APA leadership meets with USAirways executives

[Super FLUF]

Merging with US Airways makes most sense for American

When Tempe, Arizona-based US Airways announced a record US$321 million 2012 second-quarter net profit excluding special charges, up 203% from the corresponding period in 2011, it stood in sharp contrast to American Airlines parent AMR Inc., which reported a net loss of US$241 million despite record quarterly revenue of US$6.5 billion as well as artificially low operating costs due to AMRs current position in Chapter 11 bankruptcy protection, which shielded it from having to pay certain suppliers and creditors till approval is given from the bankruptcy court judge in New York.

While AMR did show a 15.7% improvement over its results from 2011 second quarter, and continues to make progress in its bankruptcy restructuring process, it has become clear at this point that AMR should at least consider the possibility of merging with another US carrier in an effort to match the scale, scope, and profitability of full service rivals Delta Air Lines and United Airlines, as both of these airlines have reported record profits over the last few years, even as AMR lost billions of dollars.

Americans standalone reorganisation underwhelming
American made a smart move in laying out a plan to increase its net results by US$3 billion annually, which would have led to profitability at AMR in each of the past 10 years except 2002 when the entire US airline industry was suffering from a post 9/11 hangover, and led to a US$1.9 billion profit excluding special items in the last full fiscal year of 2011.

However, the specifics of AMRs plan leave much to be desired. Of the US$3 billion improvement, US$2 billion is supposed to come from restructuring savings including labour cost reductions, debt restructuring, general contract renegotiation, and the grounding of older, fuel-inefficient planes. However, this US$2 billion target has already been revised downwards as AMR has reduced its target for labour cost reductions from 20% to 17% after a tepid response to its proposals from the various employee unions at AMR. That drop from 20% to 17% means that AMR is now only targeting US$1.6-1.8 billion in annual cost savings versus 2011, of which US$1-1.15 billion is expected to come from labour costs.

Whether AMR can achieve even this less ambitious cost reduction target is questionable given that AMRs various unions are highly reluctant to come to terms with AMR. For example, the Association of Professional Flight Attendants (APFA) rejected outright AMRs initial term sheet offer that would have saved the company US$234 million annually, and forced AMR into several subsequent rounds of negotiation that culminated in a Last Best and Final Offer (LBFO) from which AMR only asked for concessions of US$168 million and left in place several productivity-killing work rules.


Similarly, AMRs pilots union the Allied Pilots Association (APA) has yet to agree to AMRs term sheet or any subsequent offers, voting down the most recent AMR offer 11-5. AMR management seeks US$315 million in concessions from the APA, but more importantly is also seeking more freedom in aircraft purchases with AMRs order for 42 Boeing 787-9 being heavily delayed and in fact AMR might lose out on prime delivery positions for the 787-9 if further delays are incurred in signing the firm order with Boeing; and pilot scheduling as American has been prevented from launching several ultra-long haul routes such as Dallas-Shanghai due to a draconian clause in the current collective bargaining agreement (CBA) that requires pilot approval to fly any ultra long-haul routes. However, the APA claims that its members are unsure of the proposed benefits from the plan, including a generous profit sharing plan similar to the ones found at Delta and US Airways, and has asked the bankruptcy court judge for more time before the Section 1113 provision rejecting all of AMRs CBAs is granted to management. However, on August 15th, the New York bankruptcy court denied Americans petition, saying that AMRs management had not made its case well enough.

Even if AMR is ultimately successful in winning new deals with each of its labour groups, Aspire Aviation is sceptical that it will be able to gain the full scope of cost savings from labour, given that much of the projected savings comes from work rule changes that may not increase productivity to the degree that AMR claims it will. But Aspire Aviation believesAMR can realistically expect to meet 85% of its targeted savings, or between US$850 million and US$900 million. This would reduce Americans labour cost per available seat mile (LCASM) to between 3.7 and 3.8 US cents, roughly in line with fellow US full service carriers. Similarly, Aspire Aviation expects that AMR could achieve between 70-80% of its US$750 million goal for savings from other restructuring moves, or US$500-600 million. All told, Aspire Aviation estimates that AMR could save up to US$1.5 billion in annual costs through its bankruptcy restructuring. This would push Americans overall cost per available seat mile (CASM) down to around 13.2-13.5 US cents.

But even this level of savings will only push AMR to a tenuous level of profitability, as it does not address its biggest problem, its declining revenue performance. Now in absolute, nominal terms, AMRs revenue performance is just fine it is recording excellent growth in passenger revenue per available seat mile (PRASM), an industry measure of unit revenue, as with the general US market which has seen record PRASM growth.

Where AMR has a problem is relative to its legacy peers. For the longest time, American has held a strong PRASM advantage relative to the rest of the US airlines. But in recent quarters, that advantage has evaporated as rivals United and Delta leveraged more powerful networks to increase their PRASM in 2012 second-quarter to 13.57 and 14.23 US cents, respectively, versus just 12.33 US cents at American, including regional operations.

AMR claims that it will close this gap by increasing revenues by a total of US$1 billion over the next five years, including US$330 million from increased domestic and international codeshares, as well as more than US$660 million from increased international flying and a 20% growth in departures from its five cornerstone markets: Miami, Los Angeles, Dallas-Fort Worth, New York both JFK and La Guardia, and Chicago Ohare. However, Aspire Aviation is sceptical that American will be able to sustain much of this revenue gain over the long term, as simply adding destinations and frequencies to the network will not solve Americans fundamental network deficiencies, which lie in Asia, Europe beyond London, and domestically up and down the East Coast and to a lesser degree on the West Coast and in the Rocky Mountain region. Any revenue gains which American might accrue by putting more flights onto its network are ultimately unsustainable, because existing competitors and new entrants can take back that business by attacking Americans network holes.

Short of organic growth that will be very difficult given Americans retrenchment from its formerly diverse network of focus cities within the US and a dearth of viable hubs for transatlantic, transpacific, and East Coast domestic travel, the only way for American to solve its network deficiency is in fact to merge with another US airline.

 

[Super FLUF]

In late July, American Airlines announced that it had sent non-disclosure agreements (NDAs) to several airlines as potential merger partners. Separate reports from earlier that month indicated that the five carriers being considered include low-cost carriers (LCCs) jetBlue, Frontier Airlines a subsidiary of regional giant Republic Airways, and Virgin America, as well as full service carrier US Airways, and hybrid carrier Alaska Airlines. Additionally, Atlanta-based Delta Air Lines has expressed interest in acquiring portions of AMR including Americans Miami and Dallas-Fort Worth hubs, but indicated that it would not pursue an outright merger with American.

Out of these options, Frontier can pretty much be dismissed outright. After the failure of its merger with Milwaukee-based Midwest Airlines, Frontier has in the last year retrenched around its Denver hub as Aspire Aviation previously advised last October and shifted its business model even further to become an ultra-low cost carrier in the vein of Spirit Airlines in US (Frontier Airlines should refocus on Denver market, 10th Oct, 11). While Frontier is finally profitable after shedding the deadweight from the former Midwest route network, its CASM would be close to 30% lower than Americans even if American wins all of the concessions that it has asked for.

Therefore an American/Frontier merger would immediately render 60-70% of Frontiers network unprofitable and completely reverse Frontiers positive trend. For example, Frontier today announced the launch of twice-weekly flights between Orlando and Trenton, New Jersey, an airport that has not had service for close to 4 years and never served more than 100,000 annual passengers in its entire history. This kind of route would be completely extraneous at a merged American, but profitable for Frontier.

Considering the fact that American would likely not have the stomach to maintain a large presence in the cut-throat Denver market that also serves as a hub for United Airlines and low-cost carrier (LCC) Southwest Airlines, it is clear that any AMR merger with Frontier would be a de facto asset purchase of Frontiers 55 Airbus A320 family aircraft 16 A320s, 39 A319s and 15 Embraer E190s, as well as the latters orders for 80 additional Airbus A320neos (new engine options) that were reportedly purchased at a heavy discount. But there are easier ways for AMR to pick up new A320s and A320neos than merging with another airline such as leasing the re-engined single-aisle aircraft from aircraft lessors, thereforeAspire Aviation thinks that American is unlikely to merge with Frontier Airlines.

Virgin America would certainly boost Americans West Coast presence, with its twin hubs at San Francisco and Los Angeles. But the San Francisco hub would likely be unsustainable for American which has shrunk its once-sizeable Bay Area point-to-point network down to essentially cornerstone flights, and even the Los Angeles operation would only add 39 daily flights and just 4 destinations to Americans Los Angeles operation, that too from a terminal that would require connecting passengers to go through security again at Los Angeles to make a connection.

Furthermore, Virgin America has so far never made an annual net profit in its history and recorded a net loss of US$76 million in the first quarter of 2012. Ultimately, buying Virgin America would once again be essentially an asset purchase that added 52 Airbus A320 aircraft 10 A319s and 42 A320s as well as an elimination of a competitor on the San Francisco-cornerstone routes and generally in the Los Angeles market.

Along the West Coast, Alaska Airlines would provide serious value, with its strong hubs in Seattle and Portland, and excellent intra-West connectivity on regional partner Horizon Air with its fuel efficient fleet of Bombardier Dash 8 Q400 turboprops. American also has an existing strong relationship with Alaska Airlines, with a strong codeshare network that encompasses much of Alaska Airs network in the lower 48 states and excellent reciprocal frequent flyer benefits. And Alaska Airlines is a very profitable carrier that has remade itself over the last few years, riding a strong point-to-point Hawaiian network and better PRASM on its domestic network to an excellent US$67.5 million GAAP (generally accepted accounting principles) adjusted net profit in the second quarter of 2012.

However, it is important to note that Delta has a similarly robust partnership with Alaska Airlines, and provides better value to Alaska in terms of a frequent flyer partnership with its stronger Seattle and Portland operations. Moreover, even post-reorganisation, the CASM difference would still be more than 1.5 US cents; which, given the heavily competitive nature of Alaskas west coast trunk network, would be hard to overcome. Moreover, Alaska Airlines itself is not keen on the merger, perhaps because it prefers the cocktail method of having multiple codeshare and frequent flyer partnerships.

As a publicly traded company, we dont comment on specific merger or acquisition proposals involving Alaska Air Group. However, we have said for many years that our preference is to remain a strong, vibrant, independent company. We think our current plan provides the best outcome for all of our stakeholders including employees, customers and shareholders. We also know our owners need a return on their investment and were continually working to deliver adequate levels of profitability so they, too, have confidence that an independent Alaska Air Group is a better outcome for them, Alaska Airlines said in a statement.


Of all the airlines mentioned above, New York-based low-cost carrier jetBlue has actually been brought up the most as a merger partner for American. The airline has a relatively young fleet and excellent in-flight product compared to its US rivals, but its real value comes in its powerful East Coast hubs in Boston and New York JFK. These are markets where American is currently weak after historical strength Boston is about 70% off its peak for American and slot controls limit the expansion of its JFK gateway. However, the remainder of jetBlues network is very limited in creating value for AA, as leisure flying from secondary airports in Florida would clash with Americans extremely profitable hub in Miami, and the focus city in Long Beach would cannibalise Americans existing cornerstone market in Los Angeles. And in a merger predicated on bringing Boston and New York into the fold, it is important to bear in mind that jetBlues operational costs are more than 15% less than Americans using Aspire Aviations post-reorganisation estimates.

Some say that jetBlues Boston operation would add a new valuable hub to Americans network, but it is noteworthy that back in 2000-2003, American served 75% of what jetBlue currently does from Boston, but dismantled most of its Boston operation by 2006 before a skyrocketing in fuel price. If the operation did not make sense in that era, when AMRs CASM was at its lowest thanks to employee concessions and WTI crude oil was below US$50 per barrel, then how is a Boston operation going to make sense for American in todays high oil, high CASM world, with the same applies on a lesser scale to jetBlues newly minted Caribbean focus operation in San Juan, which was once an American hub with more than 100 flights per day? jetBlues New York operation as currently structured may not coalesce exactly with Americans JFK hub, but there is no question that the 170 or so prime departure slots that jetBlue holds at JFK are extremely valuable. But as with the New York LaGuardia/Washington Reagan slot swap enacted by Delta and US Airways earlier this year, the federal government is likely to ask for significant concessions, perhaps as many as 50 slots.

 

[Super FLUF]

Even if the regulatory compliance issues do not completely derail the merger, a final consideration will. For an airline merger to work, two essential factors are necessary. One is that the merger creates synergies whether be they revenue ones or cost ones, and the second is the blending of cultures. And in the case of American and jetBlue, the cultures are utterly opposite to each other. AMR represents, for the most part, the entrenched legacy carriers in the US an ageing and conservative workforce that provides excellent service to premium class passengers and relatively mediocre service to typical passengers. Meanwhile, jetBlue is an airline that still maintains its start-up mentality despite being an industry heavyweight these days, with a core of young employees that provides enthusiastic service to most of its passengers. The entire corporate cultures are decidedly different, and as has become apparent with the new United which had a much smaller culture gap with Continental than the American/jetBlue chasm, mergers where the cultures do not mesh are bound to run into trouble.

While Delta is also rumoured to be a potential merger partner, its chief executive Richard Anderson has gone on record to its employees saying that Delta would only be interested in buying parts of Americans operation, with most aviation analysts including Aspire Aviation speculate that these pieces would likely be Americans hubs in Miami and Dallas Fort Worth, as well as some second-hand aircraft. Moreover, any Delta-American merger would come under heavy scrutiny from federal regulators, and would in fact not be approved in Aspire Aviations opinion. Thus Aspire Aviation does not think that a Delta-American merger is likely to happen anytime soon, if at all.

That leaves US Airways as the only remaining realistic merger partner for American.

US Airways high-yield east coast penetration
Ever since US Airways attempted to merge with United Airlines before that its merger with Continental Airlines in 2010 that created the worlds biggest carrier, it has become apparent that US Airways and its chief executive Doug Parker are very interested in a merger. Parker said in an interview with the Wall Street Journal earlier this year: Consolidation was necessary, and it was a strategic imperative to get the industry well. As I look back over the past five, six years, consolidation has helped us have a more viable industry. To the extent that we helped compel the mergers of Delta and Northwest and United and Continental, it made us stronger.

Parker also dispelled the notion that US Airways would be the weaker partner in any merger with American in his speech at the National Press Club in late July. As evidenced by our record second-quarter results and how well theyre compared the other airlines, its quite clear that US Airways has a great business model that works and we certainly dont need to merge with another airline. However, we do believe the combination of US Airways and AMR is in the best interest of AMR and its stakeholders, US Airways and its shareholders and the employees of both companies. His words would seem to be confirmed by the respective financial performance of the two carriers.

As for the value proposition of a LCC/AMR merger, the primary synergies would be in terms of network compatibility and revenue generation enhancement. Both US Airways and American have their structural weaknesses, though some would judge US Airways non-existent Asian network as the most severe deficiency given that the world economy and air travel in particular are increasingly dependent on the fast-growing Asian markets.

A similar story plays out in Latin America excluding Mexico, especially, where by virtue of hubs at ethnic enclaves Dallas-Fort Worth and Miami, American is the strongest US carrier in the region, while US Airways is the weakest, flying just a solitary daily flight between Charlotte and Rio de Janeiro. Both of these are critical growth markets internationally at a time when the US domestic and European markets appear to be headed towards an increasingly stagnant future, and essential to frequent flyer retention for US Airways. At present, US Airways frequent flyers to Asia and Latin America are forced to rely on US Airways Star Alliance partners, and bringing those passengers back into the fold will boost profitability.

At the same time, American is extremely weak in the transatlantic market excluding London as its primary gateway at New Yorks JFK airport is too slot-constrained to allow American to operate a full portfolio of connecting services. Simply put, Americans two biggest rivals each have 2 bona fide transatlantic connecting hubs Newark and Washington Dulles for United and Atlanta and New York JFK for Delta, and American has no viable ones.

While the European market is still depressed, this is still a drag on AMRs PRASM for two reasons: the first one is it is forced to funnel its passengers into often onerous double connections with lower fares and the second one is the lack of a true European destination portfolio which hurts American in winning corporate contracts and retaining frequent flyers, both of which typically produce the highest-paying passengers. Meanwhile, US Airways possesses an excellent transatlantic hub in Philadelphia with a robust domestic and international origin and destination (O&D) base as well as scope for expansion.


Similarly, while US Airways lacks a connecting hub to facilitate transcontinental travel whereas American has two at Chicago Ohare and Dallas-Fort Worth, American is exceedingly weak up and down the East Coast. Since its JFK operation has limited domestic scope, American is forced to push its Northeast and mid-Atlantic passengers through Chicago Ohare and its passengers travelling to the Southeast through Dallas-Fort Worth, both of which necessitate large backtracks that cost passengers hours. In todays ever competitive landscape, businesses seek maximum productivity from their employees, and that extends to flight times.

US Airways can efficiently flow passengers travelling to the Northeast through Philadelphia and those travelling to the Southeast and Mid-Atlantic through Charlotte. This increased network optimisation will immediately boost Americans profitability on passengers travelling to these regions by cutting down on excess flight time thereby not only saves fuel, but also increases Americans frequent flyer base on the East Coast. To a lesser degree, the Phoenix hub will bolster Americans weak western presence, though this effect will be limited by Phoenixs poor location relative to rival hubs in Denver and Salt Lake City. Nonetheless Phoenix is a growing origin and destination (O&D) market with a competitor Southwest Airlines that continues to grapple with an ageing fleet and rising employee costs which are driving its CASM steadily upwards, and would thus add value to American. In short, an American-US Airways merger would increase the combined carriers attractiveness to high yield frequent flyers and business travellers, while boosting yield and streamlining cost base by retaining passengers that would otherwise have spilled over to other airlines and more efficiently flowing passengers through the combined network.

To delve into more specifics, Aspire Aviation performed an exhaustive study of origin and destination (O&D) data from the US Department of Transportation for the 3rd quarter of 2012, considering roughly 90% of US O&D travel any markets that have more than 10 one-way passengers travelling on them.

 

[Super FLUF]

According to the US DOTs DB1B database, American is the number one carrier in 610 O&D markets, serving 54,388 passengers per day of which 201, or 8,377 daily passengers, can be considered as high-yield passengers where yields are over 30 US cents per available seat mile (ASM), and 65 markets comprising 2,246 daily passengers can be considered ultra high-yield markets where yields are over 50 US cents per available seat mile.

Meanwhile, US Airways has 754 O&D markets carrying 42,283 passengers per day, with 437 of those markets carrying 21,452 high-yield passengers per day, and 158 of those markets carrying 9,390 ultra-high yieldpassengers. What this should do right away is dispel the myth that US Airways does not have a strong O&D base. On the contrary, while American has a lead in overall yields, US Airways actually performs better in terms of dominating markets despite its high fares. It is also important to look at the regional O&D variance. Less than 10% of Americans high-yield markets are in the East Coast, whereas more than 70% of US Airways high-yield markets involve the East Coast.

It is also important to note that any AMR/LCC tie up would also drive cost synergies. While the plan that Doug Parker offered to AMRs employees reduces some of the initial synergies that come from employee costs, the merger can still cut costs by cohabitation at airport terminals which cuts rental expense, elimination of redundancies in outsourced employees, renegotiating supplier contracts from a larger base, and others.

Aspire Aviation estimates that a merged American would be able to drive around US$250 million in annual synergies from these cost reductions, as well as drive US$1.1 billion in annual revenue synergies, and around US$300 million in employee cost reductions for a total of US$1.65 billion in synergies from the merger. This is a smaller sum than the figures from the Delta/Northwest and United/Continental mergers but still large enough to propel the merged carrier into solid profitability.

A LCC/AMR merger easy to complete, similar to size of Delta & United
Following an AMR/LCC merger, there is little doubt that the carrier would elect to use the American Airlines brand with its stronger domestic and global brand reach. The new American is also likely to remain within the oneworld alliance, especially if British Airways parent International Airlines Group (IAG) does take an equity stake in American as it has expressed interest in doing so. Regulatory approval will be fairly easy to get, as the two airlines overlap in just 13 domestic markets, of which just 8 would be left with only one carrier.

The rejection of the furlough and codeshare clauses in Americans Section 1113 motion yesterday actually exerts more pressure on American to merge. An integral part of Americans standalone bankruptcy restructuring process was expanded codesharing, which was expected to help hide some of Americans network deficiencies. Now that codesharing has been effectively taken off the table, while American will still be able to drive cost reductions from its pilots, it will not be able to address its network issues.

As for what a merged American would look like, the answer is that it would be very similar to todays American. From a service perspective, first class would likely be upgraded to Americans standards for the purpose of frequent flyer retention, while many of the product investments promised by American in economy class would be rolled out to more of its fleet. Existing orders would be kept in place, though more 737 MAX and A320neo family aircraft could be ordered for replacing US Airways narrowbodies. The fate of each of American and US Airways hubs is a more interesting question.

What is pretty apparent is that Dallas-Fort Worth would likely see little to no change, except perhaps a slight uptick in frequencies and/or gauge due to increased optimisation with US Airways existing Phoenix, Arizona hub. Miami too would continue pretty much as what it is today, though there would be some opportunity for incremental growth with A319s and E190s as well as beefed up Latin American service. Los Angeles has little scope to grow and would likely retain most of its current flying, though certain West Coast connections would likely shift to Phoenix. Philadelphia and New York JFK do clash a little bit more, but it makes sense to keep Philadelphia as the primary Northeast and connecting hub while transitioning JFK into an O&D-focused operation given slot constraints, of which United has implemented similar practice with its hubs, shifting Newark to a more O&D-focused operation and flowing more connections over Washington Dulles. Chicago Ohare would still serve a unique role and maintain its position in the combined network, though a 10% capacity reduction might be possible as some of the Northeast routes would then flow over Philadelphia.

While some have speculated that Charlotte would face cuts, the reality is that Charlotte is a growing O&D market that serves a new traffic flow for American very efficiently. If anything, Charlotte will lose some Latin American flying to Miami especially the route to Rio de Janeiro, but more than gain it back with extra domestic capacity as it will be the most efficient connecting point for almost any route to and from the US Southeast.

Phoenix, Arizona, on the other hand, might not be so fortunate. US Airways is only in 2ndplace in the Phoenix market, and the hub is bracketed by Dallas-Fort Worth on the one end and Los Angeles on the other. Aspire Aviation thinkswhile Phoenix is unlikely to be de-hubbed, it would be a 225-250 daily flights hub for a new American, with the current 2:1 ratio of mainline flights to regional jet ones essentially being flipped.

In conclusion, an American Airlines/US Airways tie-up would create a lot of network value and drive significant synergies and profitability for the merged carrier. Especially as American is now forced to go back to the table with its pilots following the rejection of its Section 1113 filing, the pressure to merge with US Airways will only continue to grow as time passes by.

 

[Mach85ER]

World,

You're hearing less pilots "speak out" because many like myself, are looking at this situation with a much colder, and shall I say much less charitable attitude than anytime in the past. I could give a crap about responding to jihadists who will never change their attitude or listen to any opposing view of the AMR Koran written by Tom Horton.

 

[WorldTraveler]

all great information and I don't disagree with 95% of it.

But it still is based on the notion that AA-US is the only option and it will solve the strategic issues that AA and US face individually, and that AA and US' competitors will desist from their competitive assaults on both of their networks for the 2-3 years it takes for revenue synergies to really kick in - and likely the closing of a hub or two.

Where are the job losses accounted for in Parker's plan that are necessary to create those revenue synergies?

How does an AA-US merger solve AA's minimal presence in Asia and the combined airline's presence in continental Europe. About half of US' continental Europe flying is to Star hubs and the majority of that traffic will probably be lost when US leaves Star. oneworld simply does not have anywhere near the strength on the European continent necessary to compete with Skyteam or Star and that is a large part of why AA is so weak there. How is that problem solved?

AA-US will still be far short of what is necessary in Asia and Europe - the largest regions for travel.

Domestically, AA will gain from US' stronger presence on the east coast - but the issue - NYC is not solved because US has practically given that market up and the combined airline would still be far smaller than DL and UA. NYC is the largest O&D on the east coast for nearly every city and the source of the largest block of corporate revenue.
All of this analysis doesn't factor in the slot swap in which DL has very aggressively added service in every market AA and US fly from NYC - and the results clearly support the idea that DL is moving revenue away from AA and US.
UA's successes at shifting revenue in the past six months has been masked by their own operational problems but UA is making headway against AA, esp. to/from Asia. UA is being hurt less by the growth of low fare carriers in the ORD market than AA.

I do not believe that long term AA and US will have gained what they need to compete, esp. if the goal is to be of a size comparable with DL and UA.

AA-US may be the best solution on the table but it doesn't solve the problem long term and it still results significant cross subsidies of revenue and pay between AA and US in order to make the deal work - and I don't think either party will ultimately end up better than they would have been as a standalone.

Every one of the carriers that were listed above as not interested or incapable of supporting a merger with AA most certainly would be if they had only to digest pieces of AA and not the whole.

US is trying to digest the whole, AA people are convinced they are better off being sold off as a whole, and the result will be that the other carriers will fare better than what AA/US can do because AA-US is a suboptimized solution.

Also, please don't tell anyone that DL is more valuable to AS than AA. We have a chorus that has argued that AA is more valuable to AS for years.

 

[WorldTraveler]

World,

You're hearing less pilots "speak out" because many like myself, are looking at this situation with a much colder, and shall I say much less charitable attitude than anytime in the past. I could give a crap about responding to jihadists who will never change their attitude or listen to any opposing view of the AMR Koran written by Tom Horton.

agree... but are you just trading the Horton holy book for the Parker book of prayer?...with no more assurance of success, or more importantly, a path to obtaining industry standard wages?

Remember, if DL, UA, and WN are all paying their pilots 20-25% more than AA-US even in the proposals Parker is making, you will not be making industry average wages. Saying that you will catch up with them in 3 years has the potential to be more than an empty promise.

 

[700UW]

DL is the #2 Airline in the US.

So if you merge 2 and 3 yes there is more anti-trust concerns then merging 3 with 6.

Its pretty simple, yes there is less overlap between AA and US then there is with AA and DL.

But once again our resident DL cheerleader has to keep bringing up DL in EVERY thread.

 

[700UW]

The only Star hub US flies into in Europe is FRA and MUC.

LHR, LGW, FCO, BCN, MAD, ZRH, BRU, MAN, CDG, ATH, ARN, AMS GLA, DUB, SNN, hmm those arent Star Hubs.

Gee how could you be so wrong?

 

[WorldTraveler]

DL has not said it wants to merge all of AA because it knows it likely cannot legally do so. Combining AA and DL's numbers is meaningless... but so is combining all of AA and US' current size since they also could not pass antitrust laws at DCA.
The DOJ has never ruled against a US airline merger on the basis of size alone. Their focus is market access specific to certain cities - almost entirely limited access cities.

The simple fact is that you and other supporters of the AA-US merger do not want to hear that it might do all it is advertised to do.


Pages and pages of posts from a professional analyst who talks about the antitrust problems with AA-B6 but who fails to mention the same problems w/ AA/US demonstrate that there is not a willingness to put all of the facts on the table, regardless of how they fall out.

Talking about the revenue advantage US has on the east coast without talking about the revenue implications of the slot swap are just plain careless. Anyone with a tad of initiative can see that DL has added more seats and more markets than US did - based in part on gaining more slots - and they have added a disproportionate amount of slots into US strength markets, some of which were US only or US dominated markets before the slot transaction is beyond belief.
The slot transaction did occur and to somehow belief that US has the same amount of revenue it had before - and thus enough to supposedly pull AA out of its revenue disadvantage.

It is equally problematic to NOT talk about the competitive advances that have been made in AA hubs esp. by VX, B6, and NK and the implications that has on the revenue that AA/US have to raise in order to cover the costs of the transaction.

Your attempts to frame this as a DL fanboy discussion only demonstrate your fear or inability to thoroughly examine the transaction for what it really is. I don't expect you or other people on here to have the experience or data to dive into the subtleties of the transaction - but at least recognize that maybe someone else does seem some things that you don't. Things that have the potential to dramatically impact the viability of a combined AA-US - and specifically its ability to pay wages comparable to DL and UA - which many have stated as the goal.


It becomes truly hypocritical for you and your pro-labor friends to accuse executives of fattening their wallets at the expense of every day workers when you refuse to recognize that there is someone who sees past the sales jobs and is trying to convince you that the numbers simply don't add up.


BTW, you might want to check where Star carriers have hubs in Europe. But it still doesn't mean that US doesn't have a network beyond Star hubs... that's not what I said.
You might also want to look at numbers to WHERE US carries its European traffic and more importantly where the best revenues are. US' CEO has previously stated how important Star is to US' European network.

 

[eolesen]

Why are they meeting with Doug Parker instead of working with Horton on a consensual agreement for the membership?

Seems a bit negligent... abrogation is a couple weeks away, and they're off meeting on something that might not even happen.

Has APA met with their counterparts at USAPA yet?

 

[WorldTraveler]

Why are they meeting with Doug Parker instead of working with Horton on a consensual agreement for the membership?

Seems a bit negligent... abrogation is a couple weeks away, and they're off meeting on something that might not even happen.

Has APA met with their counterparts at USAPA yet?

esp. since the further this deal progresses, the more ** show up

http://www.thestreet.com/story/11673442/1/exclusive-us-airways-pilots-mull-merger-contract-with-10000-bonuses.html?puc=yahoo&cm_ven=YAHOO

The memorandum would potentially enable downsizing. But it requires that each pilot group retain a domestic block hour rate within 5% of the annual baseline rate and a widebody international rate within 10% of the annual baseline rate. The domestic rates could not be reduced by more than 15% from the same month a year earlier, while the widebody rate cannot be reduced by more than 20% from the same month a year earlier.

 

[700UW]

Once again you say DL this, DL that.

You stated more than half of US' european flights go to star hubs, your words, not mine and I showed you to be wrong.

 

[Bob Owens]

or what if this is one more step in APA's attempts to obtain higher wages even though the UCC and mgmt has said they have no intention of increasing pay levels from what has been offered.

What would you expect Management and the UCC to say?

 

[Bob Owens]

Why are they meeting with Doug Parker instead of working with Horton on a consensual agreement for the membership?

Seems a bit negligent... abrogation is a couple weeks away, and they're off meeting on something that might not even happen.

Has APA met with their counterparts at USAPA yet?

Not at all, Horton already made it clear, he wants to try and be a bully and the pilots aint buying it. Good for them, they shouldnt bother wasting time with Horton anymore. The Judge will abrogate and then things will get interesting. Pissed off line mechanics will do whatever they can to help the pilots.