Chances for the success of the US Airways takeover bid?

[CMH_GSE]

Calloway is correct, it's leverage to some degree, but the bottom line is, the plan that saves the most jobs, is the one that will get the most support inthe end from the membership and that is clearly te merger plan at this point.

 

[jimntx]

AMR CEO Tom Horton's Letter to AA's Employees: April 23, 2012

Dear American Team:

As you know, US Airways recently revealed its non-binding arrangements with our unions, which is part of an attempt to force a merger with American. While these tactics are not surprising, I'd like to explain what this means – and doesn't mean – for all of us.

First and foremost, nothing changes as a result of these announcements and we will proceed on our path toward a successful restructuring of American.

I want you to know these developments in no way alter our course.

Sincerely,

Tom

Thought I would just edit out the extraneous bs. What's left, translated into the English, is "Bend over, grab your ankles. You are going to get screwed. End of discussion and negotiation. Sincerely, Tom"

 

[BoeingBoy]

the plan that saves the most jobs, is the one that will get the most support inthe end from the membership and that is clearly te merger plan at this point.

There should be one caveat - if the plan that saves the most jobs has a chance of being successful. Otherwise, those "saved" jobs and more disappear with the next bankruptcy...

I once got one of those emails - someone in Ethiopia needed to get $100 million out of the country and needed my help circumventing their currency rules. All I had to do was wire him $200, my SS and bank account #'s and he'd transfer the money to my account and I would get to keep 25% when all was said and done. What a great opportunity - $25 million for a few minutes "work" and $200.......why would anybody turn down free money.....

So, we've got AA with the highest overall costs and labor costs in the industry and losing money by the fistful. Along comes someone promising not lower pay/benefits but higher pay/benefits, less lost jobs, all the goodies. Why not just jump all over that deal? Free money.....no strings attached....

Jim

 

[CallawayGolf]

There should be one caveat - if the plan that saves the most jobs has a chance of being successful. Otherwise, those "saved" jobs and more disappear with the next bankruptcy...

I once got one of those emails - someone in Ethiopia needed to get $100 million out of the country and needed my help circumventing their currency rules. All I had to do was wire him $200, my SS and bank account #'s and he'd transfer the money to my account and I would get to keep 25% when all was said and done. What a great opportunity - $25 million for a few minutes "work" and $200.......why would anybody turn down free money.....

So, we've got AA with the highest overall costs and labor costs in the industry and losing money by the fistful. Along comes someone promising not lower pay/benefits but higher pay/benefits, less lost jobs, all the goodies. Why not just jump all over that deal? Free money.....no strings attached....

Jim

So are you suggesting Doug would put together a acquisition proposal that either intentionally or unintentionally cannot be supported from a financial perspective? That would be 180 degrees out of character for Doug who is generally considered a great numbers guy. Despite all of the economic turmoil of the last decade, Doug has never led a company into bankruptcy in more than 11 years as the CEO of a major airline. IMO Doug has a very impressive level of respect and is entrusted by the investment community precisely because he knows how to build and execute a solid financial business plan.

 

[diamondcutter]

It's not a conspiracy, but a legitimate method of gaining negotiating leverage in the face of otherwise very long odds for success. It's a win-win for APA and the other unions at AA. It let's them be proactive rather than reactive or victims in an untenable situation. They know US/Parker to be consolidation proponents and so they leverage that knowledge to broker a deal in case AA Management tries to stay it's stand-alone course with layoffs and concessions. With a better offer on the table AA Management had better come up with something that has broad support or they are sure to be in for a tough fight that they might not win. If AA Management is closed to the idea of merging or gaining labor peace, then the US/AA hostile takeover will be better for AA employees than the gutting that will take place in a stand-alone plan. So the labor groups generated their own leverage to win the best outcome whichever way it may go. Not many people crave change, but most can still see that change (in this case consolidation with US) has a far better outcome than what the Horton is proffering.

Or, could Parker and Horton have set this all up months ago. If Horton told all AA employees that they had to merge with US it would not have gone over that well . But, let Parker come in and strike a deal with all 3 unions on their own ..well look what you have. Why the hell would Horton give a flying f@&$. He took over when? What did he also do to the AT&T employees ? Bottom line consolidation takes market share out and every airline wins.

 

[nycbusdriver]

I've never been big on conspiracy theories, but does anyone think that maybe the unions at AA did this just to put pressure on their management and they aren't really as excited about a merger with US as some might think?

BINGO!

 

[BoeingBoy]

So are you suggesting Doug would put together a acquisition proposal that either intentionally or unintentionally cannot be supported from a financial perspective?

I'm saying that he's making a lot of expensive promises he may not be able to keep. If he brings US people up to what he's promised the AA people, I figure about $1 billion so far. So you tell me - how do you take the two highest cost legacies - one losing money and the other barely profitable - combine them and give everyone raises and produce a competitive carrier?

Despite all of the economic turmoil of the last decade, Doug has never led a company into bankruptcy in more than 11 years as the CEO of a major airline.

Yeah, he lets someone else do the dirty work and then tries to swoop in for the rewards....name one airline that wasn't in bankruptcy that he's pursued...

Jim

 

[USA320Pilot]

Calloway is correct, it's leverage to some degree, but the bottom line is, the plan that saves the most jobs, is the one that will get the most support inthe end from the membership and that is clearly the merger plan at this point.

Yep. And, I might add provides the best contract(s).

 

[700UW]

And you dont feel insulted that Doug has reached MOUs with unions not even employed with US and lets his own employees flounder?

 

[Art at ISP]

And you dont feel insulted that Doug has reached MOUs with unions not even employed with US and lets his own employees flounder?

I was wondering how long it would take someone to ask that question....

Look at the history between Doug and his current employees--it will be no different after a merger. In fact, while courting AA folk, it appears that Doug has basically marginalized current US employees.......come on now-7 years without integration, and a deal done with unions who are not even on property in a month or two? Makes one wonder...

 

[CallawayGolf]

I'm saying that he's making a lot of expensive promises he may not be able to keep. If he brings US people up to what he's promised the AA people, I figure about $1 billion so far. So you tell me - how do you take the two highest cost legacies - one losing money and the other barely profitable - combine them and give everyone raises and produce a competitive carrier?



Yeah, he lets someone else do the dirty work and then tries to swoop in for the rewards....name one airline that wasn't in bankruptcy that he's pursued...

Jim

Yes, those are expensive promises and the UCC and the investors he has lined up to drop their wealth into this merger will go through the proposals with a fine toothed comb to validate if what Parker is proposing is truly the value he says it is. So far we know that he is proposing $1.5 billion in synergy savings which includes the labor rates at the higher AA level (though we don't know yet if or when the US workforce will be integrated at those same rates). Consolidation is all about rationalizing and optimizing operational efficiencies that would otherwise be unattainable with two separate airlines competing rather than synergizing. Investors will support this transaction if the believe the combination of route restructuring, asset leveraging (hubs and A/C) and pricing dominance with the new world's largest carrier is based on valid business assumptions. It's not a zero sum game where only higher costs are acquired with no offsetting revenue and efficiency gains.

Doug has never been anything but forthcoming about his vision and methodology for airline consolidation. He believes that the best time to make a transaction work is when one of the players is operating under bankruptcy protection. Why would you blame him for striving to remain profitable and in control of his own company by staying out of chapter 11 but vigorously pursuing those airlines that fail to keep their business in a state of solvency? AA could have come to Doug and asked to merge long before going into bankruptcy protection, but they didn't and now their collective destinies lie in someone else's hands. Where others only see risk and no value, Doug develops a plan to create value and is willing to take the calculated risk to pursue it. Seems fairly commendable to me.

 

[CallawayGolf]

And you dont feel insulted that Doug has reached MOUs with unions not even employed with US and lets his own employees flounder?

You do realize that US and a merged US/AA are two very different entities right? Do you think that the $1.5 billion in synergy savings could be attained by either US or AA on a stand-alone basis?

Doug and Scott said they gained valuable experience and information with the failed DL hostile takeover, namely that their proposal was directed exclusively at the UCC for DL and they didn't anticipate that the DL employees could sway the UCC from taking a substantially better offer with a coordinated campaign to repel the takeover. So, this time around they are sowing the UCC that they have the AA employees very much on their side so the proposal to the UCC will be much given full consideration on the merits rather than emotion this time around.

Besides, no US employees are floundering as a result of Doug. All but two represented groups negotiated their current level of pay and ratified the CBA. The other two groups have been given ample opportunity to better their situation but have elected to remain in status quo despite a realistic offer from Management for improvements. Can't blame Doug for that.

 

[700UW]

Fleet nor Maintenance had a new CBA, they ratified transition agreements after the merger, they are currently in Section 6 negotiations now. They didnt have Section 6 negotiations after the merger.

 

[CallawayGolf]

I was wondering how long it would take someone to ask that question....

Look at the history between Doug and his current employees--it will be no different after a merger. In fact, while courting AA folk, it appears that Doug has basically marginalized current US employees.......come on now-7 years without integration, and a deal done with unions who are not even on property in a month or two? Makes one wonder...

You're not that ignorant of the inner workings at US to not know why the two groups haven't been integrated yet. The FA's spent 5-6 years just in a holding pattern waiting for the pilots because they valued their "me too" clauses more than they valued getting a JCBA completed. Then once they moved off that position they went to work on a non "me too" contract which eventually led to a TA. Membership rejected what their own union leadership presented to them so it looks like they still prefer the status quo to accepting any improvements.

The pilots, well we all know that it will take a federal court once all of the appeals processes to be exhausted before the east pilots will be forced into accepting a JCBA. I know it's not logical to refuse a significant improvement in pay because they can't accept the results of binding arbitration that keeps them in the same seniority status they had before the merger, but that's what they prefer.

Parker is not one to just sit around and wait for irrational labor groups to finally come to a place of being rational. He is out there making new deals for the benefit of the shareholders which will result in a strong and viable airline going forward and it wouldn't be possible if the labor groups at AA weren't on board with Doug's plan. They had leverage and they used it just like Doug has leverage and he uses it to perform his primary job of creating shareholder value.

 

[USA320Pilot]

I was wondering how long it would take someone to ask that question....

Look at the history between Doug and his current employees--it will be no different after a merger. In fact, while courting AA folk, it appears that Doug has basically marginalized current US employees.......come on now-7 years without integration, and a deal done with unions who are not even on property in a month or two? Makes one wonder...

This is not a fair statement.

You cannot have a new pilot contract until the SLI dispute is settled. If USAPA had honored its final and binding agreement and Transition Agreement requirement to accept the Nicolau Award due to contract law the pilots would have likely had a new contract. Prior to USAPA becoming the pilot's CBA ALPA had completed 80-85% of a new contract and the "close out" phase of negotiations had begun when the company presented it's first comprehensive economic proposal called the Kirby Proposal.

As far as the F/A's they traditionally wait for the pilots to close their deal before they negotiate in earnest. It took a few years before the AFA's JNC decided to truly engage US Airways in joint negotiations. This did not occur until the parties recognized it would take a long time for the pilot SLI dispute to be resolved.

7 other unions at US Airways have post merger new contracts and the Dispatchers have closed two post merger contracts. US Airways has completed new contract negotiations with the majority of its labor groups and if USAPA and the East pilots had honored their contractual requirements then it I believe it would have been likely the pilots and F/A's would have knew deals too.