American/Jetblue merging RUMOR

[Hopeful]

It isn't called a rumor for nothing. I doubt B6 would be the purchaser in such a merger. But I doubt this merger would ever happen.

I agree. A merger in the traditional sense would defeat the purpose of what the agreement calls for.
Suppose there was a merger or buyout. Then the first thing is a union election or Jetblue employees automatically come under the AA Labor umbrella if it was the buyer. What was originally jetBlue is no longer a low cost carrier. You've created a larger AA with the same costs.
However, should AA succeed in what it deems cost advantageous labor agreements, a merger might work well.

 

[WorldTraveler]

The simple reason that AA and B6 will never merge is the huge difference in costs between the two. There is no way that AA can acquire an airline with much lower costs without bringing their costs up - which would destroy B6's market.

AA could go after B6 for the slots they hold at JFK and other key airports but it is highly unlikely that even if AA wanted to buy B6 just for the assets - knowing full well that the merger would face heavy scrutiny in Washington - that it would be worth the cost. Given that AA is a top slot holder at most NE airports right now, it is certain that any incremental slot additions will face much greater scrutiny. The DL/US LGA slot swap would have a smaller portion of slots at LGA than B6/AA would have at JFK and DL/US has been torpedoed with no signs of anything changing... but clearly AA and B6 are both threatened by the potential of DL and US both fortifying their positions in key NE markets.

If B6 or a low cost airline ever came looking to acquire AA, then AA employees really should head for the hills. AA mgmt now would look like saints compared to what you would face at that point....

besides we all know that AA will eventually be merged with BA anyway and you will have to work for 'old what's his face.

 

[Hopeful]

but clearly AA and B6 are both threatened by the potential of DL and US both fortifying their positions in key NE markets.
face.

AA bears alot of resonsibility for conceding many a market to Jetblue. Same old pattern with this company.

 

[BoeingBoy]

AA bears alot of resonsibility for conceding many a market to Jetblue. Same old pattern with this company.

The old "If you can't beat'em, join'em". With the cost differential, it's hard for AA to compete with B6 on those routes so they worked out a deal for B6 to feed other AA flights and AA to feed B6 flights. A win-win for now. Long term might be a different story as B6 grows.

Jim

 

[Hopeful]

The old "If you can't beat'em, join'em". With the cost differential, it's hard for AA to compete with B6 on those routes so they worked out a deal for B6 to feed other AA flights and AA to feed B6 flights. A win-win for now. Long term might be a different story as B6 grows.

Jim

The whole reducing SJU thing doesn't make too much sense to me either. I understand they are concentrating on MIA, but still seems like a bad move. And keep in mind, even though you can't compete with JetBlue, nothing is more efficient that using containerized baggage as we did with the A300. Passengers from the Carribean pack heavily and hand loading small bellies is a major pain.

 

[BoeingBoy]

The whole reducing SJU thing doesn't make too much sense to me either. I understand they are concentrating on MIA, but still seems like a bad move.

I don't have the data to know if downsizing SJU is good, bad, or indifferent but I assume that someone in the AA organization does have that data - route planning, marketing, whatever department at AA that makes those decisions (or at least recommendations).

And keep in mind, even though you can't compete with JetBlue, nothing is more efficient that using containerized baggage as we did with the A300. Passengers from the Carribean pack heavily and hand loading small bellies is a major pain.

But that just a tiny itty-bitty part of the whole Caribbean operation. If containerizing baggage were free, it wouldn't reduce the CASM enough to equal a rounding error. But that's a different issue than worker comfort.

Jim

 

[WorldTraveler]

forgive my perssimism but I find it hard to call the AA-B6 partnership a win-win when the only winner is B6. They managed to push AA out of every NYC-FLA route except for to/from MIA and a token presence in JFK-TPA and MCO. After pushing AA out of most of NYC-Florida, then B6 wins by getting AA mgmt to buy seats on B6. Given that AA and B6 are in different terminals at JFK, I'm not even sure that AA can connect a whole lot of passengers. Telling AA employees that AA won't put its code on any B6 flight in a market where AA flies rings a bit hollow as witnessed by AA's exit from BOS-DCA just as B6 entered the market.

As for the SJU hub, it has been well suggested that part of AA's motive in buying TW was to get rid of TW's presence in the Caribbean. Almost ten years later, it is B6 and FL that have set up shop in the Caribbean; AA's capacity is down 30% - the largest reduction in the region while B6 today flies 1 out of 6 seats to the region. AA's seat share has fallen from 43% to 32% in just 5 years.

Saying that AA is simply shifting capacity from SJU to MIA is not at all accurate.
Saying that AA wins by pulling out of markets and then buying seats from the low cost competitor that drove them out of those markets is a bit of a stretch.

 

[FWAAA]

Telling AA employees that AA won't put its code on any B6 flight in a market where AA flies rings a bit hollow as witnessed by AA's exit from BOS-DCA just as B6 entered the market.

AA canceled DCA-BOS because those were the slots AA traded to B6 for several B6 JFK slots. Having traded the slots to B6, AA had no choice but to exit that market the same day B6 entered the market.

As for the SJU hub, it has been well suggested that part of AA's motive in buying TW was to get rid of TW's presence in the Caribbean. Almost ten years later, it is B6 and FL that have set up shop in the Caribbean; AA's capacity is down 30% - the largest reduction in the region while B6 today flies 1 out of 6 seats to the region. AA's seat share has fallen from 43% to 32% in just 5 years.

Nobody at AA has ever put forth that justification for buying TWA. In early 2001, TWA flew just a few flights to SJU and a few to the Bahamas. There were a lot of reasons for buying TWA, but TWA's miniscule presence in the Caibbean has never been mentioned by AA or by anyone in this forum until you did today.

 

[BoeingBoy]

forgive my perssimism but I find it hard to call the AA-B6 partnership a win-win when the only winner is B6. They managed to push AA out of every NYC-FLA route except for to/from MIA and a token presence in JFK-TPA and MCO. After pushing AA out of most of NYC-Florida, then B6 wins by getting AA mgmt to buy seats on B6.

That's certainly a creative interpretation...

AA was in something of a quandry - stay in those markets and I assume continue losing money or feed passengers to B6 (possibly making money on carrying them to the connection) in exchange for feed from B6 that AA could make money on. That seems like a win-win to me. Of course, you seem to have proprietary info on all the airlines so you are welcome to disagree.

Jim

 

[WorldTraveler]

Once again, B6 has become the largest airline in NYC-FLA and BOS domestic; AA is trying to compete with the highest costs in the industry which makes them the first to lose money competing with B6 at B6's costs. Not surprisingly, 75% of AA's NYC-FLA revenue comes from its backbone route of LGA-MIA with a minimal presence only in just a couple other markets. You do realize that DL, not AA, now carries more local passengers in JFK-MIA?

Revenue and traffic information by market is not really proprietary since airlines are required to report it to the DOT.

IN BOS, AA has been the most aggressive in pulling down its domestic network against B6's growth. I find it hard to see how you can say that B6 has not driven AA out of most the markets from the NE in which B6 competes.

Of course AA is pulling out of BOS-DCA because they can't make money. After the downsizing that has occurred at BOS, AA does not have the critical mass to fly point to point markets on RJs even against US' mainline jets. Given no other viable options for new service from DCA - any of which likely are flown by US which has a cost advantage to AA - AA had no choice but to figure out how to get some slots.

B6 finds it more valuable to develop a presence in DCA using the AA slots than to hold onto the least profitable half dozen flights from JFK; as a bonus, AA agreed to codeshare on B6 which means that AA can at least put its code on B6's flights in the markets which AA has exited. AA does have the potential to cut its decline in NYC where it is now the #3 carrier behind CO/UA and DL and where DL has been very aggressive in building JFK; with a half dozen JFK slots, AA might be able to enter a few new markets and share the risk on those markets with BA and IB under the new joint venture. But AA is still competing against lower cost rivals CO and DL from NYC who are already larger in most markets except for London, which those carriers have both entered and are doing well in. But let's be clear that American Eagle's presence in the NE has shrunk and is shrinking in light of lower cost competition and with AA and AE's exit from many markets in the NE, AA has no choice but to codeshare to maintain ANY presence - and that work is not being done by AA employees.

Now, tell me how AA wins in this? At best, this is a "lose less" or "cut your losses" strategy for AA.


As for TW, it is well known that they were an aggressive discounter throughout the US but even with their small size in the Caribbean, they were already negatively impacting AA"s profitability in the region where there was very little low cost competition 10 years ago. AA clearly benefitted everywhere - along with the rest of the industry - with elimiating TW's aggressive discounting but the reality is that if AA had known 9/11 was coming, AA would have allowed TW to fail in the post 9/11 crisis in the airline industry.

No, AA won't tell you or anyone else that they bought TW to eliminate competition but given that there is not much left of TW 10 years later and AA moved very quickly to eliminate the low fares which TW once offered, it isn't hard to put 2 plus 2 together.