Mr. Horton and his management team stand to receive somewhere between $300 million and $600 million if he can make it through bankruptcy court without merging first with a rival like US Airways.
And given that AA mgmt has managed to keep the wheels on the bus during the BK process despite the operational difficulties of the past year, the ongoing noise of a competitor’s desire to acquire AA, and a ongoing difficult labor environment, the likelihood is high that AA will be able to convince the creditors that a standalone plan is best. The creditors know full well that any acquisition – merger or just assets – is messy and could significantly delay their recovery.
Unless AA is unable to run at least an “average” airline, they will emerge as a standalone – and the executives will get paid.
Why is it that no one wants to grasp one of the basic issues here? Parker has sold the AA unions a bill of goods, and they are apparently ignoring the truth or just plain ignorant (no offense intended). I understand you hate your current management and would love to see them gone, but to take Parker and US is a mistake. He has no intention of giving you a better deal--just look at US today-the lowest paid employees in the industry, labor trouble equal to or greater than just about any other airline (7 years NO contract for pilots, and Parker is happy because he is saving money), flight attendant deal rejected, 2 pilot groups practically at war with each other...come on folks, if you think things will be better under Parker and US you are sadly mistaken.
That said, a combination might work with an entirely new management team, but I urge the AA unions to talk privately with their counterparts at US and learn the truth.
Very good question… again from a non-airline employee….and it shows how toxic the labor relations are at far too many US airlines that they would settle for one option which clearly is far less than ideal just to spite their current mgmt team – and keep them from getting a huge payout. No one doubts that a payout to mgmt that amounts to a huge chunk of the annual concessions is wrong but selling your own soul out to hurt someone else never makes much sense.
Further, no one is asking how much US execs are racking up in stock profits as a result of LCC’s inflated stock price, driven by expectations that many analysts have that AA and US will eventually merge which would dramatically improve US’ revenue outlook.
Parker and co. are happy to keep the idea of a merger going as long as possible since it gives them even more opportunities to cash in on LCC’s inflated stock price.
Good points. AA should have rammed a Non Disclosure Agreement down Doug's throat as soon as he hinted at taking over AA. Had they done so, they might have kept the attention of the APA and APFA who were off mixing it up with Parker instead of sitting down negotiating with AA management. And once Parker offered the AA unions their tentative bridge agreements (with smaller concessions than AA was demanding) it was not easy to get the APA or the APFA to do what bankruptcy law demands, and that's negotiate with their employer. What Parker did was close to tortious interference, IMO.
I fully expect that AA and US eventually combine, but I predict that management (whomever it is) won't be dangling more money and bennies at the workers when that happens, but instead will be demanding more concessions. Of course, given the very low pay of US pilots and FAs, they'll be in line for smaller raises than they were hoping for but for the AA pilots and FAs, hold onto the wallets as their post-Ch 11 pay will far exceed the pay of their US counterparts.
A lot of people – perhaps Parker included – fail to grasp that AA was so quick to start the merger discussions just to shut Parker up and keep him out of the negotiations between AA and its labor.
I’d like to hear your thoughts on when you think AA and US will merge if they don’t merge in BK.
Even Parker has said that the chances of making a merger work if it happens after AA emerges are slim…. AA is resizing in BK to be a standalone airline. Unless one of the two enters BK w/ the expectations of a merger, then it will be very difficult to get the costs out w/ neither carrier in BK.
Part of the reason DL-NW worked is because it seemed very apparent that the two went thru BK w/ the intention of merging after BK. Consequently, DL and NW emerged w/ lower costs than its peers as standalones and were able to maintain that advantage even after merging.
I think you fail to appreciate how quickly the competitive situation is moving and how difficult it will be to pull off a merger even a year down the road. AA is behind the competition right now; adding another year or more to the process of regaining position will only make it much more difficult to regain a competitive position since mergers are messy and take years to gain all of the financial benefits.
A lot of people don’t want to hear it but DL’s NYC buildup could not have gone better given the operational problems at UA and then AA. With 2 ½ times more seats and 3 X more destinations than AA, DL has worked aggressively to shift key accounts and passengers away from AA. There is enough public data to confirm that for those who want to see and more data will confirm that within the next few months.
UA is recovering from its operational problems quickly and is very keen to gain what it can from AA, esp. in Chicago and on the west coast. WN is moving very quickly to resolve its merger related issues and will be putting pressure on AA as well. B6 and VX along with Spirit are just as eager to grow their presence in key markets and continue to put pressure on AA – there is plenty of publicly available data to show all 3 of those carriers are having an impact on AA now.
Add in that the Wright Amendment will fall in less than two years and Open Skies will occur in most Latin America countries within the next two years and AA has no choice but to come out of BK – but the competitive situation remains very keen and the last ten years show that AA has not been very effective at holding off assaults on its network.
I’m not sure what AA needs to be able to stem those assaults in the next few months but there is no sign of it letting up… expecting that a little more time will make it any easier for AA to regain its footing seems more than a little wishful.
