AMR

[AAviator]

johnny kat,
You too can publish an article on "Seeking Alpha"

Just click here:

http://seekingalpha.com/page/submit-an-article

(can you think of why a Vaughn Cordle is doing articles like these??????????????)


Join the crowd!

http://seekingalpha.com/listing/contributors_stats

I'm surprised USA320Pilot hasn't done the same.

 

[zethya]

johnny kat,
You too can publish an article on "Seeking Alpha"
.......................
I'm surprised USA320Pilot hasn't done the same.

Rather than denigrating everyone who proposes an opinion contrary to the AA Fan Club, why not produce a copy of your credentials to support why we should assume that your assertions/predictions have any credibilty whatsoever.

 

[bigbusboy]

Rather than denigrating everyone who proposes an opinion contrary to the AA Fan Club, why not produce a copy of your credentials to support why we should assume that your assertions/predictions have any credibilty whatsoever.

I agree...

 

[johnny kat]

johnny kat,
You too can publish an article on "Seeking Alpha"

Just click here:

http://seekingalpha....bmit-an-article

(can you think of why a Vaughn Cordle is doing articles like these??????????????)


Join the crowd!

http://seekingalpha....tributors_stats

I'm surprised USA320Pilot hasn't done the same
_____________________________________________________________________________________________________________________________________________

And your point is???? I am not defending anyone's position I just thought someone else may like to read this opinion and make up their on mind. Pardon me for saying "I think you are an over zealous I***T".

 

[AAviator]

Rather than denigrating everyone who proposes an opinion contrary to the AA Fan Club, why not produce a copy of your credentials to support why we should assume that your assertions/predictions have any credibilty whatsoever.

Have I struck a nerve? Am I raining on your parade??

A contrarian position to the "AA's in bankruptcy, now US is going to buy them" set?

Cut me a break.....

 

[AAviator]

I agree...

bigbusboy,
Sit back for a minute and consider why you're posting, so passionately, all the possible virtues to a US AA combination......

Then ask yourself: Are these reasons why any AA employee would want to be involved with LCC?

Be honest.

 

[AAviator]

johnny kat,
You too can publish an article on "Seeking Alpha"

Just click here:

http://seekingalpha....bmit-an-article

(can you think of why a Vaughn Cordle is doing articles like these??????????????)


Join the crowd!

http://seekingalpha....tributors_stats

I'm surprised USA320Pilot hasn't done the same
_____________________________________________________________________________________________________________________________________________

And your point is???? I am not defending anyone's position I just thought someone else may like to read this opinion and make up their on mind. Pardon me for saying "I think you are an over zealous I***T".

Really? I posted that Vaughn Cordle is profiting from all of this as you can too, and thats what you come up with?

Thats rich....

 

[AAviator]

This thread already has about 18,000 views...

Just this thread!

Think about it?

Do you think a UAL scab is going to be spitting out "opinions" every other day to grow the number in his check book?

I do......

 

[bigbusboy]

"Bigbusboy,
Your arguments still attempt to focus on the east coast – and your perspective of looking at total number of hubs doesn’t factor in the revenue that those hubs produce.
First, any US/AA combination still does nothing w/ the west coast or Asia, areas that DL and/or UA have advantages. UA has the west coast taken care of – but that is precisely where DL could focus its next strategic moves – but UA doesn’t have a SE presence. The SE which does include MIA is still the largest revenue region in the US and DL is the dominant network carrier in the region and in every key city except for MIA as AA’s hub and CLT as US’…. But DL is a solid #2 even in those regions.
However, you say that DL and UA will have NYC plus one other hub – IAD for UA plus ATL for DL… yet the simple fact remains that the NYC markets remains much larger than any other market and as hubs – DL and UA both have enormous power to concentrate the east coast market using the strength of the local market – hubs are built on strong local markets and the strongest hubs have the strongest local markets. The difference is that EWR is slot restricted so UA/CO cannot grow anymore in the NYC area; DL’s addition of flights will allow it to match if not exceed UA/CO’s total NYC size but will do it from LGA and JFK which is where the largest markets from NYC are to just about any city in the US… IAH is about the only market from NYC where the largest market is from EWR and not LGA or JFK but that could change if DL decides to start LGA-IAH service. Given that LGA is by far the preferred airport compared to both EWR and JFK in markets that are within the perimeter rule, DL has a revenue advantage that could add billions in dollars in revenue that others cannot match.
The revenue that you obtain in your strongest local markets is what you use to “fund” the hub you build to support the entire region.
And you still can’t overlook the fact that DL carries more revenue to/from/through ATL than ANY OTHER TWO HUBS in the US combined; ie DL carries more revenue to/from/through ATL than UA carries through EWR/IAD, AA through MIA/DFW, AA/US carries through MIA/CLT etc.
When you combine the strength of DL’s ATL hub with what it will have in NYC, there is no conceivable combination that can surpass DL’s strength on the east coast." Worldtraveler

WT,
Your passionate defense of DL was probably triggered by my comments about DL having a "real run for their money" should an AA/US merger take place. It was never my intention to suggest the demise of DL. That's not going to happen anytime soon, if at all. Your defense of DL is spot on and ATL has the competitive advantage over any other hub east of the Mississippi; however, I'm a bit confused about your statement "but DL is a solid #2 even in those regions." Second to whom? Or, did you mean to type AA? Either way, the question remains the same. Second to whom? DL by far is the number one on the east coast bar none. AA is either number one or two with DL to the Caribbean and number one to South America. I'm referring to the market of upstate New Yorkers and New Englanders who travel to/from the South East. Much of this market is travelers doing this once, twice, even three times per month for business; high-yielding corporate contracts and walk-up fares. DL is clearly number one through ATL, but US is clearly number two through PHL/CLT. AA is not a major competitor in this market.

As to your comments about the West Coast, you're absolutely right. A potential AA/US merger adds very little to this market. Fares on the West Coast are low yielding compared to the East Coast and by your own admission "UA has the West Coast taken care of." In order to enter this market, AA would have to horizontally merge their way into the market. AS is the only viable suitor to accomplish that. But why would AA purchase their way into a low-yielding market that is "already taken care of by UA" and still be left at a competitive disadvantage to UA and DL because of AA's overall market share. Should AA choose to merge, and they may not, they would be faced with at least two choices. Merge with AS into low-yielding markets with high levels of competition only to still be left behind in market share, or merge with US into higher-yielding markets with high levels of competition but now on par with market share with the other two major competitors. AA's third choice might be to merge with B6. Ok, that brings feeder for JFK, but does nothing for market share. Market share means everything in a mature industry. It's the only way for growth; however, Boeingboy is correct by saying market share means nothing if it isn't accomplished profitably. Profitability is a function of all three: revenue, costs, and market share in mature industries.

Now, a previous AA poster asked me to "be honest" about the reasons for my "passionate" writings. Ok, here it goes. Like you WT, I have a passion for this industry. It began as a flight attendant 29 years ago with US Air in Pittsburgh. I loved life in Pittsburgh and loved working for US Air. Never once did I ever have the desire to work for UA, AA, DL, NW, EA, CO; although, I can't say the same for PA. I speak German and interviewed with them in '82. Thank God that didn't pan out. I coulddn't give two hoots about a merger between AA and US. Now, let me explain why. Several years ago my compensation package was recalculated during bankruptcy and I didn't like the results. I made a personal decision then to complete a Masters degree and move on. By this time next year that goal will be complete. My second goal is to pass the CPA exam and will focus on that during the winter of 2013. God willing and the creek don't rise I will be gone/retired form US in another year or so. AA's banruptcy filing last week is timed so very well for the graduate finance class I'm taking currently. The text I use for class and a source for my postings is Financial Management: Theory & Practice, 13th Edition. Michael Ehrhardt & Eugene Brigham. 2011, Cengage Learning. The core objectives for this course focus on corporate-valuation models for M&A activity, LBOs, divestitures, debt and equity offerings, and bankruptcies. I'm just sick and tired of so many people saying US brings nothing to the table because it demonstrates a complete misunderstanding of reasons for a merger, specifically in this industry. And, I'm using this class to validate my opinions. Who knows what will happen. AA has some tough decisions to make, but was very smart to avoid DIP financing. Every scenario I, you, boeingboy, and all of the AAers have opined on have validity. The only "rock solid" thing about all of this is the AA brand will survive and prosper. In what form, size, and ownership remains to be determined.

 

[NYCDelta]

I want to address NYCDelta's point 5 because it seems to be the one point everyone seems to not understand.

Your post is well thought out and not condescending or nasty like many on here. For that, I thank you. I probably should restate my position to "LCC brings LITTLE to AA". What I mean by that, is that if AA can dump their pension obligations, fix Eagle, and change retiree medical, they should be in a position to effectively grow the airline organically, better compete with DL/UA and better align their service offerings with their oneworld partners. I don't think they need the mess of a merger to do that. If they can negotiate better leases on their super 80's, which I'm sure they can (who would want them?), then their costs would go even lower as new, more fuel efficient airliners come aboard. Plus, word on the street is that they got a pretty great deal on said new aircraft.
I think airlines are more and more focusing on their strengths, rather than just marketshare. I'm not convinced that "bigger is always better". If AA and LCC merge, like Boyd said (and I agree with him), it would be a nice gift to executives and would result in reduced service overall by eliminating a competitor.

So if you're not a self-anointed aviation expert, why should we associate a whole lot of credence to your post, or are you inferring that we should accept that you are indeed a true recognized aviation industry expert? Please produce some reference to substantiate your claim that PHL is NOT a profitable hub for US and/or that CLT is more profitable? Since there is essentially zero growth capability out of JFK during prime departure/arrival segments because of slot controls, how do you propose that AA strengthen their relatively weak East Coast -Trans-Atlantic service ?

You don't have to give any credence to anything I say. I posted the highlights of Boyd's review, and said I mostly agree with what he said. I also said DCA would probably benefit AA more than any of the other hubs. I never said that any hub at LCC lost money because I don't have access to that information.

 

[NYCDelta]

I made a personal decision then to complete a Masters degree and move on. By this time next year that goal will be complete. My second goal is to pass the CPA exam and will focus on that during the winter of 2013. God willing and the creek don't rise I will be gone/retired form US in another year or so.

Good decision and congrats to you! I'm also in a Masters program (nursing) so I know how difficult it can be. I left DL after 15 years, worked at UA WHQ for 6 months, took a voluntary furlough and decided to just work as a nurse. I miss flying sometimes, but there is something to be said for working 3 days a week and sleeping in your own bed every night!

 

[WorldTraveler]

good posts, bigbusboy and NYCDelta.
.
first, congrats to you both for leaving the airline industry. Any job can be great but most people don't realize when it is time to move on in life and don't invest the time necessary to change their situation. Change is not easy but it can work out for the better, esp. in the airline industry where there has been virtually no upward movement in terms of salaries or benefits for employees in the group as a whole. WN's letter (posted in the AA forum) shows that the ceiling has once again been hit for several more years.
.
My comments about market share refer to the East coast domestic market as a whole, not specific hubs. Even when you speak about specific markets, DL and US are #1 or #2 in most markets from Georgia to New York and all the way west to Texas. US is still the #1 airline in a number of smaller markets but DL has chipped away at alot of US' market strength on the east coast. In Florida, the combined WN/FL is number one in many markets but DL is still number as a network carrier other than in MIA.
B6 is a potent force in the Caribbean now... don't underestimate what they have accomplished... and the real fear for AA is that B6 and WN could easily chip away at the Caribbean and northern Latin America markets. (ie other than deep S. America)
.
The notion that the west coast is low yielding is not currently accurate. You will recall that post 1987 with the 3 mergers involving US, AA, and DL, there were 4 airlines vying for a place on the west coast alongside UA. All three pulled down their north-south west coast flying fairly quickly... US still has PHX as a result of the later HP merger, DL still has SLC.
AS and WN actually coexist fairly peacefully on the west coast. The west coast is competitively stable and is not a money losing, low yield operation.
The battle remains on the east coast - and it was DL's decision to bail on much of the west coast that allowed it to focus on the east coast in the aftermath of Eastern, its ability to keep FL on a "short leash" and now to aggressively build NYC.
But consolidation is coming to the east coast and east coast fares are going up... FL's average fares have grown very rapidly since WN bought them indicating that the deep discounting on the east coast is probably winding down.
.
You are correct that market share is not the end all and be all but if an airline can't maintain market share, the changes are low that they will be profitable long term against competitors who control pricing better... in a commodity market, the largest player has a tremendous amount of pricing power. In fact, a big reason why US does not have the success on the east coast it once did is because they do not have the pricing power. DL quite honestly sits on US if they try to do anything that harms DL's position on the east coast... whether than be adding capacity on top of US or using DL's larger size to squash US' attempts to dump low fares in markets where DL does not want to see low fares. The slot swap is all about DL gaining the critical mass in NYC which is a far larger market than WAS to be able to gain the pricing power which has been heavily divided among multiple players with CO gaining the most by having the largest mass. Now DL will have a similar size to the combined UA/CO but will do it with a very heavy focus on LGA which produces higher revenue to the same destination than EWR or JFK... with the obvious caveat that you can't serve all markets from LGA that you can serve from JFK and EWR.
.
I agree that it is harsh to say that US brings NOTHING to the table... but IMO that statement should be read in the context of AA, which is where the discussions are focused right now.
CLT is a viable alternate to ATL which will remain not just the strongest hub on the east coast but anywhere in the US... remember that no two hubs anywhere in the US carry as much revenue as DL carries through ATL with the exception of AA at DFW (the number two hub) plus either CO at IAH or CO at EWR or UA at ORD. DFW plus one of those 3 hubs are the only combinations of hubs that can surpass DL at ATL in terms of revenue carried.
... and that means that the east coast WILL always be defined by what DL does at ATL more than any other factor. How other hubs might move between carriers could affect DL's strength at ATL but DL at DTW, JFK, and MSP combined are about the same size as DL at ATL - so whatever factor other hubs are for those carriers, DL matches them in the same region as well.
.
Thus, attempting to try to match DL in the eastern US is pretty much mathematically impossible to do.... the best alternative is to figure out how to competitive survive alongside DL... and the best way to do that is to have costs as low as if not lower than DL... and that is exactly what AA will have when it comes out of BK.
They will be able to compete again on the east coast, but they will still lose alot of ground competitively during the BK process.
Putting the pieces back together in 18 months will depend a great deal on what each carrier has by that point.

 

[bigbusboy]

.
You are correct that market share is not the end all and be all but if an airline can't maintain market share, the changes are low that they will be profitable long term against competitors who control pricing better... in a commodity market, the largest player has a tremendous amount of pricing power. has by that point.

This is the point I'm trying to make about AA. They need to get to a size equal to UA and DL in order to compete effectively. Resolving their cost issues through bankruptcy won't be enough. They can do this organically, suggested by NYCDelta, or they can do it through a merger with either AS, B6, or US. Organic growth in a mature industry is very difficult to do. Merging is very costly and challenged with operational and labor discord. Either way, it's going to be expensive, but got to be done IMO.

You did mention in another post about how DCA will be problematic for US no matter what happens. I agree. I'll even take it one step further by saying an AA/US merger will be challenged by the DOJ more so than folks realize. The resulting three carriers will be UA, DL, and AA. Combined they will control at least 75% of the industry. That may be too much for the DOJ to approve.

 

[bigbusboy]

Good decision and congrats to you! I'm also in a Masters program (nursing) so I know how difficult it can be. I left DL after 15 years, worked at UA WHQ for 6 months, took a voluntary furlough and decided to just work as a nurse. I miss flying sometimes, but there is something to be said for working 3 days a week and sleeping in your own bed every night!

Congrats to you too. It's very difficult. I've started to cut back on flying and I miss it already. Friends of mine who have transitioned into other lines of work tell me it will be the hardest thing I'll ever do. What is it about this industry that makes us so passionate, defensive, and difficult to leave? I haven't been able to give up TA flights for one days, but that day is coming soon. Best of luck to you too.

 

[WorldTraveler]

This is the point I'm trying to make about AA. They need to get to a size equal to UA and DL in order to compete effectively. Resolving their cost issues through bankruptcy won't be enough. They can do this organically, suggested by NYCDelta, or they can do it through a merger with either AS, B6, or US. Organic growth in a mature industry is very difficult to do. Merging is very costly and challenged with operational and labor discord. Either way, it's going to be expensive, but got to be done IMO.

You did mention in another post about how DCA will be problematic for US no matter what happens. I agree. I'll even take it one step further by saying an AA/US merger will be challenged by the DOJ more so than folks realize. The resulting three carriers will be UA, DL, and AA. Combined they will control at least 75% of the industry. That may be too much for the DOJ to approve.

yes, all the historical belief in the industry is that size matters in the airline industry... pricing power and the ability to win business is determined by size in the same way that Wal-Mart has grown to dominate the discount retail sector.
.
It is not yet apparent that AA will be unable to compete against DL and UA long-term but there are early signs... but they can't be isolated because there are other factors such as costs that are in play.
.
If AA really finds it cannot compete on the basis of size, it can be more aggressive on pricing in the network they do maintain. But keep in mind that if they can maintain their current position in their five cornerstone markets, they still offer a pretty decent network... the main detriment is Asia and it isn't unreasonable to think they could add enough of their own service plus through partnerships to at least stay in the game next to DL and UA.
.
Congress will be very concerned if the industry consolidates beyond the current big 3 network carriers plus WN... ie I think the expectations are very much there that the industry is basically a "four big guys" industry now.... the real issue is whether the industry needs to consolidate beyond that - and I don't think it will. You could have US or pieces of it plus AS or B6 come in play but basically the US industry is as close to consolidated as it will become with 4 big carriers... right now, though, there are 5 including WN plus B6 and AS and then F9 which is probably not long for this world....
.
But it still comes down to the fact that if a merger does not produce the value AA and its creditors need, there is no point in merging just to get larger... and that is the whole point with US/AA... it doesn't solve enough of AA's strategic needs. An AS or B6 merger address more of what AA needs while US basically duplicates parts of AA's existing network - w/ the exception of CLT which is a unique asset to the industry no matter how you cut it.