Another US red flag?

[jimntx]

A good bit of the PHL to Europe profitability may be due to the strength of the Star Alliance. Assuming that UAL has no interest in having a merged AA-US member of Star, the "new" AA would probably stay in OneWorld. The OW connections and destinations don't support some of the secondary cities in Europe that Star provides. Besides, BA already flies to most of those destinations from Heathrow and might not take kindly to non-stop US-EUR competition from its closest alliance partner.

For those of us who are junior, as you said, a merger would only make our situation worse. As it is, I have to work until I'm 71 just to reach top of scale. I would have to fly until I am almost 80 to be off reserve at DFW based on current reserve seniority. (I think not. )

 

[silverbird007]

A good bit of the PHL to Europe profitability may be due to the strength of the Star Alliance. Assuming that UAL has no interest in having a merged AA-US member of Star, the "new" AA would probably stay in OneWorld. The OW connections and destinations don't support some of the secondary cities in Europe that Star provides. Besides, BA already flies to most of those destinations from Heathrow and might not take kindly to non-stop US-EUR competition from its closest alliance partner.

For those of us who are junior, as you said, a merger would only make our situation worse. As it is, I have to work until I'm 71 just to reach top of scale. I would have to fly until I am almost 80 to be off reserve at DFW based on current reserve seniority. (I think not. )

That is the problem, LH doesnt seem to be so greedy with UAL, same with AF and DL, maybe we need to not give so much to BA, maybe a new CEO might stand up to BA. Maybe BA is a little too greedy.Yea as far as flying on reserve for another 15 years, im planning on leaving as soon as i can, maybe another early out I will be eligible for. But definitley at 55.

 

[WorldTraveler]

actually, Jim, US gets better average fares relative ot other US carriers in non-Star markets than in Star markets....
It would thus appear that US has a liability WRT to average fares by being in Star than if they were not..... US' average fares in Star hub markets is considerably below UA's average fares... a much larger gap than in non-Star hub markets.

WRT LHR, DL is within 1% of the average fare of AA.... the notion that DL is pulling down average fares is not supported by fact. US, which started out in LHR with very low average fares is now just a few percentage points behind the average.... which proves that LHR is a large enough market that no one is really trashing fares to maintain their position.

The problem strategically with any alliance between two strong competitors - exactly the kind that AA has developed in many markets - LHR and Latin America - is that both parties are strong enough that they look for a way to get the most from the other party... in alliances where one party really needs the other to distribute traffic - such as KL and NW had, there is a much greater sense of being fair because that is the best way for each party to get what they need.

Seniority and job progression is still closely related to the growth of the airline... the best hope of moving up is if AA grows.

 

[IORFA]

If US Air happens as the unions want, there will be another early out. According to APFA, for both sides.

 

[777 / 767 / 757 Love]

As a few have pointed out, everyone sees the grass, and noe fo the weeds mixed throughout the grass like a disease. So many things that would be totally screwed up after the merger, it would be so messy and I'm not sure if anything would be left of either airline as the competition picked it apart while it was trying to deal with the merger pains and issues.

That is what analysts today are great at: crunching numbers. But as we all know, the numbers never tell anything. When you rely PURELY on the numbers, reality sometimes BITES you in the a**.

Cheers,
777 / 767 / 757

 

[johnny kat]

Love, please give some specific examples of what would be screwed up? Why would a US/AA merger be any messier than the DL/NW or UA/CO mergers?

 

[jimntx]

Well, for starters, do you really think that a merger between AA and LCC will magically end the childish 7-year old spat between the East and West pilots? Go look at the October/November US Pilots thread. It was started fresh and clean on 10/4/2012. It already has 4,162 replies in 1.5 months. And, there is absolutely not one single original thought posted on it. Both sides are still saying the same thing over and over again that they have been saying for the past 7 years. "You stink." "No, you stink." "Well, you stink worse." ad nauseum

And, what will the LCC East pilots do if a "binding" arbitration ruling does not put them on top of the seniority list above all LCC West and all AA pilots? Vote out USAPA, vote in a new creation of a "union", and announce that the mediator's ruling is only binding on the USAPA pilots that represented the union in the mediation?

And, since Doug Parker has proven himself capable of running two separate airlines with the same name and making a modest profit at it, running three separate airlines with the same name should not be that much of a stretch. And, the beat goes on.

However, I wouldn't put the mortgage payment money on any merger bet if I were you. Horton and company are determined to emerge from bankruptcy as a standalone airline. They get a bigger payout that way. And, the UCC so far seems to do whatever Horton and company wants them to do.

 

[WorldTraveler]

Kat,
I'm not love and would like to hear what he has to say, but while agreeing w/ Jim, I also think that the whole idea of an AA/US merger is based on the mindset that "its the next best alternative even if it doesn't solve all of the problems... but we'll go with it anyway."

The reality is that mergers are difficult but AA/US wouldn't solve a number of key strategic issues compared to DL and UA including Asia and continental Europe and that other really big city in the NE that people on here get sick of me discussing.

AA is in the midst of a very difficult and painful restructuring that takes time to work through on its own; adding a merger on top only increases the risk of more difficulties - and investors HATE risk.

It is still far from certain that AA and US NEED each other... US has made a lot of progress in building a viable business over the past several years... and AMR's creditors would rather use the BK process AA is already in to make the company viable than to add the risk of a merger on top.

I'm sure we'll all discuss this until AA emerges one way or another and then, if the merger hasn't happened, there will still be those that think it will be "just around the corner."

Until the underlying competitive and structural issues in the merger are adequately addressed, a merger would serve only to add more difficulty relative to the potential gain.

It's not a question of what AA or US have done wrong but just that the first movers in this wave of consolidation had an advantage that will be much harder for AA/US to equal or surpass.

 

[FA Mikey]

Why would a US/AA merger be any messier than the DL/NW or UA/CO mergers?

Then why merge? Again you forget us needs a merger 100 time more that AA needs one. So why go through the BK right in to the nightmare of a merger. It really brings no value other than size which some employees seem to think is the end all, but frequent flyers do not.

 

[700UW]

Everything is integrated except the FA and Pilots.

 

[WorldTraveler]

It really brings no value other than size which some employees seem to think is the end all, but frequent flyers do not.

size very much matters to FFs and to corporate bookings... but alliances and joint ventures are a means of obtaining the marketing mass w/o actually integrating the carriers.
The problem is that there are 3 alliances and 4 remaining US network carriers and 3 of those 4 carriers already have joint ventures that do not require additional players to accomplish what they need.

Let's not forget that all of the rumors about a AA/US merger have run the stock price of LCC up considerably to the benefit of alot of people, including a number of US execs.
If AA execs are trying to protect their payout by emerging independently, US execs benefit from keeping the hope of a merger alive.

 

[LD3]

Everything is integrated except the FA and Pilots.

So what your saying is that it should be a piece of cake??

 

[700UW]

Where in my post did I say that?

I have been through three mergers and there was nothing easy about any of them.

 

[AAviator]

Well stated, skynews. A very rational and realistic response. I think the most important aspect of a merger will be the size of the combined companies. AA has no chance of future survival and growth all by itself. What's needed is a larger airline with a larger network to even begin competing with United and Delta. AA simply cannot survive on its own by taking back market share through internal growth alone. That would take too long, if it happens at all. The only possible way AA could be successful on its own is to actually scale down our network and become a 'niche' airline and focus on being "the" carrier to Central and South America (where we're already strong.) But that's not the vision of our executives. If we want to be a truly global airline, we need to immediatly latch on to US and be part of a larger global network. There's no time to waste. Integration and union issues will eventually be resolved in the meantime.

Juniority, I don't mean to pile on you here but this is what I've been talking about all along. You couldn't be more wrong if you tried. I didn't highlight your remark about being a "a truly global airline" be cause I'm not positive you've actually looked at or understand what you're tring to convey.

When Delta and NW merged, the resulting airline brought two companies together that needed network strength in different regions. Meaning, their combination created a comprehensive, competitive route network. Size or mass(as a lot of people gravitate to) had nothing to do with the combination other than the fact that it takes X number of aircraft to accomplish the creation of a "competitive" network.

Prior to the DL/NWA merger, Delta has very limited access to the pacific rim, as does AA. And lookie here.. He're what NWA brought to the table:
http://www.airlinero...a_pacific.shtml

NWA had a limited presence in the NATL, but had some, along with the KLM deal: (note the much larger reach across the NATL when you factor in KLM. LCC will not be bringing this additional reach when they depart STAR)
http://www.airlinero...ope_india.shtml

In 1991 Delta won the bidding for Pan Am's NE shuttle and associated international assets, to include its limited Latin America network:
http://articles.lati...elta-airlinesay
There's your foundation for what Delta is today, and why it is the industry powerhouse it is.

(wings396 may chime in about how Parker wanted DAL but NWA was already in the works... sour grapes.. >>completely irrelevant<< NWA was the right choice hands down)

Moving on to the new United...

Again, lets take a glance at the networks of UAL and CAL prior to the merger... The maps are not as good, but you'll get the idea..

http://www.airlinero...a_pacific.shtml

http://www.airlinero...es_europe.shtml

The result, again, is a comprehensive total NETWORK, that is very competitve.

(For the LCC and UAL were going to merge set: UAL-CAL+LCC? compared to UAL+CAL? lets be honest people)



Strategically, they are sound and solid in the most important "global" regions. Deltas weak spot is Latin America, and once UAL is firing on all cylinders, they will roll along VERY nicely.

Before I move on to the possibilty of the much ballyhooed AA/LCC marriage, lets stop and have a look at Star Alliance Euro member LH's behavior with regards to the Star NYC presence.

You may recall prior to the UAL/CAL merger, LH only had a small presence in the NYC market. Seeing this, along with the -at the time- likelyhood of Star being locked out of the NYC market, they took up a 19% stake in JetBlue. PHL and Star partner LCC were right down the road, but the reality is, if you're going to be a true Global airline, you had to be a player in NYC... (not PHL).

Fast forwarding now... UAL and CAL combine as a STAR airline, and LH now has a firm base in the NYC market at EWR.

So what did they do with the JBLU ownership? It is no longer needed, so they make moves to unload it..

http://worldairlinen...etblue-airways/

Now, whats important here is not the fact that they're big in the NYC market, but rather an indication of just how important the NYC market is to global alliances ($$$$$$$)

What do they do? They capitalize on EWR and grow in JFK. They don't beef up PHL, or dump capacity to the STAR PHL hub partner, they bring A380's AND a 747-400 to JFK. Follow the money... but enough about that.


Now we have the idea of AA gaining "mass"... So that we can compete with DAL and UAL..

What kind of mass? Competitively speaking the AA/LCC combination doesn't address AA's route deficiency in the Pacific. Does it?

Here's the LCC Pacific route map:

Whoops, wait a minute... They don't have one.. unless you want to call Hawaii a Pacific solution.

Moving on to the NATL: http://www.airlinero...rnational.shtml

Pretty anemic when you consider that AA already serves a good number of those, and when LCC vacates Star for OW, the german cities will most likely stop...

So here we are Juniority.. A bunch of mass without a real competitve answer...We'll be the biggest with the weakest network, and no real solution other than ORGANIC growth to address the competitve needs vis-a-vis DAL/UAL

As far as you comments about AA being unable to survive as a stand alone... Care to elaborate? Substantiate your position. Info coming from the BK process paints a very very different picture.

p.s. Do you work for AA or LCC?

 

[AAviator]

Everything is integrated except the FA and Pilots.

Operating certificates/fleets?