Good article on LCC buying AMR

[MUTATIS MUTANDIS]

Unlike your take World, the conventional wisdom in the press has always been that the last folks left standing at the dance, no matter how ugly, would get their turn. Problem is AMR will indeed get the much needed makeover in a single BK that U has still been unable to complete in two. AMR will dance, but not with Parker. U and AWA tried a go ugly early hookup almost a 7 years ago, and are still driving to the motel. They hate each other so much it looks like no Waffle House visit in the morning.

US Airways is now so toxic I see no way any other labor group or management, with any choice at all, would want to be a part of it. Look at the successful job the DAL employees did in conjunction with management in 2006 at fending off the fawning a pawing of Tempe. They said a collective “yuck” and no matter what the economics of the deal..it was never going to happen. Those of us in the trenches here at U have heard stories over the years (UAL and Buffet) that were similar, that did not even require the employees to become involved. “Yuck” again at any merger with an airline that limps on after 6 years with no merge of its last two victims, an airline where the employees are the enemy.

Sad thing with AMR is they were only ones to do the ethical and moral thing and not screw their stockholders and pensions. I know Wall Street does not reward such behavior, but surely they will at least give them a little good will going forward. Such good will would not put U in the driver’s seat of any deal.

I have a gut feeling DAL is not done yet, and will not sit idle leaving UAL as the biggest airline, and watching SWA proactively complete their own successful merger.

Unlike the postcard, would not wish you here. So sad we have such a bad situation ....that our best hope is to be broken up.

RR MM!

RR the truth, it is a better story! It is funny everyone takes it for granted AMR LCC, they forget the pocketbook of WALLSTREET, and LCC fails and fails again! DUI DOUG and company, fragmentation, and the EUROZONE! LUV could by them(AMR) outright, as for us we owe 1.14bil and have only 500 mil left, pathetic, bad fuel hedging , bad derivatives , bad office building investments, could have paid that loan off 1 year ago, instead, DUI DOUG pays his college boys, HR etc, more than the frontliners and rewards himself! MM!

 

[Harry Callahan]

Oh lord how I want those 20 seconds back!

Nothing worse than reading an inbred's rant.

What the hell do you think your rants are ?

 

[Move2CLT]

Not all of us are paid to live on this forum and actually have chores not involving a computer. The fact that I post something you cannot handle a couple of hours after you post something would usually indicate that your conclusion, as usual, is the result of your immaturity and just, frankly, stupidity.

Like I said before, try coming back in about 20 years, when you might be able to talk like an adult, finally.

What? No reference to little girls?

Did your parol officer drop have something to do with that?

 

[Move2CLT]

What the hell do you think your rants are ?

Harry, why do you even try?

You contribute more when you don't post.

Please, help us out.

 

[WorldTraveler]

Unlike your take World, the conventional wisdom in the press has always been that the last folks left standing at the dance, no matter how ugly, would get their turn. Problem is AMR will indeed get the much needed makeover in a single BK that U has still been unable to complete in two. AMR will dance, but not with Parker. U and AWA tried a go ugly early hookup almost a 7 years ago, and are still driving to the motel. They hate each other so much it looks like no Waffle House visit in the morning.

US Airways is now so toxic I see no way any other labor group or management, with any choice at all, would want to be a part of it. Look at the successful job the DAL employees did in conjunction with management in 2006 at fending off the fawning a pawing of Tempe. They said a collective “yuck” and no matter what the economics of the deal..it was never going to happen. Those of us in the trenches here at U have heard stories over the years (UAL and Buffet) that were similar, that did not even require the employees to become involved. “Yuck” again at any merger with an airline that limps on after 6 years with no merge of its last two victims, an airline where the employees are the enemy.

Sad thing with AMR is they were only ones to do the ethical and moral thing and not screw their stockholders and pensions. I know Wall Street does not reward such behavior, but surely they will at least give them a little good will going forward. Such good will would not put U in the driver’s seat of any deal.

I have a gut feeling DAL is not done yet, and will not sit idle leaving UAL as the biggest airline, and watching SWA proactively complete their own successful merger.

Unlike the postcard, would not wish you here. So sad we have such a bad situation ....that our best hope is to be broken up.

RR

The real world shows that real people do go home from the dance without a partner and without ever having had a chance to dance with someone else; the real world is a whole lot more competitive than the niceties we were all taught in kindergarten.
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The simple fact is that DL employees and their leader Grinstein had no problem fighting off US solely based on Parker’s stated intent to reduce thousands of jobs (largely DL jobs) and cut capacity; in light of the growing outcry that was going on in Washington for what AA did to TW, it was easy for DL employees to argue that Parker’s plans were nothing more than an attempt to shrink the airline industry to US’ benefit while cutting thousands of jobs and lots of air service. In contrast, the DL-NW was the closest thing to an end-to-end merger that could occur in the airline industry; there was very little overlap and history shows that, other than EAS and the cities served by turboprops, there has been little capacity cut from DL’s system, although a lot of connecting capacity has been moved between hubs.
.
A potential US acquisition of AA would involve a whole lot less overlap but there is still the potential for a lot of strategic questions when an airline the size of AA is acquired or mergers with any other carrier.
.
It is also very likely that AA employees will fight a US takeover attempt in the same way DL employees did and AA’s large presence in some of the largest states means AA and its people would likely have more influence in Washington than would US.
.
I agree that ruling out UA or DL as potential acquirers of AA’s assets is not out of the question, but the same could be said about other airlines. Wall Street and regulators both look at the track record of companies in handling mergers when asking if the next one would be handled like the last one.
DL has a lot of history with mergers and they have almost all gone quite well by industry standards. The CO-UA merger is so far producing no real concerns, although labor concerns are far from settled. Second tier (in size) players like AS or B6 could see huge strategic opportunities. No one can be ruled out to acquire AA either in its entirety – or for AA be carved up and sold off in pieces.
.
But the most likely scenario is still that AA will reorganize in BK and be given another chance. It is very unlikely that creditors will be convinced that a merger or asset sale is a better value for the creditors than a reorganized company. The real question is what shape AA will be in coming out and how long it can withstand the competitive assaults which will be very real.
Standing around waiting for AA to fail, expecting to pick up the pieces is a risky strategy. US and every other airline needs to figure out how to build a successful company based on the resources available to that company, not based on what they might get from someone else.
And you are absolutely correct that US' situation may boil over to the point where IT, not AA is carved up for everyone else's benefit.

 

[usa1]

Some AA pilots are starting to whisper that a merger with US is a real possibly. I wonder what they are hearing?

 

[Iclubbabyseals]

I know Wall Street does not reward such behavior, but surely they will at least give them a little good will going forward. Such good will would not put U in the driver’s seat of any deal.

Sadly, Wall Street only knows profit, no matter how it is obtained. I don't mind as long as there is an minimally educated citizenry and enforced regulation to go along with it. Unfortunately the US has neither.

Look at how Wall Street looks unfavorably at Costco and Southwest, two leaders in their respective industries who actually respect their employees and don't treat them like "excess baggage".

Wall Street fawns over Wal-Mart, who, until they were publicly embarrassed, actually gave lessons to their employees how to take advantage of federal and state "entitlement" programs, because Wal-Mart offered no health care or retirement, basically using federal and state "aid" to supplement their "costs". This was in addition to Wal-Mart using the taxpayer funded State Department to negotiate, execute and enforce contracts with other countries.

Fortunately, a few intelligent executives actually see the damage done by such a fantasy "John Galtism" and therefore will keep Mr. Parker well away from any head office. I hope.

""There are two novels that can change a bookish fourteen-year old's life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs."

I am certain Mr. Parker was fourteen, once.

 

[Move2CLT]

And let's not forget how USAPA looks upon the west - as an afterthought. A group of rookies whose sole purpose is to subsidize the failed careers of the east.

Glass houses and stones ring a bell sealbeater?

 

[BoeingBoy]

Sadly, Wall Street only knows profit, no matter how it is obtained.

True for Wall Street, but it's only interested in buying/selling stock and packaging debt. Wall Street doesn't care whether that stock gets wiped out or debt cancelled in bankruptcy - it's not their money or worry. The actual creditors, who would have a say in bankruptcy, might have a different view of a company that tried to do the right thing by them as long as it could...

Jim

 

[jimntx]

I have a gut feeling DAL is not done yet, and will not sit idle leaving UAL as the biggest airline, and watching SWA proactively complete their own successful merger.

Unlike the postcard, would not wish you here. So sad we have such a bad situation ....that our best hope is to be broken up.

RR

If you are suggesting that DAL might be a bidder for a cleaned-up AMR, I don't think so. Buying AMR would join union groups (AMR and PMNWA) in 3 major categories. I doubt the next representation election would go the way DAL would want it to go. AA has almost 17,000 f/as on active status. Combined with the PMNWA f/as, they could easily out-vote the PMDAL f/as. And, you know that there would be another representation election. The same would more than likely be true for the pilots and the mechanics. Although with the pilots it would just be an issue of which union, not whether there would be a union or not.

 

[WorldTraveler]

If you are suggesting that DAL might be a bidder for a cleaned-up AMR, I don't think so. Buying AMR would join union groups (AMR and PMNWA) in 3 major categories. I doubt the next representation election would go the way DAL would want it to go. AA has almost 17,000 f/as on active status. Combined with the PMNWA f/as, they could easily out-vote the PMDAL f/as. And, you know that there would be another representation election. The same would more than likely be true for the pilots and the mechanics. Although with the pilots it would just be an issue of which union, not whether there would be a union or not.

in asset sales, employees are not necessarily part of the transaction... remember that Pan Am was basically carved up over a period of several years by DL and UA who both selectively hired the people they wanted.

again, I don't think AA is at the point of an asset auction but given the high value of AA's assets relative to its indebtedness, it is far from out of the question that there could be a bidding war for AA's assets with only the necessary employees brought over.
That principle applies in any merger.. and could apply if US were carved up as well.

Wall Street will seek out the best return on the investment - not really any different from the rest of us.
If the best return is selling AA off in pieces, that is what will happen. If accepting stock from another airline for part of the purchase price and then assuming debt that would otherwise be rejected, then that is what will happen.
The bottom line is that, up against other airlines and other investors, US will have a very hard time coming up with a winning bid. Other airlines have much higher market caps, better financials, and better relations with employees - all of which could make or break a deal.
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What looks good on a network presentation in the airline industry is rarely what actually happens.

based on airline history, there will likely be an enormous competitive response if/when AMR files for BK as competitors attempt to mortally wound them and convince the creditors that AA is too damaged to recover.. that is exactly what happened in the BK rounds of the early 2000s... as each carrier stepped into the BK ring, competitors started their attacks... the difference then is that most of the network industry was also wounded so they were not capable of doing much damage to each other... now AA is in the position of being one of the very few wounded players in the industry.
If AA is wounded bad enough in the early months of BK - when the company has the exclusive right to file a plan of reorg - then the likelihood of an asset sale grows significantly.

 

[wings396]

The real world shows that real people do go home from the dance without a partner and without ever having had a chance to dance with someone else; the real world is a whole lot more competitive than the niceties we were all taught in kindergarten.
.
The simple fact is that DL employees and their leader Grinstein had no problem fighting off US solely based on Parker’s stated intent to reduce thousands of jobs (largely DL jobs) and cut capacity; in light of the growing outcry that was going on in Washington for what AA did to TW, it was easy for DL employees to argue that Parker’s plans were nothing more than an attempt to shrink the airline industry to US’ benefit while cutting thousands of jobs and lots of air service. In contrast, the DL-NW was the closest thing to an end-to-end merger that could occur in the airline industry; there was very little overlap and history shows that, other than EAS and the cities served by turboprops, there has been little capacity cut from DL’s system, although a lot of connecting capacity has been moved between hubs.
.
A potential US acquisition of AA would involve a whole lot less overlap but there is still the potential for a lot of strategic questions when an airline the size of AA is acquired or mergers with any other carrier.
.
It is also very likely that AA employees will fight a US takeover attempt in the same way DL employees did and AA’s large presence in some of the largest states means AA and its people would likely have more influence in Washington than would US.
.
I agree that ruling out UA or DL as potential acquirers of AA’s assets is not out of the question, but the same could be said about other airlines. Wall Street and regulators both look at the track record of companies in handling mergers when asking if the next one would be handled like the last one.
DL has a lot of history with mergers and they have almost all gone quite well by industry standards. The CO-UA merger is so far producing no real concerns, although labor concerns are far from settled. Second tier (in size) players like AS or B6 could see huge strategic opportunities. No one can be ruled out to acquire AA either in its entirety – or for AA be carved up and sold off in pieces.
.
But the most likely scenario is still that AA will reorganize in BK and be given another chance. It is very unlikely that creditors will be convinced that a merger or asset sale is a better value for the creditors than a reorganized company. The real question is what shape AA will be in coming out and how long it can withstand the competitive assaults which will be very real.
Standing around waiting for AA to fail, expecting to pick up the pieces is a risky strategy. US and every other airline needs to figure out how to build a successful company based on the resources available to that company, not based on what they might get from someone else.
And you are absolutely correct that US' situation may boil over to the point where IT, not AA is carved up for everyone else's benefit.

Whenever the failed US takeover of DL talk surfaces, everyone leaves out a key factor. The NW merger was without a doubt in the works behind the scenes, and the last thing DL management wanted was US ruining their plans.

 

[WorldTraveler]

Whenever the failed US takeover of DL talk surfaces, everyone leaves out a key factor. The NW merger was without a doubt in the works behind the scenes, and the last thing DL management wanted was US ruining their plans.

that fact has indeed been noted... but whatever DL or Grinstein wanted to do for their own egos couldn't have happened if there weren't solid business reasons behind it.
The same will apply to the future of AA, US, and the rest of the airline industry as well no matter how unpleasant that is for some people to hear.