Consolidation

[EMBFA]

Aside from United, US Airways is the most vocal about consolidation, has already (somewhat) completed one, and made a major attempt at another. They obviously want to be not only a player, but a controlling player. They know that they will be steamrolled into airline history if UA-CO and DL-NW happen. What do you think US's next move is, and who is thier first choice?

Our old friend United is out whoring itself about again, from Micheal Boyd...


Hot Flash - Monday, October 29, 2007

Now, We Can Talk Mergers
United's Perfuming Itself

It's about as subtle as a IED attack.

United has clearly tossed itself onto the sale block. Not to mention the chopping block.

They're apparently clearing the decks to make themselves an easy pick-up. They're talking about selling off parts to, in the B-school-ese they're paying dearly for, "unlock shareholder value." Not to mention shed stuff that might be duplicative in case somebody wanted to buy them.

United appears to be transforming itself from an airline into an acquisition target. They've hired consultants to "review" spinning off their maintenance operations - translation: spin'em off as fast as possible. They're talking about selling off other parts of the company, too. Parts that once gone might make United more attractive. And with cash in the till, too.

Then we have the CEO who was reported to have blurted out to an employee meeting that the choice is a combination of United with another carrier, or back into bankruptcy. Subtle, eh? A heck of a compliment to a management team that had the airline in Chapter 11 for three years.

This presents a real challenge for the rest of the industry. Since UA is hell bent on selling itself, it's not out of the question that somebody will look at buying. That means that every airline out there has no choice but to sit down and accomplish a lot of "what-if" scenario planning regarding their strategic options.

Buy United? Encourage a competitor to do so? Make a play for key parts? Plan a regulatory attack, with the intent of stripping key parts (like the Tokyo fifth-freedom rights) from a potential merger? Might the PBGC try to grab some of the spin-off cash? Might the Star Alliance be interested in doing something? Go after ORD slots? Lots of competitive options out there. One thing, at least at this point, seems to be certain. United's management really wants to sell.

So if United wants to sell itself, it's going to sell itself. And somebody - or somebodies - will end up buying all or pieces of the entity.

Stand by for some really innovative competitive responses.

 

[donttouchthebeauty]

EMBFA, you should know better than to listen to Michael Boyd, remember all the smack he would talk about USAIRWAYS and how they would be lucky to survive??? United is definitely priming itself, however I doubt with the profits they are posting they are that desperate... AA US and UAL along with DAL are all doing the same things with the aspect of looking at "unlocking" shareholder value...

 

[PHX PHLyer]

They know that they will be steamrolled into airline history if UA-CO and DL-NW happen.

Doug has stated that it doesn't really matter if two other carriers link up...consolidation, regadless of whether US is involved, is a good thing for the industry. Now if AA, CO, DL, NW, UA, etc., become two large carriers US will not want to be left out in he dust. But if DL-NW happen and that is it, it won't affect US....it will make them more profitable even if they aren't in the transaction. The airline industry has shown that you can be a small player and still be successful.

 

[EMBFA]

EMBFA, you should know better than to listen to Michael Boyd, remember all the smack he would talk about USAIRWAYS and how they would be lucky to survive??? United is definitely priming itself, however I doubt with the profits they are posting they are that desperate... AA US and UAL along with DAL are all doing the same things with the aspect of looking at "unlocking" shareholder value...

US Airways WAS lucky to survive lol... America West too... Tilton seems hellbent on a merger, he has 'mentionitis' about it. Does the rest of the board feel the same way?

 

[AWA320]

US Airways WAS lucky to survive lol... America West too... Tilton seems hellbent on a merger, he has 'mentionitis' about it. Does the rest of the board feel the same way?

The reason we were surviving here in the west was two fold, our cost structure and our ability to hedge fuel, two things certainly missing from the east operation along with any type of real business plan.

 

[EMBFA]

No, the merger saved you, already discussed, move on cactus.

Back to future consolidation.

 

[diamondcutter]

The reason we were surviving here in the west was two fold, our cost structure and our ability to hedge fuel, two things certainly missing from the east operation along with any type of real business plan.

oh really and please tell all of us ...just what is the WEST business plan?

 

[USstew23]

The reason we were surviving here in the west was two fold, our cost structure and our ability to hedge fuel, two things certainly missing from the east operation along with any type of real business plan.

Ahh yes that silly little thing called cost structure. Was that low cost structure that you speak of built on the backs of hard working employees who were/are paid lower than some regional affiliate carriers? That cost structure that would've never seen a wide body aircraft much less an international flight to Europe (I mean real international like Trans Oceanic). That cost structure that could not retain long term industry talent such as career airline employees like customer service, flight attendants, Operations Control. The turn over rate kind of speaks for itself and who in there right mind wants to work somewhere for substandard wages for any peroid of time when they will never be able to go anywhere and are treated like dog doo on a shoe by their inept and arrogant management. At some point you need career minded front line employees that are paid accordingly to build and ensure success.

As far as fuel hedges go if I remember correctly, a company under Chapter 11 is unable to hedge fuel. Could be wrong but remember somewhere during one of the earnings statements back when that the company lost more money than they would have if they would've been able to hedge fuel and lock it in at a lower rate rather than be subject to current rates while under bankruptcy protection.

 

[donttouchthebeauty]

US Airways WAS lucky to survive lol... America West too... Tilton seems hellbent on a merger, he has 'mentionitis' about it. Does the rest of the board feel the same way?

Without a doubt, Tilton wants UAL to be merged with someone, however, no one wants to make the first move... Everyone talks about consolidation, but everyone wants to be in the driver seat.. No matter what, if Tilton can pull off a deal of any aspect that makes him more wealthy, then he will do it.. This is what i see happening, Tilton has a while longer before he can cash in his ludicrous amount of stocks.. The announcement will be made shortly before that day to make the stocks skyrocket, he will cashout and be gone... It wouldnt surprise me if UAL hooks up with DAL.. Whoever makes the first move, will spur a hookup frenzy...

 

[cynic]

US and UA make a lot of sense in the current industry environment. Does UA have enough pilots on furlough to allow them to just terminate the East contract entirely?

 

[AWA320]

No, the merger saved you, already discussed, move on cactus.

Back to future consolidation.

No we were not looking to be saved the east was and keep in my that the east was the SECOND choice not the first of this management. I refer you to the SEC filings and not the rantings of Doug and Scott The SEC tells the truth those other two, well lets just say it still remains to be seen. I agree already discussed but you keep missing the truth...

 

[AWA320]

oh really and please tell all of us ...just what is the WEST business plan?

That's a joke right???

 

[AWA320]

Ahh yes that silly little thing called cost structure. Was that low cost structure that you speak of built on the backs of hard working employees who were/are paid lower than some regional affiliate carriers? That cost structure that would've never seen a wide body aircraft much less an international flight to Europe (I mean real international like Trans Oceanic). That cost structure that could not retain long term industry talent such as career airline employees like customer service, flight attendants, Operations Control. The turn over rate kind of speaks for itself and who in there right mind wants to work somewhere for substandard wages for any peroid of time when they will never be able to go anywhere and are treated like dog doo on a shoe by their inept and arrogant management. At some point you need career minded front line employees that are paid accordingly to build and ensure success.

Well you know you speak a lot of truth in that statement but loads missing as well, Like your statement of REAL int'l flying I guess flying the pacific was not REAL int'l and I guess the 747 was not a REAL widebody!! Turnover rate?? well lets just say that we have plenty of long term employees and I work with them on a regular basis. Lets further say that in the years leading up to the the buyout of the east that employees were leaving that place in droves!!! We all know that the pilots were furloughed 33% deep how about the FA's what was that percentage?? Be honest!!! I can't argue with you on the way your management staff treated you. There are simply no words to describe that type of thing.

As far as fuel hedges go if I remember correctly, a company under Chapter 11 is unable to hedge fuel. Could be wrong but remember somewhere during one of the earnings statements back when that the company lost more money than they would have if they would've been able to hedge fuel and lock it in at a lower rate rather than be subject to current rates while under bankruptcy protection.

You are correct in that however the east was able to capitalize on the west hedges!!

 

[EMBFA]

US and UA make a lot of sense in the current industry environment. Does UA have enough pilots on furlough to allow them to just terminate the East contract entirely?

UA has no pilots on furlough. They are hiring both pilots and F/As.

Dumb thing to say though, since you're looking for a reaction, there it was.

Again, let's get back to future consolidation. No one wants to talk about America West, yawn.

 

[N965VJ]

That's a joke right???

I agree.

The west business plan is a joke.