USA320Pilot
Veteran
- May 18, 2003
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Since the US Airways - United merger was terminated there has been continued news media speculation that the business partners would once again try to complete a corporate combination. David Bronner has publicly said on four occasions that he was interested in buying United assets if they became available and last month Dow Jones reported that former chief executive officer Dave Siegel rushed to get out of bankruptcy so US Airways could merge with United.
Separately, Siegel was very outspoken that industry consolidation will occur and that US Airways will be a part of that integration, but an open question is who will fly and operate the Arlington-based carriers assets post combination.
As the industry attempts to figure out how to evolve two interesting articles were published this week.
According to Dow Jones, the United Air Lines Creditors Committee in the bankruptcy case are seeking court permission to hire an outside consultant for an evaulation of the airline's board of directors, according to court documents.
"The committee respects the efforts of the individual members of UAL's current board," the group said. "Nevertheless, as the committee focuses on the future of UAL and its stakeholders, it must consider whether the board is ideally positioned for guiding UAL into the future." The creditors have asked Judge Eugene R. Wedoff of the U.S. Bankruptcy Court for the Northern District of Illinois for permission to hire Heidrick & Struggles International Inc to aid in the review. The matter has been slated for the airline's May 21 court hearing, Dow Jones said.
This creates the obvious question of if the Untied reorganization was proceeding on schedule and had the full support of the creditors than why are the creditors hiring an outside firm to evaluate the performance of the Board?
See Story
Separately, it appears that United is having more difficulty emerging from Chapter 11, with a major new hurdle t o overcome: skyrocketing fuel prices. The company has told the court and investors that the carrier will have more than $450 million additional fuel expense in 2004 than forecast, which obviously could jeopardize the loan guarantee application.
The severity of the fuel crisis was high lighted today in a column published by Reuters.
See Story
United’s troubles are deepening because the company asked the bankruptcy court to extend $1 billion in debtor-in-possession financing until the end of the year from mid-year, further indicating the company is having a challenge trying to emerge.
See Story
Thus, what could this mean to US Airways in its effort to restructure and survive, in one form or another?
Its unclear how this could evolve, but according to industry observers US Airways’ second quarter financial statement indicates there is more to the story.
Meanwhile today the USA Today reported that Federal officials have been lobbied more quietly on another sensitive topic: airline consolidation. Faced with the possibility of financial failure, US Airways has been building a case in Washington that an airline merger wouldn't be a bad thing.
"We've been very frank with regulators and legislators that consolidation is the inevitable next step," says US Airways executive Chris Chiames.
US Airways is in far worse shape than it was three years ago when Justice nixed its deal with United, citing the likelihood of higher fares and reduced competition. The airline hasn't made money since leaving bankruptcy protection last year. Its CEO and chief financial officer recently resigned, and the airline suggested in a securities filing this month that it might be headed back into Chapter 11.
In the case of US Airways, a prospective buyer could use the "failing firm" argument to win Justice's approval. That means the company being acquired can't survive on its own, and letting it disappear from the marketplace would be worse for consumers than a merger.
See Story
With the industry continuing to hold M&A discussions and US Airways’ new business plan similar in scope to America West Airlines, could the Arlington-based carrier be positioning it self to combine with America West? Would it make sense to integrate the only two carriers that have or are creating a hub-and-spoke/LCC business model? If true, the intent could be to create synergy and economies of scale between US Airways’ East Coast, Caribbean, and Transatlantic network with America West’s West Coast presence and then leverage the international breath of the Star Alliance, as a means to provide a revenue premium to the LCC’s cost strurcture. In light of United’s problems and the difficulty the business partners have had in integrating, could a US Airways – America West marriage be David Bronner’s new strategy?
If true, a continued open question remains: who will be US Airways’ eventual partner and who will be the surviving business enterprise?
Or could the chairman of the board decide it is no longer worth it to run an airline and decide that its better to liquidate the company, take the write off, and recover as much of RSA's investment as possible?
Respectfully,
USA320Pilot
Separately, Siegel was very outspoken that industry consolidation will occur and that US Airways will be a part of that integration, but an open question is who will fly and operate the Arlington-based carriers assets post combination.
As the industry attempts to figure out how to evolve two interesting articles were published this week.
According to Dow Jones, the United Air Lines Creditors Committee in the bankruptcy case are seeking court permission to hire an outside consultant for an evaulation of the airline's board of directors, according to court documents.
"The committee respects the efforts of the individual members of UAL's current board," the group said. "Nevertheless, as the committee focuses on the future of UAL and its stakeholders, it must consider whether the board is ideally positioned for guiding UAL into the future." The creditors have asked Judge Eugene R. Wedoff of the U.S. Bankruptcy Court for the Northern District of Illinois for permission to hire Heidrick & Struggles International Inc to aid in the review. The matter has been slated for the airline's May 21 court hearing, Dow Jones said.
This creates the obvious question of if the Untied reorganization was proceeding on schedule and had the full support of the creditors than why are the creditors hiring an outside firm to evaluate the performance of the Board?
See Story
Separately, it appears that United is having more difficulty emerging from Chapter 11, with a major new hurdle t o overcome: skyrocketing fuel prices. The company has told the court and investors that the carrier will have more than $450 million additional fuel expense in 2004 than forecast, which obviously could jeopardize the loan guarantee application.
The severity of the fuel crisis was high lighted today in a column published by Reuters.
See Story
United’s troubles are deepening because the company asked the bankruptcy court to extend $1 billion in debtor-in-possession financing until the end of the year from mid-year, further indicating the company is having a challenge trying to emerge.
See Story
Thus, what could this mean to US Airways in its effort to restructure and survive, in one form or another?
Its unclear how this could evolve, but according to industry observers US Airways’ second quarter financial statement indicates there is more to the story.
Meanwhile today the USA Today reported that Federal officials have been lobbied more quietly on another sensitive topic: airline consolidation. Faced with the possibility of financial failure, US Airways has been building a case in Washington that an airline merger wouldn't be a bad thing.
"We've been very frank with regulators and legislators that consolidation is the inevitable next step," says US Airways executive Chris Chiames.
US Airways is in far worse shape than it was three years ago when Justice nixed its deal with United, citing the likelihood of higher fares and reduced competition. The airline hasn't made money since leaving bankruptcy protection last year. Its CEO and chief financial officer recently resigned, and the airline suggested in a securities filing this month that it might be headed back into Chapter 11.
In the case of US Airways, a prospective buyer could use the "failing firm" argument to win Justice's approval. That means the company being acquired can't survive on its own, and letting it disappear from the marketplace would be worse for consumers than a merger.
See Story
With the industry continuing to hold M&A discussions and US Airways’ new business plan similar in scope to America West Airlines, could the Arlington-based carrier be positioning it self to combine with America West? Would it make sense to integrate the only two carriers that have or are creating a hub-and-spoke/LCC business model? If true, the intent could be to create synergy and economies of scale between US Airways’ East Coast, Caribbean, and Transatlantic network with America West’s West Coast presence and then leverage the international breath of the Star Alliance, as a means to provide a revenue premium to the LCC’s cost strurcture. In light of United’s problems and the difficulty the business partners have had in integrating, could a US Airways – America West marriage be David Bronner’s new strategy?
If true, a continued open question remains: who will be US Airways’ eventual partner and who will be the surviving business enterprise?
Or could the chairman of the board decide it is no longer worth it to run an airline and decide that its better to liquidate the company, take the write off, and recover as much of RSA's investment as possible?
Respectfully,
USA320Pilot
