Aa's Purchase Of Twa

[mweiss]

jimntx, that pretty much sums up my stance. I did vote "yes" in the poll, because there was no scoping of degree in the question. The purchase did hurt AA. But you're right...it didn't hurt AA sufficiently that AA would be profitable now, save for the TW puchase.

 

[jimntx]

And, the lack of scope is why I voted No. As posed, the poll was rather more like those, "Are you still beating your wife?" questions. There is no correct answer.

 

[MCI transplant]

LaBradford22,

I think you're doing a little bit of apples-and-oranges there. True, TW had lower labor costs than AA, but at the same time they had downward pressure on revenues resulting from Karabu. AA came in and removed both of those.

Which had a greater impact on profitability?

jimntx,

While I agree that the purchase is in the past and we should be looking forward, the entire point of this thread is to look back and, with 20/20 hindsight, rate the deal.

[post="243140"][/post]​

<_< mweiess----- Just a little bet of trivea for you. It was estamated that Icahn and his karabu were skiming $200M @ year off TWA's bottom line. In otherwords, if it wasn't for karabu, TWA would have been in the black making money! You don't think for a second that Carty didn't know this???? TWA was taken into bankrupcy primaraly to get reed of Karabu!!!And yes! I heard of the talks with Boeing, and G.E.! The Unions at the time were the primary movers on these talks. Remmber, the employees were the single largest stock holders at the time! But I heard they wanted to dump our CEO and the BODs! They were the ones dealing with Carty and a.a. The rest is history!

 

[mweiss]

In otherwords, if it wasn't for karabu, TWA would have been in the black making money!

[post="243193"][/post]​

Of course. But would TWA have been making money with AA's wages and workrules, without Karabu? Different question.

 

[eolesen]

I'd say it was a break-even proposition at this point. Longer term, it might still be work out to have been a good move.

It was estamated that Icahn and his karabu were skiming $200M @ year off TWA's bottom line. In otherwords, if it wasn't for karabu, TWA would have been in the black making money! You don't think for a second that Carty didn't know this????

[post="243193"][/post]​

Point of order... You can't assume TWA would have been operating in the black. That $200M of skimming was because Icahn would split the difference between what other carriers were charging and what he could buy them for with his discount. The net result was that he could (and did) sell tickets thru his outlets for less than what other airlines were charging, bringing a lot of discretionary travelers to TWA who probably wouldn't have otherwise flown on anyone.


There's one thing nobody has mentioned yet.

Customers.

Had TW collapsed on its own, its customer base would have dispersed amongst several carriers. By allowing the transfer of Aviators mileage into AAdvantage, a disproportionate number of those non-Karibu customers came over to AA.

It's much harder to quantify, but there was a positive revenue impact from keeping those customers on AA, and it is something that nobody ever recognizes in this otherwise stupid, pointless, and never-ending argument.

It also kept someone like Airtran from doing what they tried to do with ATA -- buying into TWA for a song, and jumping into STL overnight. Given the overlap of TW's STL network with that of AA's from ORD and DFW, it could have made Airtran's impact on DL at ATL look like chump change.

 

[FWAAA]

I'd say it was a break-even proposition at this point. Longer term, it might still be work out to have been a good move.

There's one thing nobody has mentioned yet.

Customers.

Had TW collapsed on its own, its customer base would have dispersed amongst several carriers. By allowing the transfer of Aviators mileage into AAdvantage, a disproportionate number of those non-Karibu customers came over to AA.

It's much harder to quantify, but there was a positive revenue impact from keeping those customers on AA, and it is something that nobody ever recognizes in this otherwise stupid, pointless, and never-ending argument.

It also kept someone like Airtran from doing what they tried to do with ATA -- buying into TWA for a song, and jumping into STL overnight. Given the overlap of TW's STL network with that of AA's from ORD and DFW, it could have made Airtran's impact on DL at ATL look like chump change.

[post="243222"][/post]​

Agree completely.

I've mentioned this aspect numerous times over the past 4 years whenever one of these pointless cryfest threads appear, but I thought I'd leave it on the table for someone else to mention this time. B)

The revenue from the former TWA pax may not have been highly profitable revenue at STL, but it was revenue, and AA has needed every dime of revenue lately.

 

[goingboeing]

Agree completely.

I've mentioned this aspect numerous times over the past 4 years whenever one of these pointless cryfest threads appear, but I thought I'd leave it on the table for someone else to mention this time. B)

The revenue from the former TWA pax may not have been highly profitable revenue at STL, but it was revenue, and AA has needed every dime of revenue lately.

[post="243249"][/post]​

There is another side of the equation that you failed to mention.
The COST side the cost to produce the revenue must be considered.

We are paying[subsidzing] passengers to fly on our aircraft by charging less than what it cost to produce a seat.
This is like you going to MacDonald's and odering a Big Mac and fries for $4.39 and then MacDonald's pays you $2.50 to eat it.
This CRAP has got to be stopped soon or the whole airline business is doomed.

 

[aafsc]

<_< mweiess----- Just a little bet of trivea for you. It was estamated that Icahn and his karabu were skiming $200M @ year off TWA's bottom line. In otherwords, if it wasn't for karabu, TWA would have been in the black making money! You don't think for a second that Carty didn't know this???? TWA was taken into bankrupcy primaraly to get reed of Karabu!!!And yes! I heard of the talks with Boeing, and G.E.! The Unions at the time were the primary movers on these talks. Remmber, the employees were the single largest stock holders at the time! But I heard they wanted to dump our CEO and the BODs! They were the ones dealing with Carty and a.a. The rest is history!

[post="243193"][/post]​

If there were other possibilities for TWA, then why did the union leaders (who were also on TWA's Board of Directors -Bob Pastore for ALPA, and Sherry Cooper for flight attendants-IAM and the IAM reps for mechanics and ramp), vote FOR the AA deal AND waive the seniority protections from their contract?

 

[MCI transplant]

I'd say it was a break-even proposition at this point. Longer term, it might still be work out to have been a good move.
Point of order... You can't assume TWA would have been operating in the black. That $200M of skimming was because Icahn would split the difference between what other carriers were charging and what he could buy them for with his discount. The net result was that he could (and did) sell tickets thru his outlets for less than what other airlines were charging, bringing a lot of discretionary travelers to TWA who probably wouldn't have otherwise flown on anyone.
There's one thing nobody has mentioned yet.

Customers.

Had TW collapsed on its own, its customer base would have dispersed amongst several carriers. By allowing the transfer of Aviators mileage into AAdvantage, a disproportionate number of those non-Karibu customers came over to AA.

It's much harder to quantify, but there was a positive revenue impact from keeping those customers on AA, and it is something that nobody ever recognizes in this otherwise stupid, pointless, and never-ending argument.

It also kept someone like Airtran from doing what they tried to do with ATA -- buying into TWA for a song, and jumping into STL overnight. Given the overlap of TW's STL network with that of AA's from ORD and DFW, it could have made Airtran's impact on DL at ATL look like chump change.

[post="243222"][/post]​

<_< TUCHET!!! Mr. Moderator! At this point in time, This argument is "stuid, pointless, and never-ending!" :down:

 

[FWAAA]

There is another side of the equation that you failed to mention.
The COST side the cost to produce the revenue must be considered.

We are paying[subsidzing] passengers to fly on our aircraft by charging less than what it cost to produce a seat.
This is like you going to MacDonald's and odering a Big Mac and fries for $4.39 and then MacDonald's pays you $2.50 to eat it.
This CRAP has got to be stopped soon or the whole airline business is doomed.

[post="243319"][/post]​

I agree. And the sooner the oversupply is corrected (which is why those fares are too low) by the failure of UAL, USAir and ATA, the better. Fortunately, the AMFA members at UAL may have hastened that correction with their concession rejection. B)

Nevertheless, that revenue has paid your paycheck, fueled the airplanes and paid other bills, and none of those recipients' checks depended on whether AA was profitable. 😀

 

[aafsc]

I'd say it was a break-even proposition at this point. Longer term, it might still be work out to have been a good move.
Point of order... You can't assume TWA would have been operating in the black. That $200M of skimming was because Icahn would split the difference between what other carriers were charging and what he could buy them for with his discount. The net result was that he could (and did) sell tickets thru his outlets for less than what other airlines were charging, bringing a lot of discretionary travelers to TWA who probably wouldn't have otherwise flown on anyone.
There's one thing nobody has mentioned yet.

Customers.

Had TW collapsed on its own, its customer base would have dispersed amongst several carriers. By allowing the transfer of Aviators mileage into AAdvantage, a disproportionate number of those non-Karibu customers came over to AA.

It's much harder to quantify, but there was a positive revenue impact from keeping those customers on AA, and it is something that nobody ever recognizes in this otherwise stupid, pointless, and never-ending argument.

It also kept someone like Airtran from doing what they tried to do with ATA -- buying into TWA for a song, and jumping into STL overnight. Given the overlap of TW's STL network with that of AA's from ORD and DFW, it could have made Airtran's impact on DL at ATL look like chump change.

[post="243222"][/post]​

If I'm not mistaken, there is a whole terminal (D I believe) in STL that is empty; so Airtran or anyone else can move in en mass right now if they wanted to. But my main point about this whole thing is simply this: What value did AA really get after the very large price they paid for TWA's assets. The only real hard assets that were of any real value were the 51 slots and a couple of gates at LGA, the 31 slots and a couple of gates at DCA, and a few slots at ORD and JFK. These assets were probably worth about $450 million. Almost all of TWA's foreign route authorities were to Europe and the middle east. Europe is now basically open skies so AA does not need TWA's route authorites to fly there and it is obvious why AA won't fly to the middle east. AS far as STL goes,I have flown through there and the facilities are terrible. The terminal is dingy and dirty. At any rate, if AA wanted STL they could have gotten it after TWA shut down. With respect to the MCI mx facility, it opened in the mid 1950s and it is now a 50 year old worn out, outdated, delapidated facility that is falling apart. In addition to all this you have a workforce that you gave top pay to that is bitter about their place on the seniority list.
Compare the TWA transaction to the EAL/South American transaction. In this transaction, AA, under Crandall, paid about $450 million in cash for the routes and that was it; no employees (except for the foreign nationals in South/Central AMerica which those governments insisted on. The US EAL people had to start over at the bottom of seniority and pay scales), no assumption of EAL retiree medical and passes, and no assumption of any EAL aircraft, debt, or liabilities of any kind. AA negotiated facility requirements with MIA and they brought in their own planes. Ever since then these routes have been a GOLD MINE for AA.

 

[MCI transplant]

If I'm not mistaken, there is a whole terminal (D I believe) in STL that is empty; so Airtran or anyone else can move in en mass right now if they wanted to. But my main point about this whole thing is simply this: What value did AA really get after the very large price they paid for TWA's assets. The only real hard assets that were of any real value were the 51 slots and a couple of gates at LGA, the 31 slots and a couple of gates at DCA, and a few slots at ORD and JFK. These assets were probably worth about $450 million. Almost all of TWA's foreign route authorities were to Europe and the middle east. Europe is now basically open skies so AA does not need TWA's route authorites to fly there and it is obvious why AA won't fly to the middle east. AS far as STL goes,I have flown through there and the facilities are terrible. The terminal is dingy and dirty. At any rate, if AA wanted STL they could have gotten it after TWA shut down. With respect to the MCI mx facility, it opened in the mid 1950s and it is now a 50 year old worn out, outdated, delapidated facility that is falling apart. In addition to all this you have a workforce that you gave top pay to that is bitter about their place on the seniority list.
Compare the TWA transaction to the EAL/South American transaction. In this transaction, AA, under Crandall, paid about $450 million in cash for the routes and that was it; no employees (except for the foreign nationals in South/Central AMerica which those governments insisted on. The US EAL people had to start over at the bottom of seniority and pay scales), no assumption of EAL retiree medical and passes, and no assumption of any EAL aircraft, debt, or liabilities of any kind. AA negotiated facility requirements with MIA and they brought in their own planes. Ever since then these routes have been a GOLD MINE for AA.

[post="243476"][/post]​

<_< Just one man's oppion! Bigoted at that! As for EAL, their dead and gone! Get over it!!!! 😛

 

[aafsc]

<_< Just one man's oppion! Bigoted at that! As for EAL, their dead and gone! Get over it!!!! 😛

[post="243499"][/post]​

Not opinion, fact, based on analysis and comparison to the EAL transaction. AS for EAL, I and the other people from EAL have been over it since it died. Bob Owens is right. EAL people sacraficed all to stop the spread of the Lorenzo cancer; unlike the TWA people who gave concession after concession after concession and who were the lowest paid of the majors in order to "save" TWA in the hopes of a "transaction" where they would be rewarded for their concessions by going to top pay and stealing the seniority of the people at the acquiring airline. TWA is dead along with your TWA seniority! Get over it!

 

[mweiss]

...the sooner the oversupply is corrected by the failure of UAL, USAir and ATA, the better.

[post="243402"][/post]​

I'm curious to know what makes you think that the removal of even all three of those airlines would reduce the supply in the market.

 

[aafsc]

If there were other possibilities for TWA, then why did the union leaders (who were also on TWA's Board of Directors -Bob Pastore for ALPA, and Sherry Cooper for flight attendants-IAM and the IAM reps for mechanics and ramp), vote FOR the AA deal AND waive the seniority protections from their contract?

[post="243381"][/post]​

Hey MCI, I am still waiting for you to answer this question!