BA/IAG heard from:

[Buck]

You got two conflicting points. The shareholders usually end up with nothing after bankruptcy because they're the owners. Would you rather that the employees lose everything to keep the owners' losses to a minimum?

The current shareholders won't get any windfall - they lose whatever they invested in the current stock.

Now, you can certainly argue that if the owners are gonna lose everything, at least senior management should be in that boat too - why should the people who ran the company in to bankruptcy come out whole while their bosses (the shareholders) get nothing? To me, that's the absurdity of bankruptcy...

Jim

The point I was attempting to make was the existing shareholders could be issued new stock, thereby keeping them in the family instead running away.

 

[BoeingBoy]

The point I was attempting to make was the existing shareholders could be issued new stock, thereby keeping them in the family instead running away.

Highly unlikely. I'm not even sure if it's legally possible for the shareholders to come out of bankruptcy in better shape than the unsecured creditors. Heck, US threw 2 complete sets of shareholders under the bankruptcy bus.

Jim

 

[usa1]

http://online.wsj.com/article/SB10001424052970203806504577181203535415244.html

British Airways Holds Keys to AMR

US Airways Group Inc. has its own ambitions to merge with AMR, which entered bankruptcy-court protection in late November. US Airways hasn't had direct talks with IAG but is building a case internally for how a US Airways combination with American Airlines would help British Airways by beefing up the U.S. carrier's presence in eastern U.S. cities where it is losing relevance to newly merged competitors, other people familiar with the matter said.

British Airways in the early 1990s took a 24% stake in a US Airways predecessor. While the relationship ended a couple of years later, the U.K. carrier is well acquainted with the network the U.S. airline could bring to British Airways and to Oneworld, a person familiar with the matter.

US Airways is in the Star Alliance, the largest of the groupings. Fellow U.S.-based Star members United Airlines and Continental Airlines merged in 2010, and US Airways has continued to feed its partners with its strong East Coast network. If US Airways were to merge with AMR, it would be open to joining Oneworld, some people said. That would help restore American Airlines' eroded East Coast network by bringing in US Airways' routes to small East Coast markets and its connecting hubs in Philadelphia and Charlotte, N.C.

 

[eolesen]

I've been saying for well over a year that I'd expect something with TPG & BA/IAG. Here's one shoe. And reliable sources say that TPG would likely be willing to back what they consider to be the right deal. Let's see if they come out of the woodwork --- they've said nary a word since November.

 

[FWAAA]

What has puzzled me all along is what seems to be a total disregard for the share holders. Asking them to wait out the strategy, if you are correct could be a windfall for those share holders.

As I've posted at least a dozen times, the existing stockholders of AMR will see their stock cancelled when the Plan of Reorganization is confirmed. The existing unsecured creditors will be issued new stock to settle a portion of their claims. Current stockholders will receive nothing and their stock will become worthless. Any stock you bought in AMR and still hold is worth what you can sell it for before the POR is confirmed.

If another airline should make a successful bid for AMR, your stock will not share in any of the riches - it will still be canceled.

You have posted before that you were holding onto some AMR - I'd sell it if I were you.

 

[psa8979]

AAviator is gonna love this one ..
What if BA is helping US with financing for an AA takeover?? It will bring US and it's network to oneWorld . Just sayin. You never know in this industry.

BINGO ! finally someone looking outside of the BOX ! Well done AAviator Well done !

 

[Buck]

As I've posted at least a dozen times, the existing stockholders of AMR will see their stock cancelled when the Plan of Reorganization is confirmed. The existing unsecured creditors will be issued new stock to settle a portion of their claims. Current stockholders will receive nothing and their stock will become worthless. Any stock you bought in AMR and still hold is worth what you can sell it for before the POR is confirmed.

If another airline should make a successful bid for AMR, your stock will not share in any of the riches - it will still be canceled.

You have posted before that you were holding onto some AMR - I'd sell it if I were you.

$128.00 total outlay at .20 per share. Still gonna watch it awhile. I can double my money in the morning.

 

[Buck]

BINGO ! finally someone looking outside of the BOX ! Well done AAviator Well done !

Doesn't exterior paint cost fuel economy?

 

[WorldTraveler]

#1 Would have nothing to do with increasing revenue...as you should know, it is a matter of capitalization of the carrier.

#2 Yes, but it is very likely they would support increasing the 25% to 49% ownership over loosing a flag carrier. IAG is likely to be just as favorable to invest at 25%, as it helps backstop their own investments.

#3 Increased mass can also be achieved with codeshare or merger later on of more desirable carriers to help fill in the network gaps. Mass is also overrated to so extent, skewed in importance to the less profitable carriers. AA would likely be quite profitable.

regarding #1, the question becomes whether they can recoup their investment... no one is going to donate anything to AA. If BA believes their ability to maintain revenues via AA is threatened if AA were to be acquired or liquidated, then it would make sense for them to consider it... but if BA's revenues are unchanged, then it is hard to make a case that they will recover their investment. It also isn't certain that their only way to obtain feed within the US is via AA; they might well find that US is as good of an option or with a combination of other carriers... I'm still not sure that, because LHR is still slot restricted and more limited access than AMS/CDG and FRA/MUC etc, the economics of a JV look the same for BA as it does for AF/KL and LH etc. Keep in mind that BA is picking up a bunch of new slots from BD and will likely further strengthen its position against VS.

2. 25% has been shown to be sufficient to keep competitors at bay... so if the intention is solely to lock up codeshare/JV revenue, then that should be sufficient.

3. I do believe that the whole wave of JVs has made people think that the previous types of interline agreements including just plain codesharing are no longer valid - but they still can deliver alot of revenue w/o the risk involved in JVs. As for domestic mass, the evidence is quite strong that DL and UA have gained a fair amount of mass as a result of their mergers and they are taking revenue at the expense of AA... the fact that both have outperformed AA in all regions except for Latin America for several quarters confirms that... although UA's most recent monthly reports indicate that their RASM growth is sputtering for some reason. Note also that US continually says its revenue generating ability relative to larger carriers is worse... and it isn't because they can't compete in their local markets. In fact, they do fairly well in their hubs and strength markets. Where they struggle is in obtaining the higher yielding traffic that is up for grabs in cities where no carrier dominates. US has given up a lot of revenue strength in non-hub cities in the SE over the past several years, esp. to DL.
Every financial analysis related to network type businesses shows that mass matters... as much as some people want to believe it doesn't matter any more (esp. those supporting AA since the DL and UA mergers), the evidence doesn't back that anything has changed from those well documented results of the past.

 

[BoeingBoy]

Every financial analysis related to network type businesses shows that mass matters... as much as some people want to believe it doesn't matter any more (esp. those supporting AA since the DL and UA mergers), the evidence doesn't back that anything has changed from those well documented results of the past.

Part of your problem is the broad-brush generalizations you make. If mass is so important, why hasn't DL been adding capacity as other carriers have cut back? Simple - making money is more important than bragging rights to being the biggest. If there's one lesson all the network carriers seem to have learned since 911, it's that chasing market share isn't necessarily a good idea. Airline history is littered with names of carriers that were once among the biggest, but disappeared. Plus those that tried to grow wildly after deregulation, but disappeared.

Jim

 

[eolesen]

Mass matters to a point, but there is also a fact called being too damn big for your own good. Aeroflot comes to mind...

 

[Frank Szabo]

Mass matters to a point, but there is also a fact called being too damn big for your own good. Aeroflot comes to mind...

True, but the Russians count their miltary aircraft along with their civilian transport stuff, too - probably even hang gliders, if they've got 'em.

 

[WorldTraveler]

except Aeroflot didn't stumble (euphemism) because they were too big... they stumbled because they were poorly run.
.
AA was happy to call itself the world's largest airline for years... but apparently being the biggest or even second biggest matters anymore.
.
DL and UA's size RELATIVE to the rest of the industry is what has allowed both to move revenue share from smaller carriers, including AA, to themselves. They don't have to keep growing just to become larger.
.
It is also why DL will acquire assets or merge not to add more bulk but to acquire key strategic assets and market position... Jack Welch at GE long believed - and GE confirmed that it is virtually impossible for a company to succeed long term in an industry where they are #3 or below. If GE couldn't be #1 or #2 in a market, they either grew or exited the market.
If you have doubts about the wisdom of Jack's business strategies, pick up a copy... they have been printed by the millions.

 

[johnny kat]

WT,

You pretty well laid out the argument for a US/AA merge.

 

[WorldTraveler]

WT,

You pretty well laid out the argument for a US/AA merge.

all the strategic reasons in the world won't and can't help a merger that is financially a poor fit - like the fact that US will have higher costs than AA by the time they emerge, US is valued less than any other airline (and thus would have to take on more debt to make the deal work), and US has a below average track record of making mergers produce the intended revenue improvements.
.
Other than those piddly details, sure, an AA/US merger makes a great strategic fit.