Industry Consolidation?

[USA320Pilot]

Today The US Airways Board of Directors approved a compensation package for President and Chief Executive Officer Bruce Lakefield that was designed to be in line with CEO compensation at low-cost carriers Air Tran, America West, JetBlue and Southwest. Lakefield's base salary will be $425,000, which is the median base salary of the CEOs at AirTran, America West, JetBlue and Southwest.

He will not have an employment agreement and will be an "at will" employee serving at the pleasure of the Board of Directors. However, in the event of a change in control of the company and he is terminated, Lakefield would be eligible for the equivalent of three years base salary and bonus.

Meanwhile, what I find interesting is that USA Today recently 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.

If US Airways was not going to enter into a corporate transaction than why would company officials tell the news media they're in merger discussions with regulators and legislators?

Regards,

USA320Pilot

 

[USFlyer]

You really like to repeat the same message over and over.

(Keep posting, though, as some of us honestly like to read alternative viewpoints.)

 

[funguy2]

Meanwhile, what I find interesting is that USA Today recently 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.

If US Airways was not going to enter into a corporate transaction than why would company officials tell the news media they're in merger discussions with regulators and legislators?

Regards,

USA320Pilot

The salary information is interesting. I guess Lakefield gets an early termination bonus (i.e. bonus for doing a bad job) just like Siegel, Cohen, and the others. I think that is a shame. The BOD needs to reward positive performance, not negative performance. The BOD missed this opportunity to change that.

How many times are you going to repeat paragraph one above? We know you find this article from USA Today very interesting, as this is the FIFTH time you have quoted it in this thread (see posts on pages 1,5,6, and 7). The fact that you repeat it so much doesn't make it any more or less true, any more or less substantial.

Have you ever noticed that when a merger is about to occur, and the rumor mill gets wind of it, the company has no comment. Companies regualarly have no comment on these types of discussions. Since companies have "no comment" up until the moment before they make their official announcement, I do not take your logic in paragraph two above as valid. Here's why:

When companies are actively discussing a merger, they have no comment. So the opposite is likely also true, that is, when the company can comment, that means it is probably not in any active discussions.

Maybe the company is telling the media that it is in discussions with other companies so that when Arpey or Gristein or Tilton reads this, they think, "Well, I'm not talking to them... So who is? Maybe I should try to beat whoever it is to the punch! Let's go buy US Airways..."

 

[USA320Pilot]

Funguy2:

Guess what, the company told ALPA representatives that it intends to be involved in M&A activity because it's the next logical step.

Regards,

USA320Pilot

 

[usairways_vote_NO]

One part that is left out of all these fantasy scenarios is the question of how can you trust a company doing something they say when you can't even trust them to abide by legally binding contracts made with labor groups? (re: Bonners comments regarding acquisitions IF you give up such and such)

Why is it that certain posters cut and plaster (more fitting then paste in this case) all these stories (or pastial plasters) over and over and over again then twist them to their own selfish agenda?

I have never read such whining in all my life from one certain poster, my God let people vote their own conscience and stop trying to manipulate them. I honestly think that if anyone is influenced by the posts it is negative to the way you want them to be influenced.

Oh course someone could be using reverse psychology?

 

[funguy2]

USA320Pilot:

Has management disclosed who they are in discussions with to ALPA?

I understand that US Airways management hopes the company is acquired. Hell, if the company is acquired, that probably comes with a $3mil termination notice for Lakefield now... So I am sure he's working on it. That doesn't mean that there is a buyer out there... There must be two parties involved for M&A activity. Its that simple. Thus far, there is no reliable information that a second party is out there. Does that mean it won't happen? No it doesn't. An acquisition is possible, and they tend to be surprises (i.e. AA-TWA).

Are you interested in my hypothetical 1973 Ford Pinto? I can place full-page ads in the New York Times trying to sell my Pinto, but if nobody wants to buy my Pinto, I am out of luck. My opinion is that is the same position that US Airways finds itself in... Trying to sell itself, but nobody's interested. At least not today... Could change tomorrow.

 

[mweiss]

Lakefield's base salary will be $425,000, which is the median base salary of the CEOs at AirTran, America West, JetBlue and Southwest.

"Median" is an interesting word to use here. I would have expected the mean base salary. So does anyone happen to have at their fingertips the CEO salaries at those four airlines?

Second question about Lakefield's compensation. What are the bonus targets and amounts? It's all well and good to have a base salary in line with the others, but if the bonuses are tied to softball targets, they're effectively part of the base salary. Softball targets became a standard part of the compensation packages when a luxury tax was instituted on all salaries above $1M about a decade ago. Contrary to the intent of the law, corporate executive compensation shot up afterward, but it was no longer in the base salary.

 

[funguy2]

mweiss... good catch on the word median. I thought the same thing, but then I thought that it was close enough to mean. The median in this case would be the average of the two in the middle, right? Since there is an even number?

I seem to recall that America West's CEO, Doug Parker, was around $400mil... Southwest's CEO, Jim Parker, was around $350mil, and JetBlue's Neeleman was around $250mil. I am not sure if those are accurate today. I don't recall ever seeing a number floated around for Joe Leonard of AirTran.

 

[ClueByFour]

If US Airways was not going to enter into a corporate transaction than why would company officials tell the news media they're in merger discussions with regulators and legislators?

You mean like talking to regulators and legislators about saving the ALPA pension? How'd that go?

Or getting beyond perimeter slots at DCA and LGA from these legislators? How's that going?

Or getting the DOJ to allow the first merger attempt? Did not go so well.

Or publically claiming (in Chiames case) that the Airbus overhaul will stay in house?

Or claiming that two rounds of concessions was enough? How did that turn out?

See, it matters not what US management says they are doing. They have a huge track record of doing nothing (or, exactly what they are saying they won't be doing).

Besides which, as somebody said on these boards the other day: If you paint your two room shack in the middle of a cornfield and price it at $1.7 million, that does not mean there are folks lined up around the block to buy it.

 

[700UW]

Good for you Clue, give him hell!

 

[USA320Pilot]

Clue:

But, RSA has the money if the choose.

Regards,

USA320Pilot

 

[funguy2]

As we (as a group) have discussed numerous times before, thats a big IF

 

[Busdrvr]

IF THEY CHOOSE!!

 

[oldiebutgoody]

Funguy2:

Guess what, the company told ALPA representatives that it intends to be involved in M&A activity because it's the next logical step.

Regards,

USA320Pilot

I see that the company is seriously after the scope and successor rights clauses in the labor contracts, as well as trying to reduce the seniority of the labor groups (seems sort of silly, I mean you've been here a certain length of time, how can they change that?). Sounds like they may WANT some sort of merger, and they're gonna try to screw the employees to make it happen. Any groups that allow this are plainly stupid! You listening ALPA? :blink:

 

[funguy2]

Oldiebutgoodie:

I am not denying that management may be trying to dress up the company for sale again... That seems abundently clear...

The problem is who is going to be the acquiring entity, assuming the sale is the whole company. The list:

AMR: Maybe, but they have plenty of their own problems right now
CAL: Unlikely - too much overlap at NYC
DAL: Unlikely - won't pass DOJ
NWA: Maybe, especially if PIT is out of the way.
UAL: Unlikely in BK. Maybe after BK

LUV: Unlikely - Southwest will protect their culture/way of doing business
JBLU: Unlikely - very risky for a company of its size... Plus they have lots of growth on tap
AirTran: Same as JetBlue
AWA: Unlikely - they have an ATSB loan to pay, and not enough cash for a merger, too risky
FRNT: Too small

Mesa/Orenstein: Possible - might save his Express investment + Orenstein seems to want to run a major (i.e. his plan to fly 737's, investment in U before BK, etc).
Virgin/Branson: Possible with the right foreign ownership laws and financial backing/US partner.

Now, in my opinion, the most possible acqirers (Mesa and Virgin) are also the most far fetched, or difficult to see proceding. That is my essential issue, besides the CASM issue, with why US Airways is unlikely to be acquired.

However, in a liquidation/fragmentation scenario, I can see lots of possibilities in terms of who wants/gets what part of US Airways:

PHL - NWA, AWA, AirTran
PIT - AWA, AirTran
LGA/DCA/Shuttle/Slots - almost anyone could make use of them
CLT - NWA, CAL, UAL, AMR, AWA
WO'eds - could be a quick acquisition by anyone for a certificate of quick regional feed...