If you can't see the difference between your statements that DL would acquire all of AMR (that the regulators would allow) to keep AMR out of US' hands and your current statements that DL is NOT interested in AMR except for certain parts, you're blind - or just justifying your "I'm never wrong" ego.
Jim
There is no inconsistency other than in your mind, Jim.
I never said DL would acquire AA in its entirety. You have inserted your bias into what I said. Period.
Move on.
DL would be satisfied? I'd be satisfied too if my foot was on my rivals neck.
Really think AA would give up a hub to DL? Only if they're being parted out like a junkyard clunker, IMHO. IMHO means in my humble opinion WT; try using it once in a while.
Last sentence....finally! an admission that AA plus US is a threat to DL. All these months of monster posts with faux concern for AA employees, the bottom line is finally disgorged. Good job! Thanks BB for pulling that one out.
If you really think that any two airlines CARE about each other, you truly don't live in reality. They are strong and viscious competitors - and that is what the law requires them to be.
That DOES NOT mean that I don't have compassion for AA people. I do care about AA people.
There is a big difference between understanding the nature of the business and not caring about the people in it.
Given that there are huge numbers of AA's own people who state they want to burn the place down, I have a feeling their actions and beliefs will have far more weight on the situation than mine.
What would be the percieved reasonableness of DL outbidding US for the entire AMR? The combined company would never get through regulatory scrutiny. Why would the creditors accept a DL bid knowing that fact and the likely result that if approved by them, it would essentially mean that AA would be equivalenced to a Chapter 7 - i.e., broken up to satisfy regulators. If I were an AMR investor, I'd be very leary of forecasting a positive return on a fragmented AA, versus a new whole AA - either alone or combined with US. Summed, I can't really rationalize how even if DL outbid US by say 25%, it would be viewed as a viable indicator of eventual Return. Now if you're speculating that with DL's deep pockets, they would submit a bid for say just the MIA and JFK operations, which is higher than an overall US bid, I guess that could be viewed as positive by the creditors - BUT who would be foolish enough to partner with DL to provide the financing for such a bid, which would certainly be subject to severe overbid scrutiny against US's whole AA bid by DLs institutional investors?
first, go back and read through what I have written - none of which says anything about DL buying AA in entirety - even if Jimbo wants you to believe it does.
2. US won't buy AA in entirety either - because US is already at the max at DCA that the DOT has allowed for slots at that airport...
3. I presume the return you speak of is DL's ability to gain a return on its investment - and if so then yes DL will not bid for more than it can to achieve said return....
that said, here is a little review on how deals like this get financed.
1. Cash from the buyer - either on hand (no US airline has enough cash on hand to buy much of AA) or borrowed money from the buyer's ability to raise funds - issue corporate debt, borrow from banks.
2. Equity or stock in the buyer's company - ie.... the creditors could and likely would be willing to accept stock in DAL or LCC as part of the price of buying AA or its assets. After all, the creditors will obtain stock in the new AA when AMR exits bankruptcy. The difference in an acquisition is that they receive stock IN ANOTHER COMPANY instead of the new AMR.
3. Assumption of debt - or taking over AMR's debts. Companies still have lots of debt on their books when they come out of BK. Some is wiped out but there is a whole lot still there.
Now --- have can DL outbid US....
1. with cash for whatever part of the deal that is done in cash - and it will probably be a fairly small amount. DL has far more cash available to it than LCC. DL has an undrawn $1.8 billion line of credit. DL also as a largely company has far more ability to issue debt than US. Companies, just like you, can't just issue any amount of debt they want. They have limits based on their credit ratings, their ability to pay etc. DL has been paying off about $1.5 billion of debt per year - plus funding its frozen pension plans for more than $500 million per year. Based on its current business, DL is generating enough cash to pay down $2B in debt per year. They could easily stop paying down that debt and use those proceeds to apply to a purchase of AA or issue debt to raise the funds DL needs to buy AA or its assets.
US is making less than $500M in debt payments per year.
DL has a higher credit rating.
2. DLs market cap - the value of all the DAL stock in circulation is $7.7B as of today. US' market cap is $1.8B... less than 1/4 of DL's. AMR's value as a company coming out of BK - what the creditors are going to want in stock in the new company is likely $6-8 billion. It will be very difficult for US to convince the creditors that it can issue stock that is worth three times what LCC is currently worth, even considering the new revenue that LCC would be gaining in an AA merger.
By acquiring only part of AA - perhaps half - DL will need to provide much less - perhaps up to $4-5 in stock - much less relative to the size of DL today.
3. Assumption of debt....any deal will require the buyer to assume large portions of AMR's debt - it won't go away and has to be paid. DL already is managing and paying off more than US and has a higher credit rating.
It will be incredibly hard to argue how US can outbid DL given that DL will acquire (if it does) only part of AA and DL has deeper pockets and greater ability to pay down debt.
The creditors ARE the investors in AA right now.
The creditors will do whatever they have to do to obtain the maximum recovery.
The employees of AA - perhaps mostly the pilots at this point - will determine if AMR's board decides it is worth more to "part out" AA than to try to keep it running whole.
If DL buys AA assets, those pilots who go with the assets would end up making more than they would at AA or US. There might be alot of AA pilots who would rather support an asset sale to DL than either a standalone plan or a US merger.
) It is what it is.
