FlyingHippie
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- Jan 27, 2003
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Chip, do you have a ballpark figure as to what the combined UAIR/UAL CASM would be? Would be interesting to know.
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Could Us Airways Merge?
- Thread starter USA320Pilot
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ohcaptainron
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- Sep 12, 2002
- 98
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I recently had the privlage of spending time with Mr. Tilton, CEO of UAL, last Tuesday in ORD. I asked him directly about US Airways and here are HIS comments. First he made it very clear UAL will emerge from bankruptcy in late fall of 04, will all current hubs and service in place, He said that US Airways was very important to UAL and the Star Alliance, however, he was worried about US Airways future. In light of the LCCs in general and the presence of Southwest in PHL in particular. He said and I quote, US Airways has assets that UAL is interested in, it was his opinion that no other carrier was interested in those assets as currently structured. But the other carriers absolutly did not want UAL to get their hands on any of them. Mr. Tilton continued" The problem in the short term is keeping US Airways in operation while UAL works out of BK, until then UAL would not have a seat at the table if US Airways does not continue operations and those assets become available". He said there is tremendous pressure building on US to perform, a realisation that the company should have spent more time working the BK process but that it may not have been an option, costs are still way to high and that further restructuring is possible, And at some point the folks in Alabama might decide to cut there losses especially now that Southwest is making a move in PHL".
UALs business plan is looking good, there is strong primary lender and supplier interest in the exit stratagy, problems remain but they are managable, IRS waivers/ recent proposed legislation look promissing in solving the pension issues. So is a merger possible I asked?" He said anything is possible but I think we learned the merger lesson last time and now more than ever not a good option for UAL, while a strong code share and marketing alliance really was the way to go..
In conclusion I would not expect a merger, if US is not sucessful in lowering their costs and increasing their revenue, I would expect pressure on Seigle to restructure the company into a regional airline with some assets being sold or tranfered to UAL in order to keep the pirates down in AL. happy. Time will tell, good luck to us all.
UALs business plan is looking good, there is strong primary lender and supplier interest in the exit stratagy, problems remain but they are managable, IRS waivers/ recent proposed legislation look promissing in solving the pension issues. So is a merger possible I asked?" He said anything is possible but I think we learned the merger lesson last time and now more than ever not a good option for UAL, while a strong code share and marketing alliance really was the way to go..
In conclusion I would not expect a merger, if US is not sucessful in lowering their costs and increasing their revenue, I would expect pressure on Seigle to restructure the company into a regional airline with some assets being sold or tranfered to UAL in order to keep the pirates down in AL. happy. Time will tell, good luck to us all.
Stick-n-Rudder
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- Aug 21, 2002
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S&L bailout mid eighties revisisted? I said this months ago. Tilton is a man that oversee's takeovers of the company he is in charge of. U's international operation survives and the domestic side is taken over by US. Seigel said, "US will be a "super feeder airline".(Bronner has 25 billion dollars).
Mesa has to much leverage at US and the bankers don't like it. Seigle is forced to limit US's exsposure to Mesa(Bankers and ATSB want all profits kept in house hence the other codeshare airlines are going away rather quickly). The big push is on to build a US Express division (MDA and PSA, PDT,ALG) with RJ's for an eventuall IPO and US cash infussion. Protection against Mesa so that Mesa cannot pull the plug on US (RJ's short term) like ACA is doing to United.
Seigle and or the people that came up with the plan are banking on th increased capacity(ASM's) and reduced op's cost's (Pilots and F/A's and ground op's personnel) that the CRJ's and EMB's will have overall.
Remember that Southwest, AirTran, America West and Jet blue can't fly from ELM,TRI,AVP.RDG,ERI,EVV or the like and make a profit.
Mesa has to much leverage at US and the bankers don't like it. Seigle is forced to limit US's exsposure to Mesa(Bankers and ATSB want all profits kept in house hence the other codeshare airlines are going away rather quickly). The big push is on to build a US Express division (MDA and PSA, PDT,ALG) with RJ's for an eventuall IPO and US cash infussion. Protection against Mesa so that Mesa cannot pull the plug on US (RJ's short term) like ACA is doing to United.
Seigle and or the people that came up with the plan are banking on th increased capacity(ASM's) and reduced op's cost's (Pilots and F/A's and ground op's personnel) that the CRJ's and EMB's will have overall.
Remember that Southwest, AirTran, America West and Jet blue can't fly from ELM,TRI,AVP.RDG,ERI,EVV or the like and make a profit.
OP
USA320Pilot
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Ohcaptainron:
Today the Denver Post wrote, "Although United said its planes are booked more fully and at higher fares than last year, analysts predict a fourth-quarter loss in the range of $400 million to $500 million, not including bankruptcy costs."
If true, it's not inconceivable United could lose between $700 to $800 million in the fourth quarter, with bankruptcy costs included. Moreover, the first quarter of each year traditionally is equally slow as the fourth quarter. Thus United could lose about $1.2 billion to $1.5 billion in the next 6 months.
That's huge, but how will the numbers effect United's DIP financing requirements and cash flow targets going forward?
See Story
After thinking about what's going on and knowing that US Airways and United management have been meeting recently, if the companies merge there would be significant economies of scale and increased revenues, thus I believe the two companies need one another to survive.
Meanwhile, Ohcaptainron, there is reason to believe your comments may not play out, however, I now believe a merger will proceed in the not-so-distant future.
Yesterday the AP reported Gleen Tilton said United remains on track to emerge from bankruptcy late next spring See Story, but you said he told you the day before the company would emerge "in late fall of 04". Ohcaptainron, why is there an inconsistency in Titlon's comments and according to you why will it take United another year to emerge, when Titlon just told the press it would occur in the spring?
Ohcaptainron, you said, "IRS waivers/ recent proposed legislation look promissing in solving the pension issues."
Tonight the US Airways ALPA code-a-phone said, "This is Jack Stephan with a US Airways MEC update for Wednesday, October 29th, with one new item. Today the Senate Health, Education, Labor and Pension Committee held a mark up to consider several bills, including pension legislation. In a move similar to action in the House earlier this month, today's senate bill was voted out of committee without amendments, and did not include The Airline Pension Act of 2003. The pension bill voted out of committee and sent to the senate floor replaces the 30 year Treasury Bond rate for a period of three years with a composite corporate bond rate based on conservative indexes. The bill also creates a commission to review all outstanding general pension issues over the next two years, and provide recommendations to the congress for a more permanent solution to the pension crisis by the end of 2005. This bill will go to the senate floor for a vote, and then will be reconciled with the House legislation in a conference committee. In replacing the 30-year Treasury Bond rate for calculating pension liabilities both the Senate and House bills only address legislation required by the end of this year, and represent the only issues all parties can agree to in committee. ALPA and our supporters in the congress will continue to look for opportunities to include The Airline Pension Act of 2003 in this pension legislation as it moves to a floor vote and in to conference; or in any other legislation that is an appropriate vehicle."
Does Tilton know something that ALPA R&I does not? Since I am directly involved in pension lobby efforts, could you expand on Tilton's pension comments because he may know something ALPA International and its Capital Hill lobbysts do not. We may get H.R. 2719 attached, but to my direct knowledge, we still do not have a Senate sponsor or Bush Administration support for a legislative solution to pension reform.
Ohcaptainron, you said "UALs business plan is looking good, there is strong primary lender and supplier interest in the exit stratagy", however, today Judge Wedoff seemed to dispute your comment. In fact, at United's Omnibus hearing Dow Jones reported "This IPO (Orbitz) will undoubtedly be of assistance to the debtor," Wedoff said. UAL needs liquidity and is constrained by its ability to raise cash by other means, he said.
Ohcaptainron, you may want to read the story for yourself because it appears you know something the bankruptcy judge does not.
Ohcaptainron, how come there are so many inconsistencies in your post?
By the way, why did it take two days for you to post your comments about your conversation with Tilton, but only two hours to post them after I started this thread?
Regards,
Chip
Today the Denver Post wrote, "Although United said its planes are booked more fully and at higher fares than last year, analysts predict a fourth-quarter loss in the range of $400 million to $500 million, not including bankruptcy costs."
If true, it's not inconceivable United could lose between $700 to $800 million in the fourth quarter, with bankruptcy costs included. Moreover, the first quarter of each year traditionally is equally slow as the fourth quarter. Thus United could lose about $1.2 billion to $1.5 billion in the next 6 months.
That's huge, but how will the numbers effect United's DIP financing requirements and cash flow targets going forward?
See Story
After thinking about what's going on and knowing that US Airways and United management have been meeting recently, if the companies merge there would be significant economies of scale and increased revenues, thus I believe the two companies need one another to survive.
Meanwhile, Ohcaptainron, there is reason to believe your comments may not play out, however, I now believe a merger will proceed in the not-so-distant future.
Yesterday the AP reported Gleen Tilton said United remains on track to emerge from bankruptcy late next spring See Story, but you said he told you the day before the company would emerge "in late fall of 04". Ohcaptainron, why is there an inconsistency in Titlon's comments and according to you why will it take United another year to emerge, when Titlon just told the press it would occur in the spring?
Ohcaptainron, you said, "IRS waivers/ recent proposed legislation look promissing in solving the pension issues."
Tonight the US Airways ALPA code-a-phone said, "This is Jack Stephan with a US Airways MEC update for Wednesday, October 29th, with one new item. Today the Senate Health, Education, Labor and Pension Committee held a mark up to consider several bills, including pension legislation. In a move similar to action in the House earlier this month, today's senate bill was voted out of committee without amendments, and did not include The Airline Pension Act of 2003. The pension bill voted out of committee and sent to the senate floor replaces the 30 year Treasury Bond rate for a period of three years with a composite corporate bond rate based on conservative indexes. The bill also creates a commission to review all outstanding general pension issues over the next two years, and provide recommendations to the congress for a more permanent solution to the pension crisis by the end of 2005. This bill will go to the senate floor for a vote, and then will be reconciled with the House legislation in a conference committee. In replacing the 30-year Treasury Bond rate for calculating pension liabilities both the Senate and House bills only address legislation required by the end of this year, and represent the only issues all parties can agree to in committee. ALPA and our supporters in the congress will continue to look for opportunities to include The Airline Pension Act of 2003 in this pension legislation as it moves to a floor vote and in to conference; or in any other legislation that is an appropriate vehicle."
Does Tilton know something that ALPA R&I does not? Since I am directly involved in pension lobby efforts, could you expand on Tilton's pension comments because he may know something ALPA International and its Capital Hill lobbysts do not. We may get H.R. 2719 attached, but to my direct knowledge, we still do not have a Senate sponsor or Bush Administration support for a legislative solution to pension reform.
Ohcaptainron, you said "UALs business plan is looking good, there is strong primary lender and supplier interest in the exit stratagy", however, today Judge Wedoff seemed to dispute your comment. In fact, at United's Omnibus hearing Dow Jones reported "This IPO (Orbitz) will undoubtedly be of assistance to the debtor," Wedoff said. UAL needs liquidity and is constrained by its ability to raise cash by other means, he said.
Ohcaptainron, you may want to read the story for yourself because it appears you know something the bankruptcy judge does not.
Ohcaptainron, how come there are so many inconsistencies in your post?
By the way, why did it take two days for you to post your comments about your conversation with Tilton, but only two hours to post them after I started this thread?
Regards,
Chip
OP
USA320Pilot
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Flyinghyppie:
Flyinghyppie asked: "Chip, do you have a ballpark figure as to what the combined UAIR/UAL CASM would be? Would be interesting to know."
Chip answers: US Airways CASM target after the pending cuts are implemented, e.g. Pref Bid, PIT hub, pension relief, MDA, etc. are expected to bring the company's unit costs down to about 9.9 cents.
United's are about 9.6 cents, however, if United rejects assets that are duplicate to a merger such as facilities and excess aircraft; as well as corporate combination economies of scale, the combined business entity could see a CASM below 9 cents.
With the synergistic revenue predicted by United's EF&A department, the combined company would likely have sustained profitability regardless of LCC expansion.
Also noteworthy, a merger could prevent further employee pay and benefit cuts at both companies.
Regards,
Chip
Flyinghyppie asked: "Chip, do you have a ballpark figure as to what the combined UAIR/UAL CASM would be? Would be interesting to know."
Chip answers: US Airways CASM target after the pending cuts are implemented, e.g. Pref Bid, PIT hub, pension relief, MDA, etc. are expected to bring the company's unit costs down to about 9.9 cents.
United's are about 9.6 cents, however, if United rejects assets that are duplicate to a merger such as facilities and excess aircraft; as well as corporate combination economies of scale, the combined business entity could see a CASM below 9 cents.
With the synergistic revenue predicted by United's EF&A department, the combined company would likely have sustained profitability regardless of LCC expansion.
Also noteworthy, a merger could prevent further employee pay and benefit cuts at both companies.
Regards,
Chip
Sepp Dietrich
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- Oct 31, 2003
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All the while forgetting that there are places all over the world that United flies to where people have never seen a US Airways aircraft, much less heard of them.Chip Munn said:
You can look at Delta's experience with the FRA and beyond flights when they acquired the FRA hub from Pan Am in 1991.PA operated quite a few beyond services from FRA (OSL,ATH,IST,Ect),however in less than a year Delta had scaled all of those flights back and basically abandoned the FRA hub.
Why? Delta as a new entrant was an unknown entity in FRA and suffered as a result.
I think to undertake a traditional merger right now would be sheer folly for these companies,regardless of whatever rosy scenario Chip Munn has pieced together here.
There will be additional layoffs,there will be nastiness between the various labor groups and if this board is any indication of the way employee relations are handled at US Airways,there will be more broken promises from the executive offices.
If you ask the former TWA people still working at AA, they probably would have prefered to "Die on their feet" so to speak than see AA dismantle their company in the systematic fashion it has.
These are two proud airlines, and I dont think it is in anyones best interest for them to fully integrate in the forseeable future.
First thing: Chip, Fly is NOT married to a pilot (not United, not any airline) In fact, he's been trying to get me to quit since the beginning.
Second: Because of the above, I personally will not lose anything if United disappears but I LOVE my job and hope that I can continue to do it for years to come.
Third: If Chip et al's plan is to fly for United, you may be disappointed. From the buzz at UAL, most would rather let the company go CH 7 then to merge. The UAL f/a's have already begun a signing to dump AFA so that we will not have to accept U f/a's into our seniority (of course, I think a blending of seniority is the fairest way, but not slotted in. Perhaps 1 for 2) From the other work groups, I've heard STRIKE. So that would pretty much push the airline into oblivion and the f/a's changing unions a moot point.
So, I wish everyone good luck but from the sounds of things, don't count on a merger. And of course UAL would be on the tail......name recognition. United has more.
Sorry I won't be able to respond....off to Hong Kong today. See you next week
Second: Because of the above, I personally will not lose anything if United disappears but I LOVE my job and hope that I can continue to do it for years to come.
Third: If Chip et al's plan is to fly for United, you may be disappointed. From the buzz at UAL, most would rather let the company go CH 7 then to merge. The UAL f/a's have already begun a signing to dump AFA so that we will not have to accept U f/a's into our seniority (of course, I think a blending of seniority is the fairest way, but not slotted in. Perhaps 1 for 2) From the other work groups, I've heard STRIKE. So that would pretty much push the airline into oblivion and the f/a's changing unions a moot point.
So, I wish everyone good luck but from the sounds of things, don't count on a merger. And of course UAL would be on the tail......name recognition. United has more.
Sorry I won't be able to respond....off to Hong Kong today. See you next week
TheWatcher
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- Aug 26, 2002
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US Airways isnt taking over anyone. It cant even handle what it has now!
Chip asks: What are the UAL pilots going to do, slow down like the Summer of 2000 and force the company into CH7.
737 answers: You might not be too far off base there buddy. There is already quite a bit of discontent because of quality of life issues (i.e. reserve), another round with U might deliver a knockout punch. :angry:
737 answers: You might not be too far off base there buddy. There is already quite a bit of discontent because of quality of life issues (i.e. reserve), another round with U might deliver a knockout punch. :angry:
U/UAL merge?
I don't care which airline would be the surviving entity; you're talking a scenario that would almost guarantee that there would be no long term surviving entity.
Both U and UAL are not financially healthy. Integration costs alone would drive the surviving entity back into chapter 11.
The acrimony between each airline's employees would more likely push the post-merger company into chapter 7.
I prefer to think of U and UAL as two drunks, leaning on each other as they stumble down the street. (* alliance)
Chip, when you sit there and speculate on the surviving entity in this fantasy ICT/UCT/merge, you are stirring the pot of discontent at both companies. The last thing that U and UAL employees need is the additional stress of worrying about this far fetched scenario.
Chip, does it surprise you that two * alliance partners' top management would talk to each other about issues OTHER an ICT/UCT/merge? What should we think when Air Canada or Lufthansa top brass shows up at WHQ or CCY?
Good luck to all of U's employees; we both (U and UAL) have a long, hard journey in front of us. Don't waste too much energy getting wound up over this fantasy; it's being brought to you by the same rumor monger that said U/UAL merge II was a 'slam-dunk,' UAL would be selling most of it's domestic route structure to U; U would be taking over UAL's 767s (some of which are now for sale on the open market), and several others that I can't think of at this moment.
I don't care which airline would be the surviving entity; you're talking a scenario that would almost guarantee that there would be no long term surviving entity.
Both U and UAL are not financially healthy. Integration costs alone would drive the surviving entity back into chapter 11.
The acrimony between each airline's employees would more likely push the post-merger company into chapter 7.
I prefer to think of U and UAL as two drunks, leaning on each other as they stumble down the street. (* alliance)
Chip, when you sit there and speculate on the surviving entity in this fantasy ICT/UCT/merge, you are stirring the pot of discontent at both companies. The last thing that U and UAL employees need is the additional stress of worrying about this far fetched scenario.
Chip, does it surprise you that two * alliance partners' top management would talk to each other about issues OTHER an ICT/UCT/merge? What should we think when Air Canada or Lufthansa top brass shows up at WHQ or CCY?
Good luck to all of U's employees; we both (U and UAL) have a long, hard journey in front of us. Don't waste too much energy getting wound up over this fantasy; it's being brought to you by the same rumor monger that said U/UAL merge II was a 'slam-dunk,' UAL would be selling most of it's domestic route structure to U; U would be taking over UAL's 767s (some of which are now for sale on the open market), and several others that I can't think of at this moment.
A merger will not be happening for at least another 2-3 years, both airlines have way too many issues to work out internally before they go that route. A merger certainly would make sense in the future.
In regard to US Airways acquiring UAL, this ain't going to happen. There are several buyout funds that would love to get a piece of UAL but Tilton realizes that things are coming back and the vultures would be getting in on the very cheap. Tilton will try to whether the storm on his own and the first resource he is going to is Uncle Sam cause the LBO firms want to control everything.
Lastly, US Airways is unfortunately in a very vulnerable position right now. Southwest coming into Phillly, while not in huge flights yet, their mere presence is chilling. US Airways needs to keep its eye on the ball and get the regional operation up and running as quickly as possible so they can stop some of the bleeding and compete.
If there is a merger in the future, I am 99.99% certain UAL will have majority control. I am a US Air pax and love US Air, but the reality is US Air is not UAL and will never come close to their global network.
Good luck to all, and let's hope things work out for both airlines.
In regard to US Airways acquiring UAL, this ain't going to happen. There are several buyout funds that would love to get a piece of UAL but Tilton realizes that things are coming back and the vultures would be getting in on the very cheap. Tilton will try to whether the storm on his own and the first resource he is going to is Uncle Sam cause the LBO firms want to control everything.
Lastly, US Airways is unfortunately in a very vulnerable position right now. Southwest coming into Phillly, while not in huge flights yet, their mere presence is chilling. US Airways needs to keep its eye on the ball and get the regional operation up and running as quickly as possible so they can stop some of the bleeding and compete.
If there is a merger in the future, I am 99.99% certain UAL will have majority control. I am a US Air pax and love US Air, but the reality is US Air is not UAL and will never come close to their global network.
Good luck to all, and let's hope things work out for both airlines.
OP
USA320Pilot
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Most of the comments in this thread are emotionally based, but when it comes time to pay the mortgage, feed the family, and live your life, I doubt any employee group would resist the merger.
In today's economic environment every employee that works for United or US Airways does so because it's their best employment option.
In regard to a strike that would be illegal. If any work group took an illegal job action either company would have the union and its members in court. Any violation of a court order would place the union and/ or its members in contempt, just like with APA a few years ago.
In regard to M&A activity, if consolidation occurs the likely partners are United and US Airways. Moreover, it's not me that started this merger thought, it was Dave Siegel.
Let's not forget that just three days ago in a prepared speech Siegel (not Chip Munn) told key industry observers and DOT representatives, "Again, I don't have all the answers, but I do sense that increased cooperation, coordination, and potentially consolidation between and among network airlines must be another source of strength through enhanced efficiencies, in both marketing and operations."
Times change and so do plans and with the dramatic LCC expansion, maybe the only way network carriers can compete is to consolidate to drive down unit costs to a competitive level.
Regards,
Chip
In today's economic environment every employee that works for United or US Airways does so because it's their best employment option.
In regard to a strike that would be illegal. If any work group took an illegal job action either company would have the union and its members in court. Any violation of a court order would place the union and/ or its members in contempt, just like with APA a few years ago.
In regard to M&A activity, if consolidation occurs the likely partners are United and US Airways. Moreover, it's not me that started this merger thought, it was Dave Siegel.
Let's not forget that just three days ago in a prepared speech Siegel (not Chip Munn) told key industry observers and DOT representatives, "Again, I don't have all the answers, but I do sense that increased cooperation, coordination, and potentially consolidation between and among network airlines must be another source of strength through enhanced efficiencies, in both marketing and operations."
Times change and so do plans and with the dramatic LCC expansion, maybe the only way network carriers can compete is to consolidate to drive down unit costs to a competitive level.
Regards,
Chip
