USstew23
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- Oct 19, 2005
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You've got that right Mama!!! I just wish they would get it going already so we can ALL get on with our lives.
Leaked: US and UA in merger talks for over a month
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USA320Pilot
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- May 18, 2003
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J. P. Morgan Investment Thesis - Our Views on Consolidation Haven't Changed
April 21, 2008
We continue to view the value of consolidation as measured by the savings that accompany less flying. We continue to view revenue as a zero-sum game, suggesting that near-term synergies are competed away over time. We continue to believe that labor has historically intercepted much of the M&A benefit. We continue to bristle at the idea that consolidation is somehow an investment catholicon (an idea perhaps put to rest given how poorly DAL/NWA was received by the equity market). And most importantly, we continue to believe that economic necessity – not deal-day assurances - will determine the number of U.S. hubs that remain open for business.
For all these reasons, we never identified a preference for any one combination over another, other than we would prefer overlapping networks that allow for more redundancies to be eliminated (which explains our one-time embrace of LCC-DAL) over the end-to-end variety of network combinations that some opine for. But we were surprised in recent days that following reports United and US Airways had been talking we didn’t field a single investor inquiry on this topic. This suggests that a) our views on consolidation are perhaps of no value, and/or B) the market appears steadfast in its conviction that CAL-UAUA is a foregone conclusion. In fact, on Friday, we fielded an additional nine calls on this topic.
Not so fast. Granted, both Continental and United managements have made semipublic overtures toward each other in the past. For example, Continental at one time identified its top network desires as including Heathrow, north-south presence along the West Coast, and a bigger Pacific footprint. Did anyone think hey were referring to AirTran? Similarly, Gordon Bethune has said if one were to put Continental & United together it would be the network equivalent of “checkmate.†But for argument’s sake, actions speak louder than words. United’s interest in America West was well-chronicled in 1998. They tried to buy US Air in 2000. Plenty has happened since, but few seem to have pointed out that both airlines are now available under one roof (and if you call today, one low price!)
We Think UAUA-LCC Would Be Less Complex Than CAL-UAUA
While a CAL-UAUA transaction may be all but fully-baked at this point, we view a UAUA-LCC transaction as materially less complex, for several reasons, largely related to fleet, labor, and the regulatory process. We also consider as sincere Continental's oft-stated preference to remain independent or at least in charge (while understandably leaving the consolidation door open, as industry events warrant). It simply isn’t known if United’s team is willing to cede the level of control Continental’s managers would potentially insist upon in a deal. Finally, we think that United’s admirable focus on shareholder initiatives may lead that carrier toward whichever deal provides disproportionate value on the United side.
Regards,
USA320Pilot
April 21, 2008
We continue to view the value of consolidation as measured by the savings that accompany less flying. We continue to view revenue as a zero-sum game, suggesting that near-term synergies are competed away over time. We continue to believe that labor has historically intercepted much of the M&A benefit. We continue to bristle at the idea that consolidation is somehow an investment catholicon (an idea perhaps put to rest given how poorly DAL/NWA was received by the equity market). And most importantly, we continue to believe that economic necessity – not deal-day assurances - will determine the number of U.S. hubs that remain open for business.
For all these reasons, we never identified a preference for any one combination over another, other than we would prefer overlapping networks that allow for more redundancies to be eliminated (which explains our one-time embrace of LCC-DAL) over the end-to-end variety of network combinations that some opine for. But we were surprised in recent days that following reports United and US Airways had been talking we didn’t field a single investor inquiry on this topic. This suggests that a) our views on consolidation are perhaps of no value, and/or B) the market appears steadfast in its conviction that CAL-UAUA is a foregone conclusion. In fact, on Friday, we fielded an additional nine calls on this topic.
Not so fast. Granted, both Continental and United managements have made semipublic overtures toward each other in the past. For example, Continental at one time identified its top network desires as including Heathrow, north-south presence along the West Coast, and a bigger Pacific footprint. Did anyone think hey were referring to AirTran? Similarly, Gordon Bethune has said if one were to put Continental & United together it would be the network equivalent of “checkmate.†But for argument’s sake, actions speak louder than words. United’s interest in America West was well-chronicled in 1998. They tried to buy US Air in 2000. Plenty has happened since, but few seem to have pointed out that both airlines are now available under one roof (and if you call today, one low price!)
We Think UAUA-LCC Would Be Less Complex Than CAL-UAUA
While a CAL-UAUA transaction may be all but fully-baked at this point, we view a UAUA-LCC transaction as materially less complex, for several reasons, largely related to fleet, labor, and the regulatory process. We also consider as sincere Continental's oft-stated preference to remain independent or at least in charge (while understandably leaving the consolidation door open, as industry events warrant). It simply isn’t known if United’s team is willing to cede the level of control Continental’s managers would potentially insist upon in a deal. Finally, we think that United’s admirable focus on shareholder initiatives may lead that carrier toward whichever deal provides disproportionate value on the United side.
Regards,
USA320Pilot
Tim Nelson
Veteran
USA320Pilot,
I posted on April 9th that United and US AIRWAYS would announce their merger the 3rd week of May. I was given 'Top info' from a chicago 'source' and I posted this info before the DL/NW deal was announced on April 14 and before anyone was talking about US/UA. There was up to 6 'upper brass' that came to ORD to 'close out some things' during the week of March 31st. Fact is after I announced this and got away with it since nobody would consider this ramp rat with this kind of information, other posters disregarded it and said I was confused with Continental. I myself went to secure a personal' transaction'.
Unless there was an unforseen or emergency Board meeting, I still believe it will not happen until the 3rd week of May. If it's Friday, then perhaps things have gotten desperate.
regards,
Tim Nelson
IAM Local Chairman, 1487, Chicago
Harry Callahan
Veteran
I think they will split US up.
EyeInTheSky
Veteran
Tim,
If this is true then this will give a whole new meaning to "Mayday." Today, UAL stock was down 36% in ONE DAY! This is huge. Personally, I don't think this is a good idea. This is one time where it might pay off to be the ugly girl at the merger orgy.
Later,
Eye
dariencc
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- Dec 4, 2006
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USA320Pilot
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- May 18, 2003
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Tim,
You were right I have strong reason to believe the deal will be announced on Friday because of energy costs.
According to TheStreet.com, "We're taking the necessary steps to become profitable over time," said CEO Glenn Tilton on an earnings conference call. "Industry consolidation is in my mind a component of [our] action plan. The industry needs to pull every lever available."
Today the AP reported Standard & Poor's revised its outlook on UAL's debt last week to negative from stable. S&P airline analyst Philip Baggaley said he anticipates potential difficulties in the company making its required $928 million in 2008 debt and capital lease payments because of the weak economy and high fuel prices. "Currently they don't have a problem, but given the earnings outlook they could well have one later this year," he said.
In today's analyst conference call Glenn Tilton said, "During our investor day in February, we discussed our five-year plan which provides a solid roadmap for the work we need to do, to continue to strengthen the performance of the Company and ensure that we have a clear line of sight to the performance of each business unit. In this extraordinary environment, we recognize the pace of change now needs to accelerate. And our actions announced today reflect just that. Oil at over $110 a barrel does not alone make the case for consolidation in this industry. It simply makes it more compelling as does increased foreign competition and a softening economy. At United, we're well-positioned to participate to the benefit of all of our stakeholders and we're accelerating the work that will serve our customers and our shareholders well in any environment."
Regards,
USA320Pilot
You were right I have strong reason to believe the deal will be announced on Friday because of energy costs.
According to TheStreet.com, "We're taking the necessary steps to become profitable over time," said CEO Glenn Tilton on an earnings conference call. "Industry consolidation is in my mind a component of [our] action plan. The industry needs to pull every lever available."
Today the AP reported Standard & Poor's revised its outlook on UAL's debt last week to negative from stable. S&P airline analyst Philip Baggaley said he anticipates potential difficulties in the company making its required $928 million in 2008 debt and capital lease payments because of the weak economy and high fuel prices. "Currently they don't have a problem, but given the earnings outlook they could well have one later this year," he said.
In today's analyst conference call Glenn Tilton said, "During our investor day in February, we discussed our five-year plan which provides a solid roadmap for the work we need to do, to continue to strengthen the performance of the Company and ensure that we have a clear line of sight to the performance of each business unit. In this extraordinary environment, we recognize the pace of change now needs to accelerate. And our actions announced today reflect just that. Oil at over $110 a barrel does not alone make the case for consolidation in this industry. It simply makes it more compelling as does increased foreign competition and a softening economy. At United, we're well-positioned to participate to the benefit of all of our stakeholders and we're accelerating the work that will serve our customers and our shareholders well in any environment."
Regards,
USA320Pilot
Just for fun speculation, what happens fleet wise in the future if they do merge? Will the keep the Airbus orders on the books, since United has nothing on order? I like the idea of US flying the A350XWB...I would think Airbus might even throw some cash at this deal, given United getting bought by CO, and US going away completely would be a big hit.
I also think this would pay off in a big way for CLT, as they could dominate Delta in most regions. Their Latin American networks compliment each other well, and hopefully much of that South American flying would shift to CLT.
As a regular CLT flyer, I'm cautiously optimistic about this possible merger...
One question, is there anyway for US to outright buy UA? It looks like UA's market cap is $1B more....seems like in an all stock deal, they would still need $1B is cash right? Who (besides Airbus) would invest that in any airline right now?
Finally, if Doug was left in charge, he wouldn't really try to lower standards at the new United...certainly he sees the premium in the name, and the product that should be associated with it.
I also think this would pay off in a big way for CLT, as they could dominate Delta in most regions. Their Latin American networks compliment each other well, and hopefully much of that South American flying would shift to CLT.
As a regular CLT flyer, I'm cautiously optimistic about this possible merger...
One question, is there anyway for US to outright buy UA? It looks like UA's market cap is $1B more....seems like in an all stock deal, they would still need $1B is cash right? Who (besides Airbus) would invest that in any airline right now?
Finally, if Doug was left in charge, he wouldn't really try to lower standards at the new United...certainly he sees the premium in the name, and the product that should be associated with it.
:huh: Because Denver is just a gold mine as opposed to Pheonix?
Now to looking at a map of the US. I guess Denver does cover a lot more then Pheonix could ever. Not to mention how close Pheonix is to LA.
Airlines are turning to international flying for profits as domestic travel is becoming unprofitable. Maybe Denver should be dropped and just leave Pheonix as a reliever hub as opposed to a connecting hub such as Denver. Not to mention Pheonix is a larger city.
Ah, but what the hell do I know... I am just your average José speculating on somthing I do not have a damn clue about
legacy-to-LCC
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- Feb 20, 2004
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if you could post a population density map, that might be a better analytical tool. i know i would be curious to see it...alas, i am too lazy to find one.
oldiebutgoody
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- Aug 23, 2002
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I guess I'm a skeptic as well. I know that LCC is in relatively good position as far as the balance sheet goes, but what about UAUA? Have they even made a profit since coming out of chapter 11? These "mergers" are usually financed by outside financiers lately, so I've got to wonder what they see as far as future potential for any of these combinations. The only way to make these things pay, it seems to me, is to shed a bunch of money losing stuff, like old airplanes, duplicate routes, equipment and employees.
Makes me nervous. I think we may get some idea on Thursday when LCC announces their Q1 results, which include forecast for the future.
It's better to make these moves when money is still available, I guess, rather than waiting until there are no options.
If this thing is handled anything like the US/AWA merger, nothing will be announced until ALL the financing is lined up.
Makes me nervous. I think we may get some idea on Thursday when LCC announces their Q1 results, which include forecast for the future.
It's better to make these moves when money is still available, I guess, rather than waiting until there are no options.
If this thing is handled anything like the US/AWA merger, nothing will be announced until ALL the financing is lined up.
Dont call me Shirley
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- Aug 20, 2002
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,
BWHAAA HAAA HAAAAA. That ts the funniest ting I have seen in long time. OMG - I am still laughing.... Dougie not lowering standards. ! That IS funny. One bone to pick with you;
I need to clean wine off the keyboard..nest time you post anything, include a warning first...................Thanks for giving me a really, really, really great laugh.
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