Delta-AA

[bigjets]

http://beta.fool.com/jonathanyates13/2012/08/24/delta-airlines/9998/?ticker=UAL&source=eogyholnk0000001


Did the pilots work out a deal with Delta pilots union?

If we are merged with Delta, I'm pushing for no union representation, it seems like their management team knows how to run a company and take care of their employees. 600 dollars a year for union representation and I have half pay for a sick day and I lost a week of vacation.

 

[eolesen]

Delta worked out a deal with their pilots. Unlike US.

 

[BoeingBoy]

DL seems to have lost interest in a merger with AA. My presumption is that they figure that too much would need to be divested for the DOT to approve a merger between the #2 and #3 carrier. After all, it would create the first mega-carrier with close to 50% of the domestic market share. They might be interested in anything a merged AA/Whoever might have to divest, however (as would UA).

Jim

 

[eolesen]

They still might get into a bidding war just to make it more expensive for Doug...

 

[WorldTraveler]

Comair doesn't factor into what DL does or does not do with AA - as was suggested by the article which doesn't really bring any new information to the table. DL shut down Comair because it was the right thing to do from a business standpoint.

So too is buying the refinery - which is on target to start producing jet fuel in a couple weeks - along with paying down debt, buying used aircraft w/ competitive operating costs to new aircraft, managing capacity to push RASM up, offering early outs etc....

Running a good business with what you have today is precisely what is also necessary to demonstrate to the creditors that you have the capability to take on other assets later.

I still believe that DL should not be counted out just because it does not want to - or can acquire AA whole. Neither can US because of DCA overlap. DL just happens to be willing to admit up front that they can't acquire AA whole. B6's lack of interest is probably as much related to their recognition of the same fact.

It is still highly possible that AA could be sold off in parts and if that happens, DL very likely has the best chance to acquire what it wants. DL and UA are in the best position to acquire the parts of AA they could each use; DL has the advantage in that they could acquire DFW as well as MIA which means that DL's bid could be much larger. DL also has a finished merger as an advantage over UA.

If is very likely that DL can offer enough stock and assume enough of AA's debt to satisfy the creditors and that its offer would be superior to others.

There is no requirement that the creditors have to sell AA in entirety if they sell at all; if the pilots carry through with actions to cripple the company, the creditors might actually CHOOSE to carve AA up. APA obviously doesn't want to see AA carved up; their greatest chance for continued existence comes if AA remains as a standalone followed by merging with US where AA pilots would probably overwhelm US' pilots. The chances of APA or an indepdent union remaining in a DL asset acquisition scenario are smaller; there are plenty of DL pilots who would be happy to vote out ALPA but it is really unknown how many of those pilots there really are.

The AA pilots might well decide that being paid the best wages in the industry for a network airline are more important than protecting a union if push comes to shove. We are beginning to see that Parker is not willing to commit to the pay levels that AA pilots want - not a surprise. Even many of the potential medium sized airlines such as AS might well be able to offer better pay packages for AA pilots - and other employees - than US.

If AA is carved up and DL takes the parts it wants - presumably DFW, MIA, and perhaps additional LHR slots - then it is very likely that other airlines would be interested in acquiring part of the remaining NYC and ORD operations which would be small enough for those smaller carriers to acquire. It is highly unlikely that any of AA's hubs would simply be shut down; they all have the potential to be profitable for one or more other airlines using their cost structure.


Yes, DL could well just bid to run up the price for Parker, but it is more likely that DL really does want and can profitably use a number of assets from AA.

BTW, Jim, DL plus AA WHOLE would not have 50% of the market - it would be much closer to 35%. If DL acquires DFW and MIA only, DL would probably only have about 28-30% of the US market which is still well within maximum size limits the DOJ has used in mergers in other industries; the airline industry is highly fragmented and too many people assume it will remain more fragmented than other industries.

DL hasn't lost interest but they won't force a deal that doesn't make sense. And unlike US, DL won't attempt a hostile takeover of AA.

Early on the AA BK, there were discussions about investment banks that might be a part of a future plan for AA. We haven't heard anything about them of late but I doubt very seriously that they are no longer watching what goes on - and might be a part of a bid w/ DL to take over the remaining part of AA or assist in selling to another airline.

 

[AA89]

Cliff Notes please.............

 

[WorldTraveler]

Cliff Notes please.............

I still believe that DL should not be counted out just because it does not want to - or can acquire AA whole.

It is still highly possible that AA could be sold off in parts and if that happens, DL very likely has the best chance to acquire what it wants. DL has the advantage in that they could acquire DFW as well as MIA.

It is very likely that DL could offer AMR creditors what they need and could top other offers.
If is very likely that DL can offer enough stock and assume enough of AA's debt to satisfy the creditors and that its offer would be superior to others.If is very likely that DL can offer enough stock and assume enough of AA's debt to satisfy the creditors and that its offer would be superior to others.
There is no requirement that the creditors have to sell AA in entirety if they sell at all; if the pilots carry through with actions to cripple the company, the creditors might actually CHOOSE to carve AA up. T

The AA pilots might well decide that being paid the best wages in the industry for a network airline are more important than protecting a union if push comes to shove.

If AA is carved up and DL takes the parts it wants - presumably DFW, MIA, and perhaps additional LHR slots - then it is very likely that other airlines would be interested in acquiring part of the remaining NYC and ORD operations which would be small enough for those smaller carriers to acquire.


DL hasn't lost interest but they won't force a deal that doesn't make sense. And unlike US, DL won't attempt a hostile takeover of AA.

there

 

[AA89]

Hahaha Thanks as always for the info and your sense of humor

 

[WorldTraveler]

my pleasure. best of luck during these trying days!

 

[FWAAA]

It is still highly possible that AA could be sold off in parts and if that happens, DL very likely has the best chance to acquire what it wants. DL and UA are in the best position to acquire the parts of AA they could each use; DL has the advantage in that they could acquire DFW as well as MIA which means that DL's bid could be much larger. DL also has a finished merger as an advantage over UA.

I'm not familiar with the phrase "highly possible." Are you saying that there's a high probability that AA will be broken up and parted out? If so, I disagree. Are you saying that there exists a possibility that AA will be broken up and sold off in parts? If so, I agree. In every Ch 11, there's a possibility that the parts oare worth more individually than their sum as a complete going concern.

CO, UA, US, DL and NW all endured at least one trip thru Ch 11 and each emerged (at least once) as an independent airline; most merged later on. Although there is a possibility that AA does not emerge from Ch 11 as an indepenent going concern (and is sold off in pieces), the likelihood of that happening is very remote. Ch 11 is slanted toward giving existing management a do-over, and there's nothing so far to indicate that the AA unsecured creditors have a different plan in mind for AA.

 

[wings396]

Lots of speculation without even knowing what financial backing Parker may have.....

 

[WorldTraveler]

I'm not familiar with the phrase "highly possible." Are you saying that there's a high probability that AA will be broken up and parted out? If so, I disagree. Are you saying that there exists a possibility that AA will be broken up and sold off in parts? If so, I agree. In every Ch 11, there's a possibility that the parts oare worth more individually than their sum as a complete going concern.

CO, UA, US, DL and NW all endured at least one trip thru Ch 11 and each emerged (at least once) as an independent airline; most merged later on. Although there is a possibility that AA does not emerge from Ch 11 as an indepenent going concern (and is sold off in pieces), the likelihood of that happening is very remote. Ch 11 is slanted toward giving existing management a do-over, and there's nothing so far to indicate that the AA unsecured creditors have a different plan in mind for AA.

I can't tell you where "possible" ends and "highly possible" begins but if the pilots engage in a job action in a week or so, then I think "highly possible" is not at all a stretch.

As I've noted before, AA is restructuring at a time when all of its competitors are strong.... that was not true when other airlines restructured. Yes, BK laws favor restructuring and emergence as a standalone company. I have said that. But AA also has very choice industry assets remaining and also has labor unrest which has a proven ability to destroy value in an airline - and which presents risk which creditors and investors absolutely hate.
Don't underestimate for a minute the likelihood of creditors pulling the plug and selling AA for parts if there is risk that labor will destroy the company. There are plenty of suitors willing to take over AA's assets - and pay the creditors what they want.

Lots of speculation without even knowing what financial backing Parker may have.....

doesn't really matter what Parker has... if he can get it, so can DL. DL is a larger company with a market cap more than 4X what US has, and better demonstrated ability to borrow and repay debt.
There are enormous risks involved w/ US taking over a company 2X its size to begin with... far less risk if DL takes over assets that generate 50% of what DL is today.
There is no doubt that from a financial standpoint that DL could outbid US if it chose to do so.
Those are just financial realities related to size - and really have nothing to do with DL vs US.

 

[AA89]

Guys, forgive me if I'm being to simplistic. How much bearing does the respective CEO's payday have to do with cooperation in a merger or takeover as far as selling the deal to the creditors?

 

[wings396]

Oh please give it a friggen rest with what Delta can do. For the love of Pete, we all know that they have a gazillion dollars to buy anything in the world, and they can outbid anyone on anything. And how much of that fortune are they sending your way again?
After all of this WT, I have to ask what the Hell do you care what Parker does? Being that you are such a Delta lover, you should be cheering him on as he marches down the path of destruction, that is what you want isn't it? If he fails, Delta wins big. But if he succeeds, is where the concern lies with you and what it means for Delta. This becomes more evident with every post of yours. This can't really all be just about your bros ramp job at AA.

 

[FWAAA]

Guys, forgive me if I'm being to simplistic. How much bearing does the respective CEO's payday have to do with cooperation in a merger or takeover as far as selling the deal to the creditors?

I don't know, but sounds like a good question.

Recall that Grinstein at Delta refused to take a big payday when DL emerged from Ch 11 (although all other top managers took many millions of stock at exit) yet Parker's bid for DL was rejected. Of course, Grinstein had become rich at Burlington Northern and didn't need a big payday.

I don't think the creditors care who takes a big payday, but I do think they'll end up picking who gets to manage AA when it emerges from Ch 11. Some think they'll pick Parker but others think that they'll back Horton. Given that the aggregate value of the new AMR stock might be worth $5 billion to $10 billion when AA emerges from Ch 11, I doubt that the creditors will quibble over $10 or $20 million for Tom Horton.

IMO, if the creditors think that a stand-alone, independent AA is more valuable for the creditors than a combined US-AA, then the unsecured debt will vote for stand-alone, independent AA.

A lot of people have opined on Horton's motives (despite knowing nothing about his motives). Here's how I see it. Had Horton not bailed in 2002 to go to AT&T, the AMR board would have likely picked him ahead of Arpey in 2003 when Carty was forced out. Horton had been at AA since 1982 and had been promoted up to his departure, so he was not topped out in his management potential. Parker left AA after just six years to go to NW and then ended up at HP. Horton isn't old, and could easily manage AA for 10 more years, so perhaps he wants the challenge of running AA for the next decade.

Parker's fans swear up and down that Parker is in it for the long-term and that Horton is just a short-time hatchet man, but I disagree. Of course Parker wants to run the world's largest airline - what CEO wouldn't? By the same token, I assume that Horton might relish the challenge of being in charge for more than a year or two. If he wasn't in it for the long-term, then I think he would have turned down the job offer last November 29.

There's one thing of which I am certain: Whether it's Parker or Horton won't be a decision that either of them get to make; the only votes that matter are the holders of the unsecured debt.