LCC Proposes $8B merger with Delta

[BoeingBoy]

Having watched this from the announcement, the one thing I haven't seen mentioned is the EU approval required for a merger.

Thoughts, anyone.....

Jim

 

[UPNAWAY]

If I was a member of a union that was in negotiations, I would certainly ask my union reps that question. Although I am not, it was still a question that arose today.
Really, if there is that kind of money for a merger why shouldnt we be compensated better?

Mama this is why unions should have no business in business!

How many investers would line up to pay employees more? If the markets thought paying the rank and file would be the best return on the investment then they would. But since they do not this money is not available for pay raises. Besides we all make market rates why would they give us a big raise?

 

[EricLv2Fish]

Has anyone taken note that "Cost Neutral" is dead if this merger goes thru? DP stated the higher of the two pay scales will be put in place.

 

[Awa Contract]

And You Trust Him??? Come on Eric, you know better than that.

 

[flyingcat]

If he can throw away the cost neutral contracts with this deal why can't he do it now with the two companies he has now?

Because US does not have anywhere near the higher paying O&D that Delta has. I love PHX and CLT but they are small beans to JFK, SLC, and ATL in terms of frequency and service.

Doug and labor are in disagreement about cost neutral in the current US, which except for PHL relies on a lot of low yielding highly competitive connect traffic. The new Delta will have a lot of good things going for it that even the Parker knows that he cannot hide the revenue from labor.

As much as people are for or against it the mere fact that he could take America West and turn it into a company that could takeover Delta says a lot about him and his staff.

True they are untested in the long run, but then is anyone really happy with the way things have been run in most legacies. With the exception of AA and CO the rest of the legacy airline management has let themselves and their employees down. Someone has to try to turn them around or else they will flounder. If he fails than better companies will survive and flourish.

I find it very ironic that Delta's current CEO is now making public statement against the false promises of merger when he himself oversaw the Delta/Western merger. Trust me when I say this battle is also very much a new generation of airline CEO (Leonard, Neeleman, Parker) taking on an older generation (Greensteen, Steenland).

Scorn him, praise him, whatever, but the fact is he has so far, even with all the US troubles, delivered financially.

 

[flyguy121]

The more I think about this deal, the more I am convinced it is a smokescreen for something else---NW. It just makes more sense. For whatever reason, DP needed the stock to go up, and this definitely accomplished that.

But who knows? I am after all just a dumb customer.....

I've been thinking the same thing all along...so I'm willing to add my name to the list of conspiracy theorists.

Perhaps this announcement is simply to get the focus off of what really would make the most sense...a merger with NW, by drawing attention to DL and perhaps inviting counterproposals from rival airlines?

As a furloughee for over 5 years from US East, I am hoping the DL proposal falls apart...if not I know a recall will likely NEVER be in the cards for myself or other furloughees that wish to return.

I'm rooting for a merger with NW.

 

[Dog Wonder]

It is wait and see time.

Separating the visionaries from those who see things that were never there.

I see nutcases claiming visions.

 

[bigbusboy]

My thoughts that won't get me a free cup of coffee, but here they are anyway. This is all about reducing capacity and giving US the size it needs to compete....nothing more. The only way this will get through the DOT/DOJ/congress is by proving that this is exactly what the industry needs. There will obviously be a huge price to pay in the form of: the shuttle, CLT and PHL, BOS and DCA. But in the longrun it will be worth it. DAL has much stronger hubs in ATL and JFK than US does in CLT and PHL. Those, I think, are the real prizes here. AA, UA, NW and CO have all been rather quiet on the matter thus far. I think they know this is exactly what the industry needs and they have plans of their own.....NW/AA and UA/CO would be my guess.

BoeingBoy brought up an excellent point with the EU. That hurdle will be solved by bringing the "New DELTA" into the Star Alliance. Think about it. SA will have the Atlantic and Car. locked up. UA will have the Pacific locked up. Both UA and DL will feed each other as codeshare partners. And the SA will have control over and access to two huge US carriers....giving them access to the US domestic market.

 

[BoeingBoy]

Because US does not have anywhere near the higher paying O&D that Delta has. I love PHX and CLT but they are small beans to JFK, SLC, and ATL in terms of frequency and service.

Doug and labor are in disagreement about cost neutral in the current US, which except for PHL relies on a lot of low yielding highly competitive connect traffic. The new Delta will have a lot of good things going for it that even the Parker knows that he cannot hide the revenue from labor.

You really should take a look at the financial reports. Care to guess which airline - DL or US - has the highest yield?

Here's a hint - it's not DL....

Jim

 

[flyingcat]

You really should take a look at the financial reports. Care to guess which airline - DL or US - has the highest yield?

Here's a hint - it's not DL....

Jim

I know their yield sucks and its shame considering the assets they have at their disposal. If the US revenue team can extract even one percentage point more out of the New Delta system than its worth giving them a shot and so far they have shown that they can.

 

[hp_fa]

Has anyone taken note that "Cost Neutral" is dead if this merger goes thru? DP stated the higher of the two pay scales will be put in place.

Did he say that, or did he say the financial projections were based on the higher labor rates of the three? Big difference.

 

[longing4piedmont]

Did he say that, or did he say the financial projections were based on the higher labor rates of the three? Big difference.

He said it.....everyones pay goes the highest of the three and they have already projected that cost. Don't remember the number though

So I will ask again, why then can he not do it now?

 

[BoeingBoy]

I guess one's definition of "sucks" would be determinate here. Yes, DL's yield is lower but so is their CASM.

It's a balancing act between yield and selling what would otherwise be empty seats (load factor). One could have a yield of $2, but if you only sold one or two seats per flight that high yield would be worthless. Conversely, a yield below CASM would be worthless since it would require over 100% load factor to break even.

DL & US are just taking slightly different paths to the same goal - getting and keeping RASM above CASM. DL accepts lower yield as the cost of higher load factor while US seems hooked on higher yield to the detriment of load factor. Consequently, US has about the highest yield of the legacies but among the lowest load factors, while DL has more legacy average yield and load factor.

Jim

 

[RowUnderDCA]

ok... here's my of the wall strategic analysis.

I'll call it 'AA can't merge and NW frag'


Parker looks at the industry and sees:

UA CO DL NW AA and LCC.

UA is interested in CO and DL.

AA is interested in NW's asian routes, but anything more than that is too much for antitrust.

So, either UA gets CO and DL and AA remain independent with AA picking up NW and fragging the domestic system. (the possibility of AA and DL in some sort of alliance is possible, but antitrust might be a concern)

Or UA gets DL and LCC is out of luck and overwhelmed in its own back yarrd and maybe out of an alliance partner.

But if LCC gets DL for a price it can deal with, it does one or some of the following:

1) gets rid of a competitor in the east

2) gets rid of a large network/non-union competitor in the east

3) remains large enough to at least slow down new competitor growth in the east

4) remains in play for some of NWA's assets should AA be induced to go for NW

5) induces other carriers to consider market share and either go after DL or other combinations that might be ok, but don't represent the 'contraction' economics that turbocharged LCC on the east

............. if LCC's offer is unsucessful


6) puts a profit margin floor on DLs reorg figures assuring that it won't coast out of court and might have to contract more to generate higher margins. (I believe that Parker is familiar with this dynamic from U's experience)

7) might induce unionization at DL right now, just by bidding.


So, before the potential merry go round that UAL and LCC has been chatting about might have resulted in LCC being folded into UAL or AA, or maybe LCC getting some kind of combo with NW, this situation preserves the possibility of some sort of combo with NW in the future but with the potential of a less harmful (or no) competition from DL.

Yeh, I'm still stuggling.

 

[PA18]

For ALL the put downs of Piedmont Airlines for stapeling the Empire f/a's to the bottom, it was done BECAUSE Empire refused AFA as did the pilots for ALPA. Everyone cruxified PI, but the more I see this hypocricy, the more I see the PI f/a's and pilots as the smart ones. That makes up at LEAST 1200 current f/a's who gave the finger to AFA one day and kissed their asss the next.

Although the Empire F/A's were non-union, they nonetheless are now flying for US Airways with their Empire date of hire. Just as the former Trump Shuttle F/A's are bidding with their original Eastern date of hire (and as a result are some of the most senior F/A's on the airline, even though they didn't actually come on the property until 1999 or so).

I would be surprised if the Delta F/A's were granted anything less than their Delta DOH. Why? Because AFA has always done it that way. Even with the non-union Empire F/A's.

Unlike another union that represents flight crews at US Airways...

And, BTW, the Empire pilots did not refuse ALPA. Over 90% of them sent cards in to hold an election on the property. ALPA National stonewalled them for the latter's own selfish political purposes.