Is USAirways hostile takeover Of AA for Real?

[WorldTraveler]

Actually, E, I do agree.
The point that DOES matter is that DL has aggressively fought its way into a key – if not THE key – market in the US and has succeeded at doing so in a highly competitive environment against carriers like AA, B6, and CO which all had advantages over DL at one time or another.
Kat,
So US couldn’t figure out how to operate in a delay prone environment, didn’t invest the right equipment in the market to successfully compete, and then fails and we are supposed to blame it on the NYC market and not US?
Somehow B6, CO, and DL have all figured out how to survive in the same market and have invested what it necessary to succeed – and are enjoying the fruits of their labors.
NYC is not the problem. It is a unique market w/ unique challenges – but it has the ability to generate revenues far larger than any other market in the US and for those companies that can figure out how to succeed in it, they will reap the benefits.
If US decided it wasn’t worth competing in NYC, then there is one less carrier fighting for the market – but they also walked away from the largest market in the US – and have made it much harder for a potential merger with AA to regain the size necessary to compete with DL and UA.

007 et al,
Absolutely AA has failed to protect its market – but history is rather clear that companies that are struggling (either internally or externally) are precisely where competitors will focus their competitive efforts. From the perspective that AA has been unable to defend key markets including the city where it was formerly headquartered, absolutely AA’s mgmt needs to go.
But it also doesn’t change – as much as US would like to believe – that creditors and all of AA’s employee based do not and will not see US as the savior that AA needs. US has indeed done a good job of pulling together two failing airlines and is now generating financial results that are on par with much larger airlines.
But let’s also not forget that it has taken US 7 years since that merger, the merger process is still not complete, US employees are the lowest paid among network carriers, and US’ revenues are not on par with other carriers, esp. in the key int’l markets where AA needs the most help.
When creditors look at the options that exist for them to obtain recovery from their investments in AMR, they do not see just the two options that many AA and US employees or US management sees.
AA employees are far more vocal that they want something OTHER than their current mgmt but they are far from signing on the dotted line to commit to US.
AMR creditors look at the incomplete labor integration at US – and most importantly with the pilots which is the most significant labor issue AA has faced – and they are most certainly asking why they would want to throw their support behind a merger in an industry where mergers are highly problematic to begin with and where US’ track record is not a whole lot better than the industry as a whole.
There are a number of other carriers that could take part of AMR and succeed quite well with what they obtain; there is no doubt that AS, B6, DL, F9 or others could absorb parts of AA and succeed with what they receive within the business models that each of them already do. And any of those combinations with AMR would involve much less risk to those companies and to the creditors AND many of those companies do have higher pay and compensation than AA employees will have under the term sheets AND higher than US has under its existing wage scales.
US can promise pay raises to levels that would satisfy AA labor but it has yet to show how it can sustain those higher costs on its own network and how it would succeed at keeping AA and US employees happy as separate employees on separate pay scales.
If AMR can’t successfully demonstrate that it can turn the company around, and that is a very real possibility given that there are legions of AA employees that say they would rather burn the place down than be pushed into lower wages and still work for AA mgmt, then the creditors absolutely will look at each potential merger or asset sale transaction on the basis of each of those carrier’s abilities to generate the maximum return for the creditors.
To be quite honest, the creditors don’t care about keeping AA held together as one airline, esp. if labor will destroy whatever possibility that AA has of successfully restructuring.
And the creditors are not going to be locked into thinking that if AA is unable to successfully reorganize as a standalone company, the only option is to merge the whole company with another company that may not still be the best option for the creditors or even the employees.

 

[PITbull]

Condescending as usual, you were junior as I recall.

Ever since your sweetheart deal with Jerry Glass fell through you've been on the outside looking in.

Would you care to elaborate for our friends at AA about your departure from union office?

If you go back far enough on the US forum anyone can find it for themselves.

When I get a chance I'll post some of the highlights here.

Keep grinding that axe or should I say, as in plural, axes?

Junior you say???LOL.....I wish. I left with 25 years on a VFLR provision we wrote for approx. 1200 f/as with 3 dpartures within that year. I slotted in the third date. Everyone who wanted the VFLR had to decide by the end of March 2005, no matter what departure they picked.
There was no way I was going to work under a concessionary contract for the next decade. I explained that to everyone, that "if US Airways terminates the pension plans, I'm out of here". And that's just what they did 5 days after ratification of the f/a T/A, they made a motion to the judge to terminate, after we had agreed to a "frozen pension", ratified it with US Airways signatures all over the new contract. So much for signed agreements. Nonetheless, The thought of US Airways giving me anything is so laughable at best. They hate me and I suspect had a corporate party the day I sent in my VFLR papers.


Malikie,

With regard to US Airways being saved by Douggie, I can flat out say to you that you are so very incorrect. We emerged from BK before the first quarter of 2005. US Airways had investors and had the lowest labor costs of all the legacy carriers after emergence (they took the LCC symbol as their permanent medal). Douggie had no hand in our bankruptcy, or cost savings that the employees sacrificed, he walked into those cost savings with absolutely NO effort on his part, and took over a legacy carrier...and yet, still, can't get his airline Am. West and US Aiways to fully merge to this date.

Yes siree, he is just such a powerful ceo with great vision and creditability...in your eyes, indeed.

 

[WorldTraveler]

Not sure you walked into those cost savings... think you got dragged into them... but the low costs of US are indeed what Doug saw attractive. AA people who think Parker will sign up for big pay raises might want to consider that the reason he was able to turn US and HP around was through well-below-average industry costs.

Those who think that DL's efforts in NYC will fall flat on its face might want to consider that DL is operating some mainline aircraft on its flights from LGA to CLT and RDU, markets deep into US territory in addition to other flights on 2 class RJs. Other than DEN and MIA, I believe CLT is the only hub of other airlines where DL has used mainline aircraft - and MIA and DEN are clearly a whole lot further away.

 

[eolesen]

I have yet to see anyone claim DL's efforts in NYC will fall on their face. They may not succeed in winning in every market, but they're going to be an influencer regardless if they stay in the #1, #2, or #3 spot. WN hasn't succeeded by being the biggest -- they've succeeded by picking and choosing their markets.

With WN, I've yet to see an attitude by which they tried to defend turf just for the sake of keeping a competitor at bay. Instead, they eventually win over a market by simply running the airline and adding markets which make sense based on the demographics, and not where someone else has service or a hub. Go look at the growth of LAS again for them. Tripled in size over a ten year period, not ten months.

 

[WorldTraveler]

Even with DL's historic north-south presence in NYC that dates back 50 years, DL has grown its presence in NYC over a period of 25 years with the Pan Am acquisition and the slot deal as key transactions that fueled significantly more growth.

And between those transactions, DL has growth its presence in NYC by slowing adding markets that make sense and then sticking with them until they deliver acceptable financial results and then start the process over with a new set of markets.

It is EXACTLY the same process as WN uses - you are absolutely right. DL and WN both decide what is strategically necessary, defend what they have or decide that it isn't necessary, and continue to grow into new markets.

The only real difference between DL and WN is that DL has tried alot more markets to see how they would work out and then pulled back fairly quickly on some that didn't work. WN usually does not pull back on markets for years.

DL still has reached its strategic goals.

DL's track record of defending its core markets while growing into new markets is far stronger than its legacy airline peers.

But at the core it is DL's ability to defend its core markets that will matter the most to the creditor's committee as they evaluate what options are best for AA if for no other reason that a big chunk of what AA needs to do requires competing against DL who has already aggressively staked its claim on NYC.

 

[700UW]

What about DL in MCO and DFW when those hubs failed and were shut down?

 

[FWAAA]

Delta previously had a small hub in Chicago at ORD as well as Western's small LAX hub. Combined with DFW, those are some big cities where DL has dismantled hubs.

 

[WorldTraveler]

yet DL is still the largest network carrier in Orlando and in nearly every Florida city outside of MIA.
They are the 3rd largest carrier at LAX in revenues and #2 network carrier on the west coast... which is the same place they were as a result of the WA merger. In some markets they are larger than UA.

DL gave up its #2 position at DFW to AA for a #2 position at DFW (5 market share points less) plus displacing AA from the #1 carrier at LGA and JFK. DL's reallocation of resources away from DFW resulted in far more revenue gained than what they lost in local DFW revenue plus the flow revenue that only works well flowing through a Texas hub.

The ORD hub goes back to pre-deregulation days... for example, CVG like alot of cities was split between AA and DL or another carrier.

Deregulation has resulted in alot of movement between where carriers had strength before deregulation.
The question is what have carriers done since deregulation and the concentration of air service into hubs and away from multiple focus cities for each carrier - but with multiple carriers claiming the same city as a focus city.

There have been multiple ways to achieve the same result... but it remains that UA is very close to UA's size in terms of domestic revenue - but UA's domestic strength is much more heavily concentrated across a few cities while DL is the dominant carrier in terms of revenue in many more markets.

But it still doesn't change that in the post deregulation era, DL has grown its domestic presence better than other carriers and has been able to successfully compete against low fare carriers as well as network carriers in expanding its reach.

This discussion only matters in so much as the creditors consider the best way to protect AMR's revenue position in an environment where competitors are increasingly targeting AA's core revenue generating markets.

Since DL hasn't said they are involved in discussions with the UCC, it is impossible to know what is being said..... but since DL said they are interested in fairly large chunks of AA's operation, but not the whole, you cannot rule out that DL will be touting its own advantages to the UCC - some of which may be more important than attempting to keep AA together to sell as one piece to US. Considering that DL is a larger airline with stronger finances, a much better track record regarding mergers on top of the network strength noted above, and DL has no open labor contracts but does have relative labor peace, the UCC will most certainly take a proposal from DL seriously, esp. if it includes some reasonable approach for the future of the assets that DL is not interested in taking.

It is also possible that other carriers could be intested in dividing up AA's domestic operation but other than UA who is likely only capable of taking the MIA hub, DL is the only US airline with existing longhaul international operations, meaning the chances of AA being divided up between B6, AS et al... without an existing network carrier... are slim.

 

[700UW]

I believe WN is the #1 airline in the US for domestic passengers, so I would say they grew larger than DL for domestic travel.

Keep dreaming of ways to keep DL #1, AA is not going to be broken up nor sell of assets, they will either merge with US or exit chapter 11 stand alone.

 

[WorldTraveler]

I believe WN is the #1 airline in the US for domestic passengers, so I would say they grew larger than DL for domestic travel.

Keep dreaming of ways to keep DL #1, AA is not going to be broken up nor sell of assets, they will either merge with US or exit chapter 11 stand alone.

WN doesn't generate near as much revenue even on their domestic system as DL or UA do.

Carrying the most passengers is not the goal.... generating profits is.

I don't honestly know what the creditors will do - but thinking that they will just dump AMR into US' lap because they are the only carrier that is interested in taking them whole is not only highly erroneous but also only sets up AMR and US to underperform relative to the best options that are available.

The creditors don't care how many pieces AMR ends up in if they can't successfully emerge as a standalone carrier as the best option.

If US has the best option if AMR does not emerge as a standalone, they will win.

But there are far more options that will result in better recovery for the creditors than an AA-US merger. Guaranteed

 

[700UW]

Generating profits?

WN has been the most successful and profitable carrier over the past 25 years or more, and their workers are the highest paid in the industry.

Cant say the same about your precious DL can you?

 

[silverbird007]

Im not fairly junior at AA im VERY junior I only have 15 years. If iy were up to me I would prefer Crandall but that aint happening. I know from reading posts, newspaper articles, common sense etc that Parker is not the savior for AA. Saying he is better than the current AA mgmt is not saying very much. I dont have any control over what happens at AA any more than anybody on this forum, l just know our mgmt is not doing what they should or could do.

 

[wings396]

So you are saying that breaking up AA, and possibly having thousands of jobs lost is something they will consider? It sounds like you are getting a bit Delta selfish here WT. I was just about to come around a bit on my opinion of you, but much of your recent Delta chest pounding is starting to turn my stomach. I still can't comprehend how Delta gives you so much "Wood" when you no longer work for them. I never seen anyone who loved a corporation more than yourself, unless they've owned it that is......

 

[700UW]

The world according to WT:

"Delta is God, every other airline is the devil"

 

[silverbird007]

Im not fairly junior at AA im VERY junior I only have 15 years. If iy were up to me I would prefer Crandall but that aint happening. I know from reading posts, newspaper articles, common sense etc that Parker is not the savior for AA. Saying he is better than the current AA mgmt is not saying very much. I dont have any control over what happens at AA any more than anybody on this forum, l just know our mgmt is not doing what they should or could do.