oz. He may have his fans here, but he's just a man hiding behind his cyber curtain.

 

[johnny kat]

KEEP USAIRWAYS MY USAIRWAYS>>>sounds pretty good to me considering AA is facing a creditors committee that is content on ripping the place to shreds. AA should have no fear that US will want anything to do with the carcass in its' current form. AA should fear that logic will prevail. US is not the enemy. A judge will soon be deciiding the fate of AA. If US is part of the re-emergence from Bankruptcy then AA employees as well as US employees should be supportive. But if the AA bankruptcy is a failure then the US employees will be most thankful they weren't put through the hassles.

 

[FA Mikey]

KEEP USAIRWAYS MY USAIRWAYS>>>sounds pretty good to me considering AA is facing a creditors committee that is content on ripping the place to shreds. AA should have no fear that US will want anything to do with the carcass in its' current form. AA should fear that logic will prevail. US is not the enemy. A judge will soon be deciiding the fate of AA. If US is part of the re-emergence from Bankruptcy then AA employees as well as US employees should be supportive. But if the AA bankruptcy is a failure then the US employees will be most thankful they weren't put through the hassles.

For starters on usairways employees and a couple 1/2 baked analysts are sounding the merger horn. AA has no interest or need for U. Dont worry you are safe from becoing a large international carrier.

Wow a creditor committee intent on "ripping the place to shreds". Dream that, or make it up on your lonesome?

 

[eolesen]

Dear God, it's my worst nightmare... the USAir forum has invaded the AA forum... All we need is Piney Bob and Chip to make it a real party....

 

[wings396]

For starters on usairways employees and a couple 1/2 baked analysts are sounding the merger horn. AA has no interest or need for U. Dont worry you are safe from becoing a large international carrier.

Wow a creditor committee intent on "ripping the place to shreds". Dream that, or make it up on your lonesome?

I guess that this must be your first BK.....
Only time will tell, but I can say for certain that the BK Judge will give the company whatever it wants/needs to sustain itself. Most, if not all of it will come on the backs of labor. Your unions will most likely throw a quick BK contract together for you to vote on, but you pretty much will have a gun held to your head while you vote. If you decide to vote ANY offer down, the Judge will give the company the right to void your contract, and impose whatever they wish in order to continue on. Sad but true......

 

[Mach85ER]

Dear God, it's my worst nightmare... the USAir forum has invaded the AA forum... All we need is Piney Bob and Chip to make it a real party....

Welcome to the chatboard version of the basement of a Turkish prison.


The factory makes the machines. Sometimes the factory makes bad machines, but the bad machines don't know they're bad machines, but the factory knows who are the bad machines.

Not an exact quote, best i can remember from the movie "Midnight Express"

You can re-name it Colodny's revenge if you want, same thing. :blink:

News just In!!: Sales of I Love American Airlines license plate frames are down.

 

[johnny kat]

For starters on usairways employees and a couple 1/2 baked analysts are sounding the merger horn. AA has no interest or need for U. Dont worry you are safe from becoing a large international carrier.

Wow a creditor committee intent on "ripping the place to shreds". Dream that, or make it up on your lonesome?

WOW FA Mikey you sure are confident...I bet you are in the loop to know just how things will be. You, my friend are sure to be disappointed in how the bankruptcy judge and the creditors committee will negotiate the settlements. I realize you have no experience, yet, in these matters but in time you will come to realize that there is nothing special in the letters AA. It will all be determined by forces outside your control. As for AA's big intl' presence just how much scope do the employees enjoy now. Wow, multple 777's to LHR, big woo. I bet you look real good on your little code share flights. Don't bash US until you understand us. We have a lot more pure metal trips to Euro destinations than you give us credit for. Just saying.

 

[ebwgs]

For starters on usairways employees and a couple 1/2 baked analysts are sounding the merger horn. AA has no interest or need for U. Dont worry you are safe from becoing a large international carrier.

Wow a creditor committee intent on "ripping the place to shreds". Dream that, or make it up on your lonesome?

Sweetie humble yourself and focus on how YOU can personally help navigate your company through this nightmare of Chapter 11. You may be right in that AA has no interest in US. If you're confident in that belief then chill and have faith. But the truth is, you, I, and none of us knows. So focus on what you can control because you could be wrong. And if you're wrong then you'll have a new reality to deal with. There are many of us over here at US--I for one--who've never been crazy about the idea of merging with your company. But guess what: If there is an AA-US combo I'm gonna still come to work every day and perform my duties as expected. And I suspect you will to. Just grab hold of the car on the roller coaster you're riding in because my friend you're in for a bumpy ride! God forbid we all are.

 

[ContUNITEus]

I guess that this must be your first BK.....
Only time will tell, but I can say for certain that the BK Judge will give the company whatever it wants/needs to sustain itself. Most, if not all of it will come on the backs of labor. Your unions will most likely throw a quick BK contract together for you to vote on, but you pretty much will have a gun held to your head while you vote. If you decide to vote ANY offer down, the Judge will give the company the right to void your contract, and impose whatever they wish in order to continue on. Sad but true......

Absolutely true....

If I recall right, didn't the mechanics take the concessions all the way to court just to have their contract completely thrown out? Actually see here: http://www.post-gazette.com/pg/05007/438525-28.stm

After that AFA quickly acted to prevent that from happening literally begging its members to vote yes on a second concessionary contract.


Don't think for once that this is not going to happen to AA employees.

 

[WorldTraveler]

Thank you WT . I have always enjoyed reading your posts. I tend to agree with a lot of what you write about.
For a long time you where an advocate that AA needed to get its house in order. Well the process has began.
I agree with you 100% a US/AA merger would do nothing for AA while it would immediately put US in a world map.
AA can go thru it's restructuring and come out a lean formidable competitor. I don't understand all the personal attack
from all the US people toward you. It seems that if one does not agree with their desire to merge at all cost, you are
either a chearleader for another company or you are just an arrogant AA employee. I have said it before and will say it
again this has nothing to do about wether one likes or dislike US employees, the reality is that AA/US won't work.
I will start my own slogan. KEEP AMERICAN, MY AMERICAN!!!!

Thank you.
I decided a long time ago that I could either participate in aviation chat forums by posting cute little responses that said nothing of substance or I could post the truth which probably would offend a lot of people.
You see, it is human nature, that we crucify, villify, and attempt to silence the people who say things we don't want to hear so we can continue saying, doing, and believing what we do want to hear.
The irony is that I merely REPORT and ANALYZE what I see in the industry - I don't make it happen. Either I am right or I am wrong.... those who castigate me only make themselves look like the fools when it becomes apparent that I was right all along.
What alot of people on here don't like is that in my bold arrogance, I have a highly accurate track record when it comes to understanding and predicting what happens in the airline industry.
You can go back for years and I see that I was one of the few people who said that DL would not only successfully restructure but would also "come out of BK swinging" and would become a global powerhouse. Four years after DL emerged - and my predictions came even earlier than that - DL continues to profitably grow into key markets whether they once were someone else's or not.
With respect to AA, I said years ago - to the dismay of many here and while most called me delusionally wrong (to put it nicely)- that AA was careening towards a restructuring and even with the benefit of hindsight to learn from other carrier's mistakes, AA would have a much harder time restructuring than other companies. AA is now in BK and the process has just begun. We can look at my track record 6-12-18 months from now but I can assure you that my arguments against the rosy predictions of how well AA will fare in BK will be shown to be completely accurate.
And then we have US, which some seem to fancy themselves as being a successful product of multiple mergers when in fact the US of today has discarded huge parts of the companies that originally formed it - it's success ratio when it comes to measuring how much of the assets/network it acquired with relation to has now is actually not very good at all.
And that glaring reality is exactly why US is both dying to gets its hands on AA while at the same time trying to delude themselves at how well they have done with mergers - because if the truth really is known, no creditor in their right mind would entrust AA's assets (which are really the AMR's creditors assets) to a company with such a dismal track record.
But US WILL persist because they have been unable to build a viable long term future for their company and they know their options are running out to do so. There will be incredible pressure on AA to accept anything US comes up with regardless of whether it is in AA's best interests or not.

The best news is that AA/AMR has an exclusive period of at least 120 days when it doesn't even have to look at any proposals that will come its way. That period will end in late March. AMR can ask for that period to be extended and I can tell you that Parker and US will start up their propaganda machine in full force no longer than March 1 telling us that AA can't successfully restructure and US is the only option.
Other parties will make proposals behind the scenes but the chances are very high that AA will be able to argue that it is making sufficient progress toward restructuring, they will be given another 90 days, and we will have to live with this long noisy for months to come in a continuous cycle.
But it won't change the fact that I have said and won't hesitate to continue to say that US offers no value to AA and has a very poor track record of integrating and using the assets it has already acquired and that message will offend a whole lot of people - including Parker's paid PR machine who are major contributors to this forum.
And isn't it ironic that many of the people who in US forums trash Parker and US mgmt day in and day out now swear allegiance to him and his plans - because he provides the best hope out of the miserable situation they are in - even if he can't deliver on these promises any more than the ones before.
And getting US people all wound up about going after AA also has the effect of helping them forget how poorly US is actually doing relative to its peers. Parker won't be telling his people near as much in the coming months that US doesn't have what it takes to compete and that there is no basis for raising US people's pay - while he insteads talks about how much AA can "offer" to US.

Dear God, it's my worst nightmare... the USAir forum has invaded the AA forum... All we need is Piney Bob and Chip to make it a real party....

And isn't it ironic that the person who you once wanted to shut up because he wanted to get in the last word that you thought you should have now is defending the interests that you support and all of us with an interest in AA will now be subjected to the nausea of Parker's paid PR machine which may well render this entire board valueless except as a place for the continual US mgmt/labor feud WHICH IS the backbone of this forum.
So, E, you will be competing more than ever to get a word in edgewise with a group of people who are at best trying to deflect from their own pitiful situation and at worst hanging onto the hope that AA will be the end all and financial savior that they have been waiting for - and that message will be coming from paid advocates that will make it even harder for those with common sense and an objective analysis of the situation to be heard.
Good luck to us all... but focus on the message and ultimately the truth will prevail... it always does.