Is USAirways hostile takeover Of AA for Real?

[PITbull]

That refrain is often heard - apparently while forgetting that the creditors are no more interested in watching their recovery be diminished to line AA CEO's pockets than they are for any other reason.
Horton and Co. work for the creditors; their role is to manage the enterprise to create the maximum value for the creditors.
But don't believe for a minute that the creditors are going to fatten anyone's wallet while short-changing themselves.

It is a good thing that AA execs are being forced to look at all kinds of options - and I suspect Horton really did not want to do that.... remember, there have been creditors and bondholders over the past several months that have pushed the idea.


Richard Anderson
As a matter of policy, we do not comment or speculate on transactions of that nature. I would just say that overall, one, at Delta we will continue to always control our destiny. And by pushing a lot of different opportunities and leverage across the business and, number two, global consolidation is good for the business model."

whatever that means

"Whatever that means"...means that it is a good business model to gobble up your competition through consolidation. In the airline industry, the smaller carriers will never be able to compete against these huge conglomerated airlines. That would be like putting a lemonaide stand in front of the Coca-Cola Corporation and trying to offer a beverage at a cheaper price.

Lose/lose situation for the flying public. If you want to fly to "anywhere" and/or take your family, you will have to empty out your bank account.
And as far as labor goes, its a lose/lose career...for at least the next decade or two, or until the government steps in.

 

[WorldTraveler]

If the airline industry was generating enormous profits because of the consolidation and capacity reductions that are taking place, then it would be reasonable to accuse the executives of gouging the public. Even based on this quarter's results - which exceeded analyst expectations for most carriers - airlines are not making money hand over fist even despite much tighter capacity than the industry has seen in a long time.

Few people understand that increased costs - including fuel - mean passenger fares have to increase which results in decreased demand. Consolidation has helped to create more expansive route systems but at the expense of much less depth in most markets outside of their hubs. Low fare carriers have taken a larger percentage of the market than they did a decade ago, but their margins are not significantly higher than the network carriers - ultra-low fare carriers excluded.

Labor is probably in the best position to make gains in the airline industry in a long time. The AA BK will hurt the upward movement of labor for a couple years but a healthier AA will be better able to compete and make money - which takes pressure off of its employees. UA eventually will have to pay its employees to integrate their systems - their pilots are getting restless. US employees need to honestly put alot more pressure on the company to resolve their situation. US doesn't address it because they have relative labor peace while paying very low wages.

Most experts expect that oil prices will remain at current levels or go not much higher for the next several years because there is actually an abundance of oil on the world market, including in the US and Canada where alot of new production is increasing supply. Saudia Arabia has stated and demonstrated that they are willing to pump oil in order to keep Iran from seeing prices high enough to help their economy.

The outlook for US airline companies is probably the best that it has been in a long time - and US airlines are likely to do much better than many of their global peers.

Labor at US airlines need to ensure they do not settle for BK wages; many airlines want labor to believe that is all they can afford.

BTW, I believe - may be wrong - that Anderson's competition about global consolidation is that DL will start looking at acquiring stakes in foreign airlines if they can't get what they need to expand their network here. Even with foreign ownership limits, a couple billion dollars would buy 25% of just about any public airline or airline group in the world. Given that US airlines are doing relatively well compared to their foreign peers - esp. in Europe - and DL's market cap is north of $9B and DL is paying down debt at the rate of better than $1B per year, a couple billion dollar investment is well within DL's capabilities - and UA's as well if they chose to follow.
DL has a seat on the board of both Gol and Aeromexico, airlines in which it holds only about 4%.

 

[PITbull]

I can understand your perspective. And you are right, DL will probably look to see who they can merge with on the foriegn front......but your dealing with airlines that are mostly owned by their governements across the globe. So, at best, I believe you will see more alliances, which has been going on for decades.

I don't agree about what the top execs get out of their airline in the form of compensation. Its performance based...and these characters get their pockets lined first...at the same time they tell their employees, "although it appears we are making money, we have to expect the unexpected and to handle that so that you can keep your jobs, blah, blah, blah,....

That's how that works.

I still am sticking to my crystal ball prediction....if airlines continue to consolidate, the government will evenutally have to step in to regulate the fares to protect the public.
With regulation and government oversight, the airlines will be able to be propt up by government funds when they run in to some issues with uncontrolled fuel prices...and I think we may see more stabilization in the industry when this does occur into the future.
I do remember that as an airline employee, I had a more stable contract with decent wages and work rules when the industry was under gov. regulation and oversight.
When deregulation occured, the airlines had a race to the bottom to control labor costs, because that was about all they could control, and that wipe out was done in bankruptcy, where labor had absolutely no protections and many lives were financially destroyed with no recovery even with jobs.

 

[Hopeful]

I do remember that as an airline employee, I had a more stable contract with decent wages and work rules when the industry was under gov. regulation and oversight.

How true. And airlines competed on service fiercely.

Until, of course, Alfred Kahn and Sen. "Er ah Er ah" Ted Kennedy decided it was time to take people off the Greyhound and Trailways buses with their back packs and put them on airplanes for price of a bus ticket.

The easiest and fastest way to compete with the likes of People Express was to decimate airline workers.

 

[PITbull]

How true. And airlines competed on service fiercely.

Until, of course, Alfred Kahn and Sen. "Er ah Er ah" Ted Kennedy decided it was time to take people off the Greyhound and Trailways buses with their back packs and put them on airplanes for price of a bus ticket.

The easiest and fastest way to compete with the likes of People Express was to decimate airline workers.

And that I remember very clearly...the start of all the low-grade, low-cost, trailways in the air People's Express Airline...with $19 fares one way being subsidized by the government. This was the start of the deregulation era...

and here is the results...current day.

 

[BlueStar]

Blue bird or blue star, You guys come from the same fold, bunch of newbies fishing around these waters. You haven't quite defined who YOU ARE...BUT I suspect I know. If I were AA unions' leadership and in BK, I would use whatever leverage I could create to "balance" the equation. BK is an unfair tool used by corporations to get a "free pass", protected from creditors and wipe their debts clean. This is the only means by which to take contract language that had been years negotiated in "good faith" and toss it out. The process in BK is a means by which the company can be "unfaithful" at the table. That is why there are laws on how many BK a corporation can use this type of tool. Unlike personal BK, an individual will suffer the consequences of a BK filing for a decade or more of poor or not credit worthy. On the flip side, when a corporation does it, and cleans their debt, new investors are waiting in line to get on board a debt free corporation that can prove it has a good business plan. Of course these debts that are wiped go to the taxpayers to be paid. Taxpayers never get a free pass. No one protects Labor contracts in this arena except labor. They have to muster up and create what works to give them some leverage against their managment WANTS vs. need, and the judges gavel.

Blue Star If you knew who I was, I think you would be much nicer.

...I'm friendly to United States Treasury, the United States Airline industry, all employees (including management and non-union workers) and the UCC...

All this says is that you pay your taxes. Ok.

Could be from the NLRB to see what's up and what labor is thinking. Don't know, don't care.

I think we got off on foot.

A September 2008 valuation suggusted over 1 Billion dollars worth of net present savings for the US Airline industry and 431 Million dollars of that (about 40%) for AMR alone. By my estimate the treasury will save a 9 figure amount annually on as 8-10 Billion dollars worth of “junk rated” tax-exempt private activity airport specical facility bonds through this structure as they will receive an investment grade rating in one of the lowest interest environments this last 12 months has seen in over 40 years.

Here is the website...
http://bluestarpatents.com/

The complaint writes well, IMO, and is probably where intereseted parties should start. The website also has several other relevant links.

From wikipedia:
https://en.wikipedia...ning_Agreements

11 U.S.C. § 1113, “Rejection of Collective Bargaining Agreements,” codifies under what circumstances collective bargaining agreements may be rejected in a Chapter 11 Bankruptcy. When a company seeks to reject or modify a collective bargaining agreement under Chapter 11 of the U.S. Bankruptcy Code, Bankruptcy Code §1113, entitled Rejection of Collective Bargaining Agreements, clarifies the circumstances under which such agreements may be rejected. Section 1113( B) and © generally require the following steps:

• The debtor must make a proposal to the union to modify the collective bargaining agreement anytime after filing a petition and before an application seeking rejection of the agreement.
• The proposal must be based on the most complete and reliable information available at the time of the proposal.
• The proposed modifications in employees' benefits and protections are those necessary to permit the reorganization of the debtor.
• The proposed modifications must assure that all creditors, the debtor and all of the affected parties are treated fairly and equitably.
• The debtor must provide the union with such relevant information as is necessary to evaluate the proposal.
• The debtor must meet at reasonable times with the union between the time of the making of the proposal and the hearing on the application to reject the collective bargaining agreement.
• The debtor must confer in good faith with the union in attempting to reach mutually satisfactory modifications of the agreement.
• The union must have refused to accept the debtor's proposal without good cause.

The balance of equities clearly favors the rejection of the collective bargaining agreement.

 

[WorldTraveler]

Pit,
actually the majority of the world's largest airlines are not government owned. Aviation is still highly nationalistic but most governments have decided they cannot continue to subsidize and laws are moving in that direction.

I haven't ever said I find any justification for the gap between executive and frontline worker salaries - or that management should not participate in the cuts that frontline people take.
I have said that the bonuses for mgmt personnel amount to a fraction of what has been asked for (or taken from) frontline employee groups.
Doesn't justify it by any means. Cutting mgmt salaries won't solve the problem from a financial standpoint

What does provide hope for frontline personnel is when companies are profitable. Still doesn't mean that labor WILL benefit - but there is far more chance they can get something if the company is profitable than if it is losing money.

I still repeat that there should be every reason that labor at the US mainline carriers should begin to see pay raises over the next few years - and they need to push for it.

 

[PITbull]

From wikipedia:
https://en.wikipedia...ning_Agreements

You would be surprised how many times I've read this.

 

[BlueStar]

You would be surprised how many times I've read this.

So then you finished the complaint?

How then can they abbrogate union contracts?

 

[700UW]

They can and it happened at US and NW.

 

[BlueStar]

They can and it happened at US and NW.

Did you read the complaint?

Skadden Arps is a Wall Street firm, BTW.

P.S. - I sent you a tell but you seemed to be blocked?

 

[FWAAA]

So then you finished the complaint?

How then can they abbrogate union contracts?

I looked at your website but the complaint doesn't have anything to do with abrogration.

How can AA abrogate union contracts? Exactly the same way as NW did to its flight attendants.

 

[BlueStar]

I looked at your website but which complaint do you think is relevant? The one about antitrust or the one about patents? Neither one looked relevant to me.

There is only one complaint. Did you read it?

 

[700UW]

http://www.bloomberg.com/news/2012-07-26/amr-bond-ascension-points-to-us-airways-deal-corporate-finance.html

 

[WorldTraveler]

here is the reason, despite the headlines and first paragraph:

"Much of the increase in the convertible bonds is due to American’s push to freeze rather than terminate its pension plans, which removes a potential claim on assets, according to Mark Streeter, an analyst at JPMorgan Chase & Co. American’s efforts to cut costs by renegotiating union contracts have gone better than expected as well, he said."