AA/US continuation of good trend

[curious1]

I have grown tired of these endless threads about US going after AA - partly because they spend an aweful lot of time focused on something that may or may not happen and very little focused on current reality for either AA or US - but also because the desire for a US acquistion of AA is driven by US' desire to fix its revenue problem and to fix its labor problems. Given that there is little evidence anywhere in life that you fix your own problems by going after someone else, I don't think it is realistic to think that a combined AA-US would be a viable company unless US can get its act together - which means generating industry comparable profits and revenues which also means bringing US people up to industry compable pay.... until you fix those things, dragging one broken company into a merger and expect to merge it with another company that has all the resources to fix itself up in BK and solve its problems on its own, a merger won't do anything more than increase the magnitude of existing problems.
I don't think a BK could do much to fix US other than to get rid of "expensive" (from a CASM perspective) regional carrier contracts. But those regional operations on the east coast are precisely what gives US the identify it needs. What US needs is viable longhaul domestic and international operations that are lower CASM... of course that is what AA has but AA is still a shorter haul airline than DL or UA - so the only way to get US/AA CASMs down to levels comparable to DL and UA levels is to pay people a whole lot less - and you still have to generate RASMs higher than DL and UA in order to offset the higher costs. Given the competitive assaults on AA's network by low fare competitors, that is a pretty tough recipe to turn into reality esp. since the difference between AA and DL/UA profitability is about $2B/year - far more than even the highest labor cost disadvantage AA has claimed.


well said, Jim, and I can agree.
What US has to do is create a plan that creates more value than what AA can create on its own... the reason why DL was able to fend off US had nothing to do with a ptential NW merger but because DL's turnaround plan delivered more value to the creditors than US could. The same will hold true for AA. The chances of AA - which has an enormous amount of tools available in BK - NOT being able to create a plan that is superior to one created by another carrier NOT in BK - are pretty small.

Too many people are fixated on Parker's access to Wall Street money while failing to recognize that other companies have similar if not better access. Further, part of why Parker has succeeded on Wall Street is because he is smart enough to know when companies are going to fail and go find more money in an attempt to fix the problem -since those lenders would rather throw more money at a problem and drag out the resolution than say "enough is enough" and lose their investment. US is paying its debts -so the banks don't really care if US is viable long-term...it is in their interests to throw a little more money to solve the problem than to shut it down.
The same is not true of AA who can hit a whole lot more reset buttons than US can.

You are tired of these threads about AA & US, yet you respond to every single one of them? Aren't you tired of writing about Delta each and every hour?
I would suggest that you get a life. Responding to every post and talking about how wonderful life is at Delta land is not a life. Go play sports, exercise, travel, collect stamps or something. Turn the computer off for 60 days. Your life will be much more fulfilled.

 

[usa1]

Everybody is assuming that a potential merger has US trying to take over AA and AA trying to fend them off. I believe AA's plan all along may be to include US as a merger partner when they reorganize.

agree +1

 

[WorldTraveler]

You might ask the people who have far more posts on any number of topics, including those that continue to push this whole AA-US merger thing what kind of life they have. For the record, I have a very full life which includes all of the suggested activities except stamp collecting...
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The simple fact remains that an AA-US merger is merely the dream of a few people at US including their leader who can't resolve their own internal problems so they look elsewhere in hopes that someone else can.
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US has to figure out how to make its own company a top performer in the industry, choose to pay its own employees even average wages, and decide that they have all the ingredients necessary to compete.
The fact that other companies have successfully restructured while US has not says more about US and its leadership than the other airlines.
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And it remains that there is no evidence that AA now or in the future has any interest in US... AA has all the resources of BK to restructure itself - the same resources that US had access to twice but didn't use well enough to create a viable long-term future for the company or its employees.

 

[usa1]

You might ask the people who have far more posts on any number of topics, including those that continue to push this whole AA-US merger thing what kind of life they have. For the record, I have a very full life which includes all of the suggested activities except stamp collecting...
.
The simple fact remains that an AA-US merger is merely the dream of a few people at US including their leader who can't resolve their own internal problems so they look elsewhere in hopes that someone else can.
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US has to figure out how to make its own company a top performer in the industry, choose to pay its own employees even average wages, and decide that they have all the ingredients necessary to compete.
The fact that other companies have successfully restructured while US has not says more about US and its leadership than the other airlines.
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And it remains that there is no evidence that AA now or in the future has any interest in US... AA has all the resources of BK to restructure itself - the same resources that US had access to twice but didn't use well enough to create a viable long-term future for the company or its employees.

Hope you don't have to eat those .....

 

[WorldTraveler]

Hope you don't have to eat those .....

I'll be happy to admit it if it comes.. but I'm sure not going to spend 18-24 months preoccupied with something that is little more than a fantasy for some people.
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I will ask, what is the end game for US if AA successfully restructures, doesn't choose to merge with US, and US finds no other merger partner?
I know it is early on a holiday Sunday but perhaps asking those kinds of questions might be a bit more relevant than pushing an agenda that is really out of US' hands to execute.

 

[signals]

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I will ask, what is the end game for US if AA successfully restructures, doesn't choose to merge with US, and US finds no other merger partner?

History will repeat itself, yet again

Happy New Year, and welcome to another merger-wolf cry at US!

Next year they will merge with WN, which seems the only one that the wheel hasn't landed on

 

[AAviator]

I'll be happy to admit it if it comes.. but I'm sure not going to spend 18-24 months preoccupied with something that is little more than a fantasy for some people.
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I will ask, what is the end game for US if AA successfully restructures, doesn't choose to merge with US, and US finds no other merger partner?
I know it is early on a holiday Sunday but perhaps asking those kinds of questions might be a bit more relevant than pushing an agenda that is really out of US' hands to execute.

I suspect there will be a break up of the entire operation, much like was proposed in 2001(?) when UAL and AA were going to split "U" up. I looked on Wikipedia, but there wasn't any accurate historical reference of that proposed and public transaction. The twist here being is that the slots at DCA and the shuttle are the only real value in the whole. It is doubtful any buyer would be interested in the DCA operation and shuttle, turn key, so it would most likely be just the slots.

Time table? 3-6 years from now would be my guess.

 

[FlyUs]

I have grown tired of these endless threads about US going after AA - partly because they spend an aweful lot of time focused on something that may or may not happen and very little focused on current reality for either AA or US - but also because the desire for a US acquistion of AA is driven by US' desire to fix its revenue problem and to fix its labor problems. Given that there is little evidence anywhere in life that you fix your own problems by going after someone else, I don't think it is realistic to think that a combined AA-US would be a viable company unless US can get its act together - which means generating industry comparable profits and revenues which also means bringing US people up to industry compable pay.... until you fix those things, dragging one broken company into a merger and expect to merge it with another company that has all the resources to fix itself up in BK and solve its problems on its own, a merger won't do anything more than increase the magnitude of existing problems.
I don't think a BK could do much to fix US other than to get rid of "expensive" (from a CASM perspective) regional carrier contracts. But those regional operations on the east coast are precisely what gives US the identify it needs. What US needs is viable longhaul domestic and international operations that are lower CASM... of course that is what AA has but AA is still a shorter haul airline than DL or UA - so the only way to get US/AA CASMs down to levels comparable to DL and UA levels is to pay people a whole lot less - and you still have to generate RASMs higher than DL and UA in order to offset the higher costs. Given the competitive assaults on AA's network by low fare competitors, that is a pretty tough recipe to turn into reality esp. since the difference between AA and DL/UA profitability is about $2B/year - far more than even the highest labor cost disadvantage AA has claimed.


well said, Jim, and I can agree.
What US has to do is create a plan that creates more value than what AA can create on its own... the reason why DL was able to fend off US had nothing to do with a ptential NW merger but because DL's turnaround plan delivered more value to the creditors than US could. The same will hold true for AA. The chances of AA - which has an enormous amount of tools available in BK - NOT being able to create a plan that is superior to one created by another carrier NOT in BK - are pretty small.

Too many people are fixated on Parker's access to Wall Street money while failing to recognize that other companies have similar if not better access. Further, part of why Parker has succeeded on Wall Street is because he is smart enough to know when companies are going to fail and go find more money in an attempt to fix the problem -since those lenders would rather throw more money at a problem and drag out the resolution than say "enough is enough" and lose their investment. US is paying its debts -so the banks don't really care if US is viable long-term...it is in their interests to throw a little more money to solve the problem than to shut it down.
The same is not true of AA who can hit a whole lot more reset buttons than US can.

You can't blame the employees of US for wanting a merger to happen with one of the Big 3 legacy carriers. We know we are and have always been the weakest link in the industry. At least when it comes to route structure. I'm sure Tempe will do everything in it's power to make a deal happen with AA now that it is in Chap 11 bankruptcy. They'd be foolish not to. What would they have to lose? If done right, a much stronger industry will emerge and we'll all get bigger paychecks. That's the bottom line for most of us here. I still think US was foolish trying to acquire DAL instead of NW. A much more compatible fit.

 

[DCaf]

Random thoughts regarding some of the more recent posts on this thread:

Since UA was interested enough to get into serious talks about merging with US (twice), I guess they saw some value.

I still don't understand Delta's interest in all this, other than to keep AA as small as possible. I don't think DL wants another
large carrier to fly in the rarefied air with them and UA.

A merge would solve some US problems, as DL/NW solved one of DL's problems (lack of a Pacific presence). Nothing wrong with a merger helping
fix a shortcoming. Though pilots will have to solve their own problems, IMHO.

You think Doug Parker has made a serious overture yet? I doubt it. This will be a long process, and I can't imagine he'd go for another hostile try. He will watch how things go at AA and if it makes sense, he'll give it a shot. As a good CEO should. It would be up to AA management to see if it makes sense to them.

As I said, just random musings.

 

[AAviator]

You can't blame the employees of US for wanting a merger to happen with one of the Big 3 legacy carriers. We know we are and have always been the weakest link in the industry. At least when it comes to route structure. I'm sure Tempe will do everything in it's power to make a deal happen with AA now that it is in Chap 11 bankruptcy. They'd be foolish not to. What would they have to lose? If done right, a much stronger industry will emerge and we'll all get bigger paychecks. That's the bottom line for most of us here. I still think US was foolish trying to acquire DAL instead of NW. A much more compatible fit.

Nor can you blame the employees of AA wanting nothing to do with "U". The vast majority of your airline is of little to no use for AA. Given we have the opportunity in BK to fix some of our problems, rest assured we have no interest in adding to them vis-a-vis a transaction of any sort with LCC.

 

[FlyUs]

Nor can you blame the employees of AA wanting nothing to do with "U". The vast majority of your airline is of little to no use for AA. Given we have the opportunity in BK to fix some of our problems, rest assured we have no interest in adding to them vis-a-vis a transaction of any sort with LCC.

I respect your opinion but I disagree about US adding little value. The east coast market share AA will gain with this merger would be huge. AA would definitely become a formidable competitor against DAL and any other lcc in this region with plenty of potential international expansion. And with one less carrier in the US, the industry would be able to price their product according to fair market value. We would become much stronger as one and get much needed raises.

 

[john john]

I can't imagine he'd go for another hostile try. As a good CEO should.

 

[AAviator]

I respect your opinion but I disagree about US adding little value. The east coast market share AA will gain with this merger would be huge. AA would definitely become a formidable competitor against DAL and any other lcc in this region with plenty of potential international expansion. And with one less carrier in the US, the industry would be able to price their product according to fair market value. We would become much stronger as one and get much needed raises.

http://www.aviationplanning.com/Images/AMR%20Bankruptcy%20-%20Time%20For%20Reality.pdf
See page 8 or 9.

And what to do with LAS and PHX??

Regarding your last sentence.... The LCC value you trumpet exists only because of the industry bottom total compensation earned by you good people. If that were to go up, the value you speak of evaporates. (see page 11 of the above link)

Now apply your logic using jetBlue. Can you say w o w ???

side note from across the pond:
http://www.bbc.co.uk/news/business-16298167

 

[john john]

And what to do with LAS and PHX??

BYE BYE

 

[WorldTraveler]

All of these "airline X's network would fit so well with airline Y" fail to consider that network is one of only several factors and the chief factor is and will be evidence that the combined company can generate more revenue than either company separately.
Given that US and HP haven't generated the revenue they promised and in fact have revenue shortfalls to the industry, investors aren't going to be quite as wooed about what US says it can do with AA - again that AA can't do by itself. Quite simply, other combinations have the potential to return better value to investors... the only scenario where US is on equal footing is if it is all borrowed money - and an AA combination with anyone regardless of who remains in control will be too large to be done entirely w/ borrowed money, esp. since AA's fleet replacement plans will still leave them w/ debt levels multiples of times larger than other competitors.
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But there also is the consideration of what AA will gain and how competitors will react. AA and US would combine come close to equalling DL and/or UA on the east coast in size based on recent DOT data, but it still doesn't fix other key strategic issues including the Pacific.... and it is also very possible, if not likely, that if AA or US made a move on each other, DL and/or UA could make their own strategic moves to counter whatever AA or US could do. DL could easily acquire AS, as much as some people want to believe that AS' business model won't work under DL (DL's CASM is actually quite close to AS' and at times has been lower), UA (which has no shortage of cash right now) could easily buy US and spin off the DCA operation - or reduce it to a size necessary to eliminate DOJ concerns. UA, now w/ the possibility of being shut out of the largest alliance partners in Latin America could easily buy a significant portion of LanTam (and ditch what Star will remain with). Virgin Atlantic's future is still far from certain and there is still a strong likelihood that it will end up in some type of relationship that will deepen DL or UA's position in the UK.....
all of these are possible and they produce risks to any potential AA/US combination, and investors cannot blindly overlook those risks. And NO competitor is interested in seeing another one strengthen their position. All of US and AA's competitors are in a better position to make strategic moves than US will be by the time AA and US either separately or in a hostile format is ready to make a move.
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The whole argument about increased pricing power is actually rather funny considering that it is US that undercuts the industry in order to fill its planes... it doesn't take long to realize that US has lower fares in many markets, esp. in/out of other carrier hubs/strength markets as well as in int'l markets that are not to Star hubs.
The whole PHL/CLT-SLC game is all about US attempts to gain a foothold from the east to SLC in order to erode DL's revenue base... it doesn't take too far of a glance back at the history books to realize that US has won few of these contests, which isn't terribly surprising given that DL is a whole lot larger.
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