JUSTICE DEPT SUES TO BLOCK US/AA MERGER

[jimntx]

The New AA should move the corporate HQ to PHX, and move the Miami operation to SJU and South Carolina for going against AA. Miami is important, but it can be turned into a focus city rather then a hub.

Why ever would anyone want to establish a hub at SJU? As others (including me) have stated before...the reason the SJU hub was dismantled was because there was no longer a reason for it to exist. SJU was built up at a time when most Caribbean islands had small airports and short runways. AA would fly people into SJU on mainline and then they would continue on to the other islands via RJs and commuter props.

Now it seems like every Caribbean island has at least one runway that is longer than the island itself. AA can better serve those islands with 737s from MIA. Ergo, there is no longer any need for an RJ hub at SJU.

 

[WorldTraveler]

Jacob,

It is only a hypocrisy because you don’t want to see the facts.

Even if we look only at the five year part of the order, AA has tens of millions of dollars more aircraft on order than DL and yet they aren’t going to gain a cost advantage for it.

DL has TEN widebody aircraft on order…. How many does AA have? DL can figure out how to make their older 744s and 767s work for several more years but AA feels like they have to buy new 787s while DL is buying 10 current generation aircraft – but that happen to have lower CASM than the 787s that AA will be buying.

AA will be buying more than 250 new narrowbody aircraft while DL will buy half that number; the narrowbody aircraft that DL will be buying are the lowest CASM aircraft available and will generate cost savings as large as what AA is buying. DL is buying and leasing ten year old 717s and M90s that have CASMs as good as if not better than what AA is buying.

DL also said that they could finance the M90, 717, and 737-900ER fleet transitions with internally generated funds…. And since DL has been spending about $1B/year on capex with internally generated funds and that is what these transactions have/will cost DL, there is no reason to believe they can’t do the same. DL didn’t make that statement about the Airbus order that was just announced – but they are spending less than $3B and probably a lot less on those aircraft. Airbus said that “Boeing was desperate” which obviously means that Airbus had to cut the price very, very deeply, something they weren’t afraid to do to win over the first Airbus order from DL in 20 years.

But again, it isn’t just DL. WN is buying new aircraft but also forcing down CASM using far lower expenditures.

DL and WN are both comfortable that they don’t need to replace every non-current generation aircraft – because they can control the costs of operating those aircraft, they have enough short-haul segments for which the latest generation aircraft will not deliver the benefit necessary to offset the costs, and also because they can generate the revenue necessary to cover the higher costs of operating those older aircraft. AA is in the position it is in now because they have lost revenue at a far faster rate than other airlines over the past 10 years and the pace will only accelerate with the fall of the Wright Amendment, Open Skies in AA’s top markets in Latin America, and the DL/VS joint venture which will give AA the first meaningful challenge it has had in some of its top LHR markets.

I am more than happy to wait a few years to see the difference between AA and UA’s strategy vs DL and WN’s… but history overwhelmingly says that AA and UA are following the same model that legacy airlines have followed for decades while DL is moving toward the capex model that WN has used – very prudent, limited expenditures only when the costs will result in clear revenue benefits. DL and WN believes they can achieve that with far smaller expenditures.

Let’s see how it plays out…


yes, Jim, there are people who are still trying to use yesterday's answers to solve today's problems... with predictable results.

 

[FrugalFlyerv2.0]

I am more than happy to wait a few years to see the difference between AA and UA’s strategy vs DL and WN’s… but history overwhelmingly says that AA and UA are following the same model that legacy airlines have followed for decades while DL is moving toward the capex model that WN has used – very prudent, limited expenditures only when the costs will result in clear revenue benefits. DL and WN believes they can achieve that with far smaller expenditures.

Let’s see how it plays out…

One of your smarter statements (about waiting to see how it plays out).
I don't think AA has too many options other than to entirely replace an aircraft type in their fleet, given the age of their aircraft and the large number that they operate. Furthermore, lets wait and see if AA actually takes delivery of all the Airbus and Boeings that they have ordered.

 

[WorldTraveler]

yet DL and WN have older average fleets than AA now and they don't see a need to replace everything.

If AA doesn't take delivery of the 2nd half of the order book, then by all means, I think AA's ability to support the amount of debt will be much more in line with the rest of the industry - and the merger and the necessity to maintain their pension obligations (not known when the aircraft order was placed) - may well result in a reduction in the size of AA's orders, even if it is heavily loaded for the next few years.

 

[Hatu]

Interesting take:

How Budget Cuts are Helping the AMR-US Airways Merger

This expedited trial date gives the two companies a big advantage over the Department of Justice, which has been struggling through a multiyear hiring freeze. The DOJ may feel pressure to settle in order to conserve resources. This could pave the way for the merger to be approved with relatively few concessions.

http://www.fool.com/investing/general/2013/09/03/how-budget-cuts-are-helping-the-amr-us-airways-mer.aspx

 

[OldGuy@AA]

Concessions? What concessions did Delta give to get NW? What concessions did United give to get Continental?

 

[robbedagain]

only concessions ual gave to get co was to lease 18 slots at ewr.. dl none wn. fl none...

 

[etops1]

The New AA should move the corporate HQ to PHX, and move the Miami operation to SJU and South Carolina for going against AA. Miami is important, but it can be turned into a focus city rather then a hub.

Are you smoking crack ?

 

[SRQRoadWarrior]

Didn't see this posted. Don't know whether this will change anything or not....Michigan joins lawsuit.....

http://aviationblog....ys-merger.html/

 

[Hatu]

All 1,008 city pairs:

What, you want to know all 1,008 routes listed by DOJ in the American Airlines-US Airways complaint?

http://aviationblog.dallasnews.com/2013/09/what-you-want-to-know-all-1008-routes-listed-by-doj-in-the-american-airlines-us-airways-complaint.html/#more-17232

 

[TWU informer]

Here is yet another example of the idiot belief system that Industrial Unions have some political influence.

Some of the most rediculous statements ever made.
When will they ever learn the time to change strategies passed by years ago.

http://business-news.thestreet.com/dallas-morning-news/story/us-airways-biggest-union-wants-contracts-before-it-backs-merger/12038926

 

[robbedagain]

twu please explain why should the iam support the merger when those slow arse donkeys left their stalls negogiated backroom door buster deals with AMERICAN UNIONS knowing full well that they just dont want to negogiate with their own unions... the iam... it only took 8 plus yrs for the donkeys and the flight attendants to reach a deal on the 3rd time... it only been over 8 yrs and the pilots for the east are still flyin in the ch11 contracts and they still never gotten a contract with their bs crap that still goes on... yet both groups support it bec they stand to make the most gains as far as im concerned with the merger i dont care just as long as i get a paycheck i think we should have our contracts prior to any merger.. all this goes to show is that the donkeys runnin usairways has no intentions on settlin with the iam and with their big power al i hate labor hemmoraging hemmingway runnin the labor its gonna be a long while

 

[TWU informer]

twu please explain why should the iam support the merger when those slow arse donkeys left their stalls negogiated backroom door buster deals with AMERICAN UNIONS knowing full well that they just dont want to negogiate with their own unions... the iam... it only took 8 plus yrs for the donkeys and the flight attendants to reach a deal on the 3rd time... it only been over 8 yrs and the pilots for the east are still flyin in the ch11 contracts and they still never gotten a contract with their bs crap that still goes on... yet both groups support it bec they stand to make the most gains as far as im concerned with the merger i dont care just as long as i get a paycheck i think we should have our contracts prior to any merger.. all this goes to show is that the donkeys runnin usairways has no intentions on settlin with the iam and with their big power al i hate labor hemmoraging hemmingway runnin the labor its gonna be a long while

MY point was it doesn't matter if they do or do not support the merger. They are powerless, but still pretend in the press and public that they have power. Self fullfiling failed strategy.

 

[robbedagain]

thanks twu i understand you