Is USAirways hostile takeover Of AA for Real?

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You better check your information with the USAirways Passengers Service Group

And while you’re at it check your DL and their efforts to have as few fulltime jobs with benefits as possible
I didn't say that US employees are below average in every category and I am also aware that DL has eroded the potential for a career for many airport type jobs and have acknowledged as much.
 
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US Airways & American: Another shafting?

A new report warns that forming what would be the nation’s largest airline (some say even the world’s largest) could reduce competition and choice, create monopolies at key airports (while, we add, possibly abandoning others) and jack up fares.

Oviously, I'm not the only one warning the public that a merger of this magnitude will reduce competion and choice creating monpolies and increasing fares to infinity...according to the Pittsburgh Tribune:


http://triblive.com/...cy-court-debunk
 
Jim, QQ only operated about 240 flights a day in Sept 1998, the year prior to being bought by AA. They didn't grow that much when AA took ownership -- about 250 flights in summer 1999.

Despite their name, they only operated 29 departures from RNO. They also had 27 departures from SJC, 32 from LAX, and ~17 flights each at LAS and SNA.

Your point is taken that the city lost the nonstop service they had with QQ's hublet, but the airport had never seen more than about 40 or 50 flights a day at the peak of QQ's operation.
No response to show how AA has improved service to STL over what TWA offered? I'm shocked. Though, I can answer that. AA has provided the opportunity to WN to increase service for STL residents immensely. They just don't have the non-stops to Europe and Tel Aviv anymore. What was the problem with AA and the Israeli government? Something about closing down the operation without paying the Israeli employees the legally required severance pay? Surely, AA wouldn't screw over employees, now would they?
 
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WT,

This report below is a lengthy read. If you are able to read this, what would be your take (after reading my posts above on re-regulation) if there are only three major carriers left in the U.S.?


More in this "white paper" report regarding anti-trust issues between AA and US Airways:


The Proposed Merger of US Airways and American Airlines:
The Rush to Closed Airline Systems
August 8, 2012
Diana L. Moss and Kevin Mitchell
1
Executive Summary
Should US Airways make a bid for American Airlines, currently in bankruptcy
proceedings, the deal could present a conundrum for antitrust authorities. The transaction
would create the largest domestic airline, reducing the number of legacy mega-carriers to
three – Delta Air Lines (Delta), United Continental, and US Airways-American Airlines
(US Airways-American). This consolidation would occur against an industry backdrop
marked by a dwindling fringe of low-cost carriers (LCCs) and growing questions as to
whether legacy look-alike Southwest Airlines-AirTran Airways (Southwest) exerts any
significant competitive discipline in the industry. The merger could therefore hasten a
troubling metamorphosis of the domestic airline industry from one in which hub airports
were designed to accommodate multiple, competing airlines to a few large, closed
systems that are virtually impermeable to competition and create a hostile environment in
which LCCs and regional airlines have difficulty thriving and expanding


http://www.antitrust...e Paper_8-7.pdf
 
WT,

This report below is a lengthy read. If you are able to read this, what would be your take (after reading my posts above on re-regulation) if there are only three major carriers left in the U.S.?


More in this "white paper" report regarding anti-trust issues between AA and US Airways:


The Proposed Merger of US Airways and American Airlines:
The Rush to Closed Airline Systems
August 8, 2012
Diana L. Moss and Kevin Mitchell
1
Executive Summary
Should US Airways make a bid for American Airlines, currently in bankruptcy
proceedings, the deal could present a conundrum for antitrust authorities. The transaction
would create the largest domestic airline, reducing the number of legacy mega-carriers to
three – Delta Air Lines (Delta), United Continental, and US Airways-American Airlines
(US Airways-American). This consolidation would occur against an industry backdrop
marked by a dwindling fringe of low-cost carriers (LCCs) and growing questions as to
whether legacy look-alike Southwest Airlines-AirTran Airways (Southwest) exerts any
significant competitive discipline in the industry. The merger could therefore hasten a
troubling metamorphosis of the domestic airline industry from one in which hub airports
were designed to accommodate multiple, competing airlines to a few large, closed
systems that are virtually impermeable to competition and create a hostile environment in
which LCCs and regional airlines have difficulty thriving and expanding


http://www.antitrust...e Paper_8-7.pdf
I took enough of a read through it to know there are major issues in the conclusions they came to:
1. They basically looked at hub to hub route consolidation in the DL and UA mergers found a majority of the UA routes and half of the DL hub to hub routes resulted in higher fares, so they came to the conclusion consolidation produced bad results. What about the half of DL hub to hub routes (and they list DL and UA hub fares as a whole too) did not increase faster than the average? They found a little bit of what they wanted - but ignored the other half that didn't fit their plan in order to argue that consolidation produced something undesirable.
2. Half of the markets that involved CO-UA are to/from DEN which has had absolutely brutal and unsustainable competition. Just like every other market, consumer advocates want to point out the higher price that consumers have had to pay while being unable to recognize that fares have been unsustainably low. Of course, those analysts don't have access to P&L data for DEN but anyone who understands the industry and can look at DEN fares relative to the rest of the US knows that airlines are not making money at DEN. Airlines couldn't make money in most of the US for much of the past 35 years on a sustained basis either but that doesn't mean that fares should stay where they were just because consumers will be hurt if fares go up.
3. Small communities do lose choices - as do large city consumers - but that is the nature of consoliation. The only way you can argue that losing choice is bad is if airlines are abusing their pricing power in markets.. and I'm not sure there is any evidence that is happening, even in markets where fares are well above industry average. As long as other competitors can enter a market, there is not a barrier to entry. Airlines have always had some of the most mobile productioin assets in any transportation industry. If there is a market that can be sustained, other airlines will find it.
4. It is true that the WN/FL combination may eliminate alot of the pricing competitiveness that existed thruout the US. WN was smart enough to know that their historic business model was no longer going to work because of costs that are looking more and more like legacy airlines. They bought out their competition... hardly a new concept in business even if it isn't one that any of us really is in the best interests of the majority of America. The difference between WN and the rest of the legacies is that WN recognized its challenges and has moved to correct it before immense damage was done to WN's finances- which the network/legacy airlines did not do in enough time.

Sorry, but I don't see any reason that the DOT or DOJ would block AA-US on antitrust or consumer grounds.

The issue of allowing AA-US is in the hands of the employees and creditors who have to decide whether Parker can deliver the benefits he says will come from the merger, including to the employees.
Few of us are at all confident he can meet his promises or for the creditors provide an outcome for AMR that is superior to other options, including potentially an AA standalone model.

What seems certain is that US' pressure on AA will result in AA being forced into doing some deal that they might not otherwise have chosen to do - with the result that the resulting company - AA standalone or any combination except perhaps an asset sale - will not be as well eqiupped to compete as if they had not been rushed into making decisions.
And sadly AA people are likely to pay at least part of the price for being under that pressure.
 
US Airways & American: Another shafting?

A new report warns that forming what would be the nation’s largest airline (some say even the world’s largest) could reduce competition and choice, create monopolies at key airports (while, we add, possibly abandoning others) and jack up fares.

Oviously, I'm not the only one warning the public that a merger of this magnitude will reduce competion and choice creating monpolies and increasing fares to infinity...according to the Pittsburgh Tribune:


http://triblive.com/...cy-court-debunk


The employees have been getting shafted for years to sustain 20 year old air fares, now it's time to put an end to it. Where are all of those advocates when it comes to nearly everything else the public has to buy?
Think that the UAW guys will work for $12 an hour so I can buy a new car for 7k? Hell, I just shelled out $80 an hour in labor charges to get my car repaired....
 
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I took enough of a read through it to know there are major issues in the conclusions they came to:
1. They basically looked at hub to hub route consolidation in the DL and UA mergers found a majority of the UA routes and half of the DL hub to hub routes resulted in higher fares, so they came to the conclusion consolidation produced bad results. What about the half of DL hub to hub routes (and they list DL and UA hub fares as a whole too) did not increase faster than the average? They found a little bit of what they wanted - but ignored the other half that didn't fit their plan in order to argue that consolidation produced something undesirable.
2. Half of the markets that involved CO-UA are to/from DEN which has had absolutely brutal and unsustainable competition. Just like every other market, consumer advocates want to point out the higher price that consumers have had to pay while being unable to recognize that fares have been unsustainably low. Of course, those analysts don't have access to P&L data for DEN but anyone who understands the industry and can look at DEN fares relative to the rest of the US knows that airlines are not making money at DEN. Airlines couldn't make money in most of the US for much of the past 35 years on a sustained basis either but that doesn't mean that fares should stay where they were just because consumers will be hurt if fares go up.
3. Small communities do lose choices - as do large city consumers - but that is the nature of consoliation. The only way you can argue that losing choice is bad is if airlines are abusing their pricing power in markets.. and I'm not sure there is any evidence that is happening, even in markets where fares are well above industry average. As long as other competitors can enter a market, there is not a barrier to entry. Airlines have always had some of the most mobile productioin assets in any transportation industry. If there is a market that can be sustained, other airlines will find it.
4. It is true that the WN/FL combination may eliminate alot of the pricing competitiveness that existed thruout the US. WN was smart enough to know that their historic business model was no longer going to work because of costs that are looking more and more like legacy airlines. They bought out their competition... hardly a new concept in business even if it isn't one that any of us really is in the best interests of the majority of America. The difference between WN and the rest of the legacies is that WN recognized its challenges and has moved to correct it before immense damage was done to WN's finances- which the network/legacy airlines did not do in enough time.

Sorry, but I don't see any reason that the DOT or DOJ would block AA-US on antitrust or consumer grounds.


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I don't agree.

It's not all about what is good for the investor, or the employees. At the end of this road (consolidation), and it surely will come, it won't be good for the flying public, or the industry employees, or the industry as a whole. Just good, for a short while for those executives who will put those cost savings and profits in their pockets, and then the hell with everything else. Who cares.

The problem with many many many many people I run into is that they lack hindsight, insight, and foresight on most issues that have a direct or indirect impact on society. They can't really develop their opinions for discussion. Folks consider discussion that is deep, an argument, therefore, they would rather watch sports, or have discussions that are mainly general and superficial. They pretty much regurgitate someone else's views, and don't know the where or how, or the why. They just can't see down that dark road what things will look like by making certain decisions now. Their brains just don't function that way...and that's sad, indeed. They allow others to make decsions, and if those making them sound really really good in their presentation, they're for it.

Parker can make "pie in the sky" promises to people who are desperate to be "saved", but the guy has no history of a sound business plan that offers any sustained performance. And, nobody really cares if its real or not...I believe that the DOT/DOJ are much smarter than that...and look at the "consolidation" mre objectively; not having any real stake on who can make a profit, but rather, what is the...
greater good for the public and industry .
 
The problem with many many many many people I run into is that they lack hindsight, insight, and foresight on most issues that have a direct or indirect impact on society. They can't really develop their opinions for discussion. Folks consider discussion that is deep, an argument, therefore, they would rather watch sports, or have discussions that are mainly general and superficial. They pretty much regurgitate someone else's views, and don't know the where or how, or the why. They just can't see down that dark road what things will look like by making certain decisions now. Their brains just don't function that way...and that's sad, indeed. They allow others to make decsions, and if those making them sound really really good in their presentation, they're for it.
I agree... but the reality is that the vast majority of humanity doesn't think and in some ways it is worse in a democracy where everyone is free to express their ideas.

But there are plenty of intelligent people in the world who genuinely do have the perspective and knowledge to look at the world - but the simple fact is that none of us can be experts in more than one or at most two things in life.
We rely on others to help fill in the missing pieces that we cannot understand.

I value these boards and many of the people who participate in them because it provides the opportunity to connect w/ people who are thinkers. We have different perspectives but the number of people who have above average knowledge of the industry and the issues facing their company and their jobs specificially are above average compared to other airline employees or customers.


I know the business of aviation quite well but there are people on this board who know far more about certain aspects of the business that I will ever know - and they also have current insight at multiple points in the industry which I want to know and hear.


There are smart people on this board. I wouldn't underestimate the influence that anyone has here... and I would dare say that recognizing the contribution others make is the foundation from which they will accept or at least listen to what you say.


I don't agree.

It's not all about what is good for the investor, or the employees. At the end of this road (consolidation), and it surely will come, it won't be good for the flying public, or the industry employees, or the industry as a whole. Just good, for a short while for those executives who will put those cost savings and profits in their pockets, and then the hell with everything else. Who cares.
The measure of whether consolidation is good for the consumer or not is whether airlines become far more profitable than average American companies, whether airline employees and executives become far better compensated than other industries, and whether service deteriorates as a result of the consolidated marketplace.

So far, none of those factors is anywhere close to happening and based on some of the structural issues which airlines have to face, I doubt if they ever will happen.

While it is nice to think that executives of a public company - of which all US major airlines are - can benefit dramatically is just not even close to reality.
The top executives at any of the US airlines combined do not make more than a fraction of a percent of the total costs of that airline. The vast majority of even management are people who could easily make more money elsewhere - as could the executives themselves.

I'm not defending their salaries; I'm just saying what they make won't change the finances of the company one iota.

Parker can make "pie in the sky" promises to people who are desperate to be "saved", but the guy has no history of a sound business plan that offers any sustained performance. And, nobody really cares if its real or not...I believe that the DOT/DOJ are much smarter than that...and look at the "consolidation" mre objectively; not having any real stake on who can make a profit, but rather, what is the...
greater good for the public and industry .
The DOT/DOJ will measure a potential AA/US merger on the basis of what antitrust rules and the standards that have been applied to other recent mergers - that is the basis of case law, of which antitrust regulation is related.

We don't disagree that it will be essentially AA employees who will have to decide if they are really going to obtain their best outcome from a US merger, an AA standalone plan, or something else... and for the most part the media has basically considered the only options are one of the first two. I submit that there are alot of other valid options that AA's creditors and employees need to consider.
 
No response to show how AA has improved service to STL over what TWA offered? I'm shocked. Though, I can answer that. AA has provided the opportunity to WN to increase service for STL residents immensely. They just don't have the non-stops to Europe and Tel Aviv anymore. What was the problem with AA and the Israeli government? Something about closing down the operation without paying the Israeli employees the legally required severance pay? Surely, AA wouldn't screw over employees, now would they?

Jim, I've written probably about a dozen times over the past 15 years on how grossly overserved STL was during the days of the TW hub. I was writing about it long before the acquisition. There's no excuse for a city half the size of BOS having twice as many departing seats per day. It was > 70% connecting traffic, and Lord only knows how much of that was driven solely by Karibu and CheapTickets.com, which bled TW dry.

TLV?... Not much to say there that hasn't been said a dozen or two times.... TW pulled out before the acquisition, so take it up with the TW estate...
 
Here's your comparison, Jim. I plugged in some 2003 vs. 2012 frequencies to compare.

Short story... WN went up from 61 to 88 flights.

What you're not seeing here is that in 1999, WN was running 89 flights a day at STL. They contracted post 9/11 and AATW. If anything, they've just recovered to the point they were at 10 years ago.

It also appears that STL hasn't exactly missed the other 250 flights a day.


Code:
    WN 2012                AA 2012                    WN 2003                    AA 2003        
    Orig    Dest    Freq        Orig    Dest    Freq            Orig    Dest    Freq            Orig    Dest    Freq
    STL    ABQ    1        -                    STL    ABQ    2            STL    ABQ    2
    STL    BHM    1        -                    STL    BHM    1            -        
*    STL    BNA    2        -                    -                    STL    BNA    10
*    STL    BOS    2        -                    -                    STL    BOS    4
    STL    BWI    5        STL    DCA    3            STL    BWI    3            STL    BWI    5
    -                -                    STL    CLE    3            STL    CLE    5
    STL    CMH    2        -                    STL    CMH    2            STL    CMH    4
    STL    DAL    9        STL    DFW    9            -                    STL    DFW    9
*    STL    DEN    4        -                    -                    STL    DEN    4
    STL    DTW    2        -                    STL    DTW    3            STL    DTW    5
    STL    EWR    2        STL    LGA    4                                STL    EWR    5
    STL    FLL    1        STL    MIA    2                                STL    FLL    3
    STL    HOU    4        -                    STL    HOU    6            STL    IAH    3
    STL    LAS    4        -                    STL    LAS    1            STL    LAS    4
    STL    LAX    2        STL    LAX    3                                STL    LAX    6
    STL    LIT    2        -                    STL    LIT    3            STL    LIT    3
    STL    MCI    5        -                    STL    MCI    6            STL    MCI    9
    STL    MCO    4        -                    STL    MCO    3            STL    MCO    4
    STL    MDW    10        STL    ORD    9            STL    MDW    10            STL    ORD    12
*    STL    MKE    2        -                                        STL    MKE    8
*    STL    MSP    3        -                                        STL    MSP    6
*    STL    MSY    1        -                                        STL    MSY    4
    STL    OKC    2        -                    STL    OKC    2            STL    OKC    5
    STL    OMA    3        -                    STL    OMA    2            STL    OMA    6
*    STL    PHL    2        -                                        STL    PHL    5
    STL    PHX    3        -                    STL    PHX    4            STL    PHX    3
*    STL    RDU    1        -                                        STL    RDU    3
*    STL    RSW    1        -                                        STL    RSW    1
*    STL    SAN    1        -                                        STL    SAN    3
    STL    SDF    2        -                    STL    SDF    4            STL    SDF    5
*    STL    SEA    1        -                    -                    STL    SEA    5
    -                -                    STL    SLC    2            STL    SLC    3
=    STL    TPA    2        -                    STL    TPA    1            STL    TPA    3
=    STL    TUL    2        -                    STL    TUL    3            STL    TUL    5

            88                30                    61                    162
                                                              OTHER 259
                                                                    421
 
So the point is that WN has added a lot fewer flights to STL than AA had?

WN still has managed to take over STL as the dominant local airline as AA has walked away from the market. The amount of connecting capacity that AA had is immaterial; who controls the local market is what matters.

TW in its final years discounted heavily but STL was a viable hub when TW was still a viable airline. Many large hubs, esp. monopoly hubs, have around 70% connecting traffic, including DFW.

Is DFW too large?

The fact is that TW did not command premium revenues systemwide and thus STL was not profitable. STL did not become unprofitable because it was too large. It became unprofitable because the hub was built on low fare traffic. AA killed STL because it had to kill connecting traffic somewhere on its network and it made more sense to do it in STL than in ORD or DFW, markets that were key to AA's historic network (as was STL at one time).


TLV won't make or break an airline - but it is a key market esp. from NYC. Given that TLV is just one more market that AA can't serve while the other 3 network carriers can makes it that much more difficult for AA to compete.
 
WN didn't take over as the dominant local airline -- they just happened to be in second place when AA forfeited.

They're still operating at about the same size they were prior to 9/11, and if you look at where they've grown since 2003, it is primarily into markets they didn't even serve in 2003 (e.g. BOS, DEN, MKE, MSP, PHL).

To your question "Is DFW too large?" --- absolutely. I've been saying that for the past ten years, too. AA could probably cut it back by about 20% and likely not feel the impact once you consider the expenses involved in running that extra 20%. It would certainly run more effectively, and they'd be able to eliminate at least one terminal in the process.

What's more likely is they'll try to pull ASMs out of the market and keep the frequencies...
 
WN most definitely carries the largest number of STL passengers and revenue among any carriers. AA had the honor at one time but walked away and WN took over.

The notion that STL was bound to become WN territory just because AA pulled down the hub is not supported by evidence from other carriers where the hub has been pulled down but the former hub owner still is the dominant carrier in the local market.

AA isn't the largest revenue carrier in any of its four post-deregulation hubs that it has closed.

It is precisely because AA cannot hold onto its revenue that carriers like DL, UA, and WN are making it increasingly obvious that other carriers could fill in the gaps should AA fail, sorry to say

AA at DFW is the 2nd largest hub in the US and likely quite profitable, or has the potential to be esp. given new aircraft. Why would you pull down a profitable operation that is AA's largest operation and forms the backbone of AA's east-west network?

More significantly, even if you reduce frequencies and upgauge, other hubs including UA's DEN/IAH pair provide enough frequency to surpass AA's role as the dominant airline in the southwest.
Further, pulling down DFW only makes it much easier for WN to set up shop at DAL - which does have very definite capacity limits.
Finally, increased aircraft size probably would reduce unit costs, esp. if you factor in a shift from RJs to AA mainline as DL is doing, but what are you going to do with all of the people whose jobs you are ready to eliminate?

The answer is for DFW to remain a large, viable hub - the largest in the southwest - and for it to operate as part of a viable company that can be competitive w/ whatever competitors decide to show up for the party.
 
US Airways & American: Another shafting?

A new report warns that forming what would be the nation’s largest airline (some say even the world’s largest) could reduce competition and choice, create monopolies at key airports (while, we add, possibly abandoning others) and jack up fares.

Oviously, I'm not the only one warning the public that a merger of this magnitude will reduce competion and choice creating monpolies and increasing fares to infinity...according to the Pittsburgh Tribune:


http://triblive.com/...cy-court-debunk


Whatever , we want jobs and security . Pit you left we are here. It's about damn time this industry rights itself. One would think you would want the best for your former co workers. Wrong!!! You are soooo bitter for someone who does not work here.
 
The notion that STL was bound to become WN territory just because AA pulled down the hub is not supported by evidence from other carriers where the hub has been pulled down but the former hub owner still is the dominant carrier in the local market.

Which other hubs have been pulled down where WN had a significant presence?

I can think of four in total -- LAS (HP), STL (AA), MDW (TZ) and MKE (YX/F9).

AA isn't the largest revenue carrier in any of its four post-deregulation hubs that it has closed.

Your claim that DL kept their dominant status in CVG is a great soundbyte, but c'mon... right now, Ohio has the trifecta of failed hubs with DAY, CMH, and now CVG. When If CO UA finally decides to pull back at CLE, the state will go down in history as having lost every post-deregulation hub it ever had.

Look at the long list of other failed hubs, and in addition to CVG, you'll see it's predominantly places like BNA, RDU, GSO, IND, PIT, DAY, CMH...

What else do they share in common? All cities firmly in or at the edge of the Rust Belt.

And the last thing they share? Without diving into my skeds tool, none of them strike me as overly huge markets for WN, aside perhaps for the odd flight to one of their hubs focus cities...

If you want to point to a single factor of a weak hub, I'd say it is the lack of a significant presence from WN. Remaining as the market leader in a failed hub which is underserved by the guys on Denton Drive isn't exactly what I'd call a sign of victory....


All that said, while BNA and RDU are certainly convenient to bring into the discussion, going back 17 years isn't what I'd call any more relevant to the discussion than it would be to discuss TWA's ATL hub... So much of the competitive landscape and the overall economy have changed between 2003 and 2012.
 
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