Is USAirways hostile takeover Of AA for Real?

[eolesen]

The ORD hub goes back to pre-deregulation days...

Yes, but it took until 1989 to unwind it.

Year   Flights Markets
1978   76      24
1986   47      15
1987   33      12
1989   28      8
1990   25      8
1991   24      6
1992   35      7
1997   28      4
1998   28      4
1999   27      4
2000   27      4
2001   27      4
2002   24      4
2003   27      5
2004   24      4

 

[WorldTraveler]

So you are saying that breaking up AA, and possibly having thousands of jobs lost is something they will consider?

who says that asset sales and dividing up AA is going to result in any fewer jobs than if AA remains as a standalone company or is merged with US?

The entire notion I have argued is that US - Parker and his followes on this board - have had the mindset for years that they should be entitled to the next legacy carrier that might become available.

If US' offer is not financially superior and does not provide the best outcome for all parties, the creditors will not be pushed into accepting an offer from US just because is the only airline that could possibly acquire AA whole.

Banish the thought from your mind that US has a corner on any transaction that might involve AA. It does not.

I do not know if DL will be involved in a transaction with AA - but I do know they have said they want significant parts of AA's operation, they have demonstrated they can merge a large airline into their own flawlessly compared to other carriers, and they have the financial strength the creditors need. And they do not have the baggage such as open labor contracts that US has.

Any other airline could also participate in the process or replace DL. A number of the smaller airlines - AS, B6 - would be delighted to pick up parts of AA's franchise - but they don't want the whole thing.

What you and other US fanboys can't handle is that US will have to PROVE it is the best option instead of simply walking into BK and telling the creditors and employees they are the best option and walk out w/ the keys and title to an airline.
It simply does not and won't work that way.

WN is not interested in acquiring AA's international franchise. It isn't the type of business model they are in. It is doubtful they would be interested in acquiring any of AA's domestic hubs. They don't matter in the discussion.

DL made a FORTUNE in Chicago renting out Concourse L to int'l carriers while the int'l facilities were under construction. Those revenues helped subsidize alot of DL operations.

DL as you have undoubtedly noticed has been increasing ORD service as a result of its NYC buildup.

 

[robbedagain]

i would bet that if dl and aa were to have any kind of transactions it is almost a bet that ual would be forced to take some kindof action and secondly i highly doubt the us govt would even allow a dl/aa transaction

 

[A320 Driver]

The entire notion I have argued is that US - Parker and his followes on this board - have had the mindset for years that they should be entitled to the next legacy carrier that might become available.

I've never gotten that feeling from anyone in management or otherwise. Parker sees an opportunity. It is not imperative that he do this. Much of the industry consolidation has already been done. You won't see him stick his neck out but so far, and then he'll walk away if necessary.

If US' offer is not financially superior and does not provide the best outcome for all parties, the creditors will not be pushed into accepting an offer from US just because is the only airline that could possibly acquire AA whole.
Banish the thought from your mind that US has a corner on any transaction that might involve AA. It does not.

Agree totally.

I do not know if DL will be involved in a transaction with AA - but I do know they have said they want significant parts of AA's operation, they have demonstrated they can merge a large airline into their own flawlessly compared to other carriers, and they have the financial strength the creditors need. And they do not have the baggage such as open labor contracts that US has.

I think any kind of transaction with DL would be so picked apart by the DOJ, that it would probably render it useless. Just my guess. The labor situation at LCC has been as issue, but management has still been able to put and keep the airline close to the top in performance dynamics over the last 5 years.

What you and other US fanboys can't handle is that US will have to PROVE it is the best option instead of simply walking into BK and telling the creditors and employees they are the best option and walk out w/ the keys and title to an airline.
It simply does not and won't work that way.

Agreed. If they don't bring a comprehensive plan with the data to back it up, they might as well stay home.

Driver...

 

[WorldTraveler]

I appreciate your candor and honesty, Driver, but your perspective is not shared by everyone who posts here. But even if it was, there have been a number of assumptions that have been made well before AA even filed for BK that are not correct and have needed to be addressed.

First, US has been more vocal about the need for consolidation and in justifying why AA-US makes sense than any other airline has in the history of aviation. While most merger transactions play out behind closed doors, Parker has very unconventionally chosen to play his pursuit of AA out in public. I think there is plenty of reason to believe his public strategy has only given other parties more time and opportunity to pursue their own interests at the expense of US.
It is very hard to envision a stable prosperous future for US and their people if they remain as a standalone network carrier. They are not only dwarfed by other network carriers but the competitive situation on the east coast as a result of the 3 other mergers will make US’ efforts to defend itself far more difficult.
US is being as aggressive in pursuing AA because they recognize the competitive future they face as a standalone carrier. It is hard to envision a long term stable future for US without a merger or other transaction that gives US the size necessary to compete w/ larger rivals.
There is no size limit above which the DOT or DOJ would not allow any US airline to become – and any conceivable combination of AA and or US would not push any resulting entity above 33% of the market – sizes that very much exist in other industries.
There is absolutely DOJ and DOT precedent regarding market concentration, esp. in limited access markets (slot controlled airports). But those who argue that DL plus AA would violate those limits in NYC fail to acknowledge that US plus AA would violate those same restrictions at DCA.
AA and US cannot fully combine any more than DL plus AA could based on precedent.
The creditors will ultimately choose the option that is in their best interest, even if AA management proposes a different solution. Management works for the creditors right now – but the creditors do not waive their right to reject or modify actions of management if they do not agree with those decisions.
There is no requirement that AA has to emerge whole or be merged into another airline as a whole. AA continues to operate a very valuable network and have valuable assets within that network, and those pieces are not all dependent on each other in order for the value of the pieces to be as much as or more as the value of AMR as a whole.
Creditors absolutely hate uncertainty –and labor discord is probably at the top of the list. Creditors will not stand by and allow what remains of AA~s network and intrinsic value to be destroyed by labor unrest.
Other competitors do see value in AA and its assets just as US does.
Other competitors also see value in blocking US and AA from merging and will most certainly exert influence to achieve that end.
Other competitors can achieve that value by acquiring parts of AA while minimizing the risks involved in ongoing labor unrest or merger related problems.
Other companies have stronger finances and the proven success in a number of metrics as well as success with mergers and acquisitions.

As I have noted before, AA is restructuring at a time when most other US airlines are relatively healthy, unlike in past industry BKs. This reality makes the job of AA management much harder in trying to convince AA labor of AA’s needs – and I think there is reason to believe that all of the cuts AA is proposing are not necessary.
Just because AA employee and labor groups negotiated potential labor agreements with US, they have NOT at all decided that merging w/ US is in their best option.
For some AA employee groups, they could well gain more by having the company split up and sold in pieces to other competitors, esp. since AA and US have some of the lowest pay scales in the industry for some key work groups.

The preferred outcome from the creditors’ standpoint is a standalone AA that can successfully compete. But absent that happening, for whatever reason – and labor unrest could well be one of them – AMR’s creditors will most definitely pursue any number of other options. Few people on this board have ever acknowledged there are more than two options available to AMR’s creditors – AA standalone or in an AA/US merger.

 

[A320 Driver]

First, US has been more vocal about the need for consolidation and in justifying why AA-US makes sense than any other airline has in the history of aviation. While most merger transactions play out behind closed doors, Parker has very unconventionally chosen to play his pursuit of AA out in public. I think there is plenty of reason to believe his public strategy has only given other parties more time and opportunity to pursue their own interests at the expense of US.
It is very hard to envision a stable prosperous future for US and their people if they remain as a standalone network carrier. They are not only dwarfed by other network carriers but the competitive situation on the east coast as a result of the 3 other mergers will make US’ efforts to defend itself far more difficult.
US is being as aggressive in pursuing AA because they recognize the competitive future they face as a standalone carrier. It is hard to envision a long term stable future for US without a merger or other transaction that gives US the size necessary to compete w/ larger rivals.
There is no size limit above which the DOT or DOJ would not allow any US airline to become – and any conceivable combination of AA and or US would not push any resulting entity above 33% of the market – sizes that very much exist in other industries.
There is absolutely DOJ and DOT precedent regarding market concentration, esp. in limited access markets (slot controlled airports). But those who argue that DL plus AA would violate those limits in NYC fail to acknowledge that US plus AA would violate those same restrictions at DCA.
AA and US cannot fully combine any more than DL plus AA could based on precedent.

Parker has been an advocate for industry consolidation for the entire time he has run LCC. It seems to be paying off. Overcapacity was a huge problem in our industry and crippled us from raising fares to cover increased operating expenses...especially fuel. IMO the argument you make with regard to the long range prospects of LCC and AA actually work in favor of DOJ approval of some kind of merger. If your predictions are correct, there will be industry consolidation one way or the other regardless.

The preferred outcome from the creditors’ standpoint is a standalone AA that can successfully compete. But absent that happening, for whatever reason – and labor unrest could well be one of them – AMR’s creditors will most definitely pursue any number of other options. Few people on this board have ever acknowledged there are more than two options available to AMR’s creditors – AA standalone or in an AA/US merger.

I'm sure there is a large contingent of employees that would like this to happen as well. I would have preferred that Piedmont go it alone, but we were purchased to a large degree with our own assets. Being a healthy airline worked against us to a degree and then U management began the dismantling of the airline because they had no clear picture of where the whole thing was going. From that perspective, I can see your heartburn with all of this. I've had my share since 1989. We all really want the same thing...a fair income, benefits and schedule coupled with at least some kind of long term security. That is what was touted at Parker's presentation, but I haven't seen the MOU yet. The devil is in the details and we shall see where all this goes. No employee should have to go through what we went though and what you now are going through. We have fallen so far from where we were when we were hired. Good luck to you.

Driver...

 

[wings396]

Driver, WT isn't going thru anything. He is NOT employed by either DL or AA, which makes all of his rhetoric that much more bizzare.

 

[A320 Driver]

Driver, WT isn't going thru anything. He is NOT employed by either DL or AA, which makes all of his rhetoric that much more bizzare.

Oh...Relative? Concerned stockholder?

You could have fooled me (and he did). I thought he had some real vested interest in this.

Driver...

 

[wings396]

Former DL manager, still infatuated with the company. At this point his vested interests are cloudy. One thing is very clear, and that is that he fears that the combination of AA & US with pose a threat to Delta's universal domination of aviation. My guess is that he is trying very hard to impress the top brass at DL so they offer him his job back.

 

[WorldTraveler]

It really doesn't matter what the connection is with the industry.


Wings and others have tried to discredit some people's opinions by stating they have no interest in the outcome. Said that 7 years ago when we were discussing US takeover attempt of DL and it didn't change the result.

The facts are still the facts.

And I absolutely do have interests in the industry as well as how AA's restructuring plays out.

Since Wings and others focus so much interest on discrediting me, they clearly fear that I will be found to be right - exactly as I was before.

Just because some would like to make this a personal campaign doesn't change the fact their personal interest won't make a hill of beans worth of a difference in the outcome.


No industry leaders and or even those in government would argue against consolidation as a means to deliver stability to the airline industry. Consolidation was an expected result of deregulation.


US and other carriers have clearly benefitted from reduced capacity as a result of consolidation. The real question for US long-term is whether they can gain more benefit from consolidation in the industry - without US participating in it or by reaping the benefits of consolidation which are initiated by other carriers.


US has indeed made enormous progress in building a stable business model. The question is whether US can use either its current place in the industry or whatever consolidation it can participate in to create an environment that allows US people to see salaries increased and US investors to receive returns on their investments comparable to what should be seen in stable industries - and the US airline industry is moving closer to stability than it ever has before.
The reason why AA's future is so significant to the industry is because it probably is the last major event that needs to occur before the industry gains a significant amount of stability and because AA holds enough key industry assets to affect the outcome for others should those assets change hands.


The reason why the network carriers struggled so badly post 9/11 and their employees took it so badly in the shorts is because the legacy airline model could not adapt fast enough to the enormous changes that the combined dot.com bust and 9/11 forced on legacy airlines. Low fare carriers only fueled the fire because they were ready to win where the legacy airlines failed.

The difference between low fare and legacy/network airlines is diminishing and the barriers to entry of successful competitors to existing carriers is much higher than it has been in the past.

Airline labor has so far not enjoyed many of the benefits of the stabilizing industry - and that in part is why AA's labor groups have reason to be concerned about signing long-term concessionary deals when the chances are quite high that they are not needed - either in the size of those concessions now or for the length that AA is saying they need those concessions.

AA's future is far from certain.... but one thing is certain and that is that some of the voices that not all of the people on this forum can be right - there are too many opposing positions. Someone and someones will be wrong.

That is the nature of life.

And truth and facts are not subject to the whims of the majority.

 

[wings396]

Wow, another page long rant reply. Pound my chest, I was right, I'm always right, I'm an industry expert, I love Delta.....keep it rolling, I'm sure Richard is paying attention to you, and the seat next to his will soon be yours WT. Don't forget to take along your knee pads.
May we now call you " Little Richard"?

 

[WorldTraveler]

just because I understand what drives this industry doesn't at all mean I am beholden to Richard, Delta, or anyone else - something you can't seem to grasp.

This board retains previous threads and keeps most active.... you can go look up a few if you would like.

The fact remains that there are a number of valid business reasons why US was not successful with its attempts to acquire or merge with UA and DL in the past.

There are still a number of valid reasons today - and some that are valid for different reasons than in the past - that will make it very hard to achieve the merger with AA that you seem to think US needs.

AA has other options including a standalone plan that may very well succeed and leave US without a major network carrier merger once again.

US might succeed - but when all of the factors are weighed, the chances are more than a stretch just like they were in the past.

I won't apologize for being right or quit speaking what I believe to be the truth regardless if some like you can't accept that others may very well have a better grasp of the realities of the business of the airline industry than you.

 

[signals]

Just an observation...from an observer...WT has a better grasp of the industry as a whole than most. Sure his baseline is Delta, but but he has the "airline formula" as a whole. Like it or not, it seems to work!

 

[wings396]

Whatever, if he has such an amazing grasp on the industry, why isn't he in it? He is no different than you, me, or anyone else who posts here. The only difference is that every post of his goes into a page long story that most get too tired to finish reading. If he knew half as much as he thought he did, he would be sitting in the corporate office of a major airline.

 

[WorldTraveler]

...or maybe I recognize that there are other things to do with my life besides work for an airline.

Condoleezza Rice's abilities as a pianist were not one bit diminished because she was the Secretary of State.