Chances for the success of the US Airways takeover bid?

[signals]

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! It can be a negotiating tool!

 

[USFlyer]

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...

I would hope Parker offers the exact same proposal to the US employees that is effective if and only if a merger is consumated. I'm actually surprised he hasn't already done this to generate support among the US rank and file. Parker has always said US has a revenue problem. A merger in theory would solve this, negating his position over the past few years that US needs to pay less to offset the lower revenue generating potential.

 

[signals]

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.

I don't think Parker can save more jobs, unless outsourcing is an option. To save jobs there have to be cuts somewhere. There is too much double talk going on, leaving too many unanswered direct questions.

Outsourcing gives you an option of keeping your job, if you take a pay cut and benefit reduction or elimination.

 

[BoeingBoy]

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.

Except that even the mighty Parker can't predict the future. There will be lots of numbers showing how it will work under a given set of assumptions. The true test for the UCC and possibly then the investors is to determine whether the assumptions have a good chance of being valid or are pie-in-the-sky wishful thinking. Generally speaking, no airline merger has produced the amount of "synergies" predicted. If I remember anywhere close, the US/HP merger was supposed to produce something like $500 million profits for 7-10 years....how's that coming?

Just ballparking it, I figure he's promised about $1 billion in extra costs - just keeping 6-7000 more people on the payroll is half of that so it could easily be more.

Jim

 

[USFlyer]

Generally speaking, no airline merger has produced the amount of "synergies" predicted. If I remember anywhere close, the US/HP merger was supposed to produce something like $500 million profits for 7-10 years....how's that coming?

Having been involved in three non-airline mergers in my career (one of which I was on the merger team for), I've never seen the full amount of "synergies" achieved. The MBAs generate all sorts of analyses, yet those of us in the day to day details know some of what they come up with is nonsense. So ... I've learned to discount the numbers being floated around anytime I hear about a merger.

Don't get me wrong. Mergers can produce scale, reduce G&A costs, etc., but it's not easy to do, takes time and never achieves the full savings predicted pre-merger.

 

[CallawayGolf]

Except that even the mighty Parker can't predict the future. There will be lots of numbers showing how it will work under a given set of assumptions. The true test for the UCC and possibly then the investors is to determine whether the assumptions have a good chance of being valid or are pie-in-the-sky wishful thinking. Generally speaking, no airline merger has produced the amount of "synergies" predicted. If I remember anywhere close, the US/HP merger was supposed to produce something like $500 million profits for 7-10 years....how's that coming?

Just ballparking it, I figure he's promised about $1 billion in extra costs - just keeping 6-7000 more people on the payroll is half of that so it could easily be more.

Jim

I agree with your comments that all the numbers will be based on a certain set of assumptions. The HP/US merger was predicated on oil staying around $65 a barrel or lower IIRC. When it was at that level the synergy savings and profitability assumptions were achieved. When it all blew up in 2008 (cost per barrel and consumer demand for air travel), these external factors did a number on the projected profitability. Of course without the synergy savings already achieved by the merger US would have been in chapter 7 and who knows where HP would have ended up. Both entities are still here because the merger was completed and LCC weathered the economic storm well enough to survive to fight another day and to even make a run at merging with AA.

The investors who were in it (HP/US) merger made a good return on investment before all airline stocks took a tumble in 2008. Those who got out in 2007 must still be quite pleased with their results. Those who are still in are probably very hopeful that Doug can pull off a repeat with the LCC/AMR merger once again. Some are in it for a quick buck and some are in it for the long-term. Both groups will have to take a big risk for a chance at an even bigger reward and I don't think there is a shortage of investors with the financial resources to help Doug with his proposal to the UCC.

 

[BoeingBoy]

Exactly - the assumptions were optimistic so the projections were optimistic. Don't you think that the UCC might be aware of that? Especially since Parker is signing agreements with the unions based on those projections? Guaranteeing cost increases but assuming revenue increases can be a tricky game...

I don't think there is a shortage of investors with the financial resources to help Doug with his proposal to the UCC.

But in the end, it's the unsecured creditors that have the say, not the investors...

Jim

 

[dash8roa]

Exactly - the assumptions were optimistic so the projections were optimistic. Don't you think that the UCC might be aware of that? Especially since Parker is signing agreements with the unions based on those projections? Guaranteeing cost increases but assuming revenue increases can be a tricky game...


But in the end, it's the unsecured creditors that have the say, not the investors...

Jim

Figures don't lie but liars can figure. No one can forecast what the price of oil will be,what the euro mess will amount to,what the american economy will do,and the threat of terrorism is always lurking around the next corner. The proposed savings are an ultra optimistic guess at best. US employees hated the crystal palace and then hated the sand castle. I remember the employee's mantra, " the concession stand is closed".Did not mean a thing. When someone offers a great deal, always look for the strings attached.

 

[Jimmy Neutron]

AMR Will Likely Consider Merger in Bankruptcy, Adviser Says


http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2012/04/25/bloomberg_articlesM31N8W6K50Z001-M31YL.DTL

 

[Phoenix]

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.

Your condescension to one of our most courteous customers, your inability to ascribe sanity to your fellow employees (who expressed their will by actually voting), and your fawning over management's bold action (that will undoubtedly disadvantage the former two objects of your disdain)...well it is a bit offensive.

 

[Mrs. McFly]

I don't think Parker can save more jobs, unless outsourcing is an option. To save jobs there have to be cuts somewhere. There is too much double talk going on, leaving too many unanswered direct questions.

Outsourcing gives you an option of keeping your job, if you take a pay cut and benefit reduction or elimination.

This is something that doesn't add up to me. With mergers come cuts. We were promised there would be minimal cut son our side. where does that leave you guys and why the veil of secrecy?

 

[BoeingBoy]

I would guess that a large majority of the remaining employee reductions would be in maintenance due to outsourcing....

Jim

 

[CMH_GSE]

I believe a large number of employee reductions will be through an early out offer that TWU proposed to Parker and he apparently has agreed to.

If it was agreed to as proposed, several thousand will retire, it makes sense.

 

[Dilligas]

I believe a large number of employee reductions will be through an early out offer that TWU proposed to Parker and he apparently has agreed to.

If it was agreed to as proposed, several thousand will retire, it makes sense.

I sincerely hope the TWU group got such a generous deal.

It would not be likely however. With AA in bankruptcy, free to make cuts and determined to slash headcounts by outsourcing, there is no incentive for a company to offer early outs. The huge cuts have to come from AA M&R. I am therefore doubtful that TWU could secure any such financial incentives to reduce headcount. The concessionary contract (if approved), or the contract abrogation if the contract does not pass, will allow AA to slash M&R.

I think if TWU had been successful in obtaining such a generous offer from Doug, they'd be either telling you outright or letting it leak.

 

[mike33]

I believe a large number of employee reductions will be through an early out offer that TWU proposed to Parker and he apparently has agreed to.

If it was agreed to as proposed, several thousand will retire, it makes sense.

If there is a Merger and an agreement then maybe just maybe there are 2 chances of this happening?...

1) in BK
2) and once out of BK

Teastimony from the BK court this a.m. from AA consultant ..........


Asked by an APA attorney about the potential for mergers, Dichter said a merger loses some of its synergies if one company has higher labor costs than the other because costs tend to rise toward the higher-cost company.

A company involved in a merger would want to be in the ""strongest negotiating position with the maximum amount of synergies," he said.

American's three unions have agreed to term sheets with US Airways Group officials that would form the basis for collective bargaining agreement, and the unions support a potential merger with US Airways.

The APA attorney asked Dichter if he has heard American's chairman, president and CEO Tom Horton say that he would prefer to wait until American was out of bankruptcy court before considering possible mergers.

"I've heard him say that in the press," Dichter replied.

Out of Bankruptcy? Sounds like what may be better for the AA employees of the 3 unions ( during BK ) doesn't matter to him. Self serving maybe?