None of the smaller carrier bring any value to USAirways. US wants global expansion . Only UA,DL, and AA can give them that .
Merger Mania Thread
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None of the smaller carrier bring any value to USAirways. US wants global expansion . Only UA,DL, and AA can give them that .
OP
SparrowHawk
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Spirit would seem to address at least a small portion of worldwide expansion. The other thing that should appeal to DP & SK is that upon acquiring Spirit they could announce they are converting the whole airline to Spirits ULCC business model, complete with MILF fares and the "Big Seat Up Front" Just being able to do that should give Dougie a woody a yard long.
Besides, with all those South American routes a certain US Exec could get hammered and abusive on two additional continents!!!
Bother way is Central America considered a continent? Been a long time since High School geography.
WorldTraveler
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US is more of a network carrier than a low fare carrier.... NK (Spirit) and Sun Country are niche low fare carrier that happen to fly to some places that might be of interest to US.
Both carriers work because they have business models that are different from network carriers even though they operate in the backyards of much larger network carriers.
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US' business model flying to Europe (as part of Star) and of being a hub carrier up and down the east coast - where it has a healthy position - depends on acting like a network carrier, even if it is a small one.
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Attempting to digest smaller carriers with different business models only confuses what US is or will be... and ultimately leads to doing nothing well - although I can read that there are people here who think that defines US now.
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The reason why the DL/NW merger is working and the CO/UA merger will likely work is because they are mergers of two similar types of airlines that have resulted in larger airlines basically along the same lines. Granted, no two airlines are alike but DL/NW and CO/UA are more alike than WN/FL - which will have to resolve some significant differences in strategies and operations in order for the combined airline to work. That is also why WN is smart enough to keep operating FL for now as a separate subsidiary and not try to even connect the two airlines in the eyes of the public.
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US needs bulk to compete with its larger network peers - but it won't succeed by attempting to merge with another airline with a different type of business model unless they very intentionally and methodically figure out how to come up with a unified model for both and then move toward that model.
Both carriers work because they have business models that are different from network carriers even though they operate in the backyards of much larger network carriers.
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US' business model flying to Europe (as part of Star) and of being a hub carrier up and down the east coast - where it has a healthy position - depends on acting like a network carrier, even if it is a small one.
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Attempting to digest smaller carriers with different business models only confuses what US is or will be... and ultimately leads to doing nothing well - although I can read that there are people here who think that defines US now.
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The reason why the DL/NW merger is working and the CO/UA merger will likely work is because they are mergers of two similar types of airlines that have resulted in larger airlines basically along the same lines. Granted, no two airlines are alike but DL/NW and CO/UA are more alike than WN/FL - which will have to resolve some significant differences in strategies and operations in order for the combined airline to work. That is also why WN is smart enough to keep operating FL for now as a separate subsidiary and not try to even connect the two airlines in the eyes of the public.
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US needs bulk to compete with its larger network peers - but it won't succeed by attempting to merge with another airline with a different type of business model unless they very intentionally and methodically figure out how to come up with a unified model for both and then move toward that model.
OP
SparrowHawk
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@ World Traveler,
I'm reminded of the consolidation in my industry (Office Products). Most all of the makers of copy machines sold/sell through distributors. This was especially true up until around 1992. Then we had a company called Alco Standard which was a distributor of fine paper. Alco started buying up copier dealers. Average sales annually for these dealers was anyplace from 6 Million to about 50 Million. This went on quietly as they allowed the acquired dealer to use their previous name. What you'd see is something similar to a regional carrier. The company might be "A-Copy, an Alco Standard Company"
Finally Also reached a critical mass and on October 1, 1996 IKON Office Solutions was born and spun off from Alco with around 4.3 Billion in Sales. 12 years later in a bold move Ricoh bought them.
My point in the above is that growth can come in two ways. Organically and via acquisition. So since US has the infrastructure having to wholly owned subsidiary companies that slowly US starts picking off these 6 to 50 plane airlines, integrate them into the general res system as shared services only. Then once these subs reach say 150 planes combined, US folds them into US and BLAM you've got a five or six hundred mainline aircraft airline. NK when it's all done gives you probably 70 planes, solid management, throw in USA 3000 and their 8 planes, Sun Country's 12 and a few others out there maybe even Republic and all of the sudden you're not little anymore.
US has probably 4 years to put this together prior to the arrival of the AB350's. If the money & timing is right US could IMO make itself an international player and a solid competitor. In this case slow and steady wins the race
I'm reminded of the consolidation in my industry (Office Products). Most all of the makers of copy machines sold/sell through distributors. This was especially true up until around 1992. Then we had a company called Alco Standard which was a distributor of fine paper. Alco started buying up copier dealers. Average sales annually for these dealers was anyplace from 6 Million to about 50 Million. This went on quietly as they allowed the acquired dealer to use their previous name. What you'd see is something similar to a regional carrier. The company might be "A-Copy, an Alco Standard Company"
Finally Also reached a critical mass and on October 1, 1996 IKON Office Solutions was born and spun off from Alco with around 4.3 Billion in Sales. 12 years later in a bold move Ricoh bought them.
My point in the above is that growth can come in two ways. Organically and via acquisition. So since US has the infrastructure having to wholly owned subsidiary companies that slowly US starts picking off these 6 to 50 plane airlines, integrate them into the general res system as shared services only. Then once these subs reach say 150 planes combined, US folds them into US and BLAM you've got a five or six hundred mainline aircraft airline. NK when it's all done gives you probably 70 planes, solid management, throw in USA 3000 and their 8 planes, Sun Country's 12 and a few others out there maybe even Republic and all of the sudden you're not little anymore.
US has probably 4 years to put this together prior to the arrival of the AB350's. If the money & timing is right US could IMO make itself an international player and a solid competitor. In this case slow and steady wins the race
Toothy Grin
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How are flight attendants not standing up for themselves?
You realize any job action that entails a strike is illegal at least for the moment.
You realize any job action that entails a strike is illegal at least for the moment.
US made an attempt at a fll operation back in the 2303-2005 time frame. This was before Spirit really even had the FLL operation. The reason it wasn't successful for US was mainly due to customs facilities and the airport infastructure. Baldanza and a few other US guys left and went to Spirit and guess what? They order the Airbus and expand like gangbusters, pay to improve the customs issue and they airport has changed a lot since then to support a hub carrier there. Remember, Spirit didn't become a ULCC until Baldanza arrived in late 2006 I believe. Now look at their labor costs... their pilots are probably industry leading or a close second for narrowbody airbus. Yet the airline makes money.
As far as US not being able to merge with smaller airlines, I think that is a load of bull. This airline is made up of several small niche carriers and airlines that had all kinds of different business plans at the time of aquisition. All of their plans were changed once aquired to what we have now. For the most part it has been successful or we wouldn't be around. These smaller carriers are easier to merge and digest and as far as the earlier comment of UA/CO being a success, I think that is still up in the air. They are having similar labor and integration issues as we had, so time will tell.
My magic 8 ball tells me US will not be merging with AA, UA or DAL but some type of combo with Hawaiian, Spirit, Alaska and or Frontier/Republic.......
As far as US not being able to merge with smaller airlines, I think that is a load of bull. This airline is made up of several small niche carriers and airlines that had all kinds of different business plans at the time of aquisition. All of their plans were changed once aquired to what we have now. For the most part it has been successful or we wouldn't be around. These smaller carriers are easier to merge and digest and as far as the earlier comment of UA/CO being a success, I think that is still up in the air. They are having similar labor and integration issues as we had, so time will tell.
My magic 8 ball tells me US will not be merging with AA, UA or DAL but some type of combo with Hawaiian, Spirit, Alaska and or Frontier/Republic.......
Well then you need to buy a new Magic 8 ball because the one you have is lying to you . That USAirways can merge with smaller airlines ?? Of course they can .Do they want to ?? No.
WorldTraveler
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Sparrow,
Good reminder that airlines can learn from successful business strategies elsewhere in the business world....
it is indeed possible to operate separate airlines as subsidiaries - but there are few if any examples where it has been successfully done. DL's various low fare carriers within a carrier, UA Ted, US and CO's etc... all proved that it is very difficult to obtain any benefit from a separate company inside of a company - yet you have alot of the costs.
I don't see much benefit of acquiring another airline with the intentional of operating it separately - nor do I see any evidence that it has worked.
We need only look at Republic's current problems with Frontier to realize how a previously well run company is being dragged down by the problems of a subsidiary.
To be honest with you, US couldn't compete with NK in FLL because other carriers including B6, DL, and WN all decided they were going to protect or develop the domestic markets from FLL - which are necessary to make int'l work.
NK has made FLL work because it is a lower cost carrier than even B6 and WN and because it only has as much presence in FLL domestically as it needs to support its int'l hub.
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US COULD merge wiht other smaller carriers- but it has to convince each of those airlines that it is the best option for each of those carriers in a merger. In each of the cases you cite, those airlines all say they want to be independent and build a business case around that and/or they would have to compete with other network carriers that could provide more value in a merger scenario - ie AA and DL's larger west coast presence makes them more valuable to HA or AS than to US.
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Remember also these other airlines are largely succeeding; US has not digested its previous merger.
It is also not valid to say that US is a successful merger of multiple airlines.... US East and specifically the PHL, DCA, CLT corridor is what is generating revenues for the company and where it intends to focus.
FYI, Spirit's operation from FLL to Latin America is absolutely not dependant on any domestic feed. I know because I used to work there. I would be willing to bet there are less than 15-20 passengers per flight on average connecting onward out of south florida. I'm not talking the vfr island flying I'm talking the true Latin America markets such as Bogota, Lima, Cartegena, Panama City, Armenia, Guatamala City, Managua, Medellin, toluca, el salvador, I'm sure there are a few others as well. A lot of these flights leave FLL after 20:00 as this is what the Latin American population wants.
The few flights US had were scheduled at poor times. Since it wasn't a true crew base they didn't have the aircraft or crews in Fll to really be competitive with NK or AA down the road at MIA. AA schedules the same way, all night flying. There is such a demand in South Florida for this Latin American growth that Spirit and B6 are coexisting on routes out of FLL and MCO and AA down in MIA hasn't chased anyone off these routes. If US were to merge with Spirit, US would really be competing with AA not B6 or WN. It is time for US to start competing instead of retreating shrinking and merging.
WorldTraveler
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psw,
according to DOT data, NK's FLL-Latin America routes - as well as the Caribbean routes - absolutely DO carry connection passengers - on average 25-35%. That is a smaller percentage than AA at MIA and while NK's capacity is alot less than AA's to Latin America, they very much compete in key markets such as LGA, BOS, LAX etc to Latin America. On the domestic segments to/from FLL, they carry 15-20% connecting on to Latin America.
They have very much created their Latin system to benefit from flow traffic - and that flow traffic is actually worth quite a bit more than their local FLL traffic... in otherwords the stimulate the local FLL market in order to develop a sufficient traffic base to support the flights but then they obtain about half of their system revenue on those flights from connecting passengers coming from outside of FLL. They could not operate their Latin or Caribbean flights without connecting traffic.
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But the point still remains that NK is a niche, standlone ULCC and they have a business model that works based on that.... in order for another carrier to acquire them, the acquiring carrier would need to produce MORE revenue than what NK obtains now. Every business case for a merger is based on IMPROVING what another carrier already operates.
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It is highly unlikely that a subsidiary where US simply fed more traffic to a subsidiary carrier - such as NK - that operated separately - could produce real benefit without resulting in significantly higher costs to NK's model.
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Further, part of the reason why carrier within carrier models don't work is because labor does not like the idea of a company being able to shift work between subsidiaries - and thus seek to obtain identical labor provisions to prevent that kind of thing from happening.
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I will never say it is not possible to have a carrier within a carrier concept work but it has never been done in the US successfully.
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If US were to decide to acquire another carrier such as above - and B6 could be added to that list - then US has to compete both in terms of funding and in terms of the merits of the business proposal with other carriers that are larger and have greater ability to demonstrate value.
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These principles have also been demonstrated by the fact that the best chance for US to acquire a larger carrier - which as others have noted is what US needs - can happen when those other carriers are in bankruptcy and US can move in what that carrier has little chance to defend itself.
If US thought they could obtain more value for US right now through a merger, they would likely do it.
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While alot of people criticize Parker for alot of things, he has a pretty good sense of strategy in the industry and what it will take for US to succeed.
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What I believe needs to be done to make US' current network work better is provide above average levels of service to give passengers a reason to choose their smaller network.
according to DOT data, NK's FLL-Latin America routes - as well as the Caribbean routes - absolutely DO carry connection passengers - on average 25-35%. That is a smaller percentage than AA at MIA and while NK's capacity is alot less than AA's to Latin America, they very much compete in key markets such as LGA, BOS, LAX etc to Latin America. On the domestic segments to/from FLL, they carry 15-20% connecting on to Latin America.
They have very much created their Latin system to benefit from flow traffic - and that flow traffic is actually worth quite a bit more than their local FLL traffic... in otherwords the stimulate the local FLL market in order to develop a sufficient traffic base to support the flights but then they obtain about half of their system revenue on those flights from connecting passengers coming from outside of FLL. They could not operate their Latin or Caribbean flights without connecting traffic.
.
But the point still remains that NK is a niche, standlone ULCC and they have a business model that works based on that.... in order for another carrier to acquire them, the acquiring carrier would need to produce MORE revenue than what NK obtains now. Every business case for a merger is based on IMPROVING what another carrier already operates.
.
It is highly unlikely that a subsidiary where US simply fed more traffic to a subsidiary carrier - such as NK - that operated separately - could produce real benefit without resulting in significantly higher costs to NK's model.
.
Further, part of the reason why carrier within carrier models don't work is because labor does not like the idea of a company being able to shift work between subsidiaries - and thus seek to obtain identical labor provisions to prevent that kind of thing from happening.
.
I will never say it is not possible to have a carrier within a carrier concept work but it has never been done in the US successfully.
.
If US were to decide to acquire another carrier such as above - and B6 could be added to that list - then US has to compete both in terms of funding and in terms of the merits of the business proposal with other carriers that are larger and have greater ability to demonstrate value.
.
These principles have also been demonstrated by the fact that the best chance for US to acquire a larger carrier - which as others have noted is what US needs - can happen when those other carriers are in bankruptcy and US can move in what that carrier has little chance to defend itself.
If US thought they could obtain more value for US right now through a merger, they would likely do it.
.
While alot of people criticize Parker for alot of things, he has a pretty good sense of strategy in the industry and what it will take for US to succeed.
.
What I believe needs to be done to make US' current network work better is provide above average levels of service to give passengers a reason to choose their smaller network.
OP
SparrowHawk
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This is fun guys! just what I had in mind. Total BS and fun all at once. I did see something interesting today about Republic/Frontier that may be of note.
Whole Blasted Article
Sooooo, now we have Brian Bedford making noise that Frontier might not be around all that long and is taking steps to have it succeed or fail as a stand alone carrier separate from the Regional contract carrier business. A sale/merger of the Frontier portion of Republic might make sense for US. Some reasons why:
Thanks to the USAPA, the pilots won't have a deal in place for another few years IMO which gives US time to acquire or merge with B9, NK and Hawaiian. With Frontier struggling already, Doug could pick them up for about the same as Bedford did. Since the other two actually make money they would be tougher to bring into the mix.
Face it, love or hate Doug Parker you have to give him his due as a money guy. PLUS, and this is totally my opinion, US has what I feel is their ace in the hole in Andrew Nocella who knows how to squeeze the last nickel out of a route and plan routes to maximize revenue they could very slowly quietly alter the aviation game.
Whole Blasted Article
Sooooo, now we have Brian Bedford making noise that Frontier might not be around all that long and is taking steps to have it succeed or fail as a stand alone carrier separate from the Regional contract carrier business. A sale/merger of the Frontier portion of Republic might make sense for US. Some reasons why:
- US already has a significant Hub in PHX and could easily draw down DEN where Frontier just gets hammered by WN & UA, which would raise yields.
- MKE provides a top notch facility for the "missing" Midwest hub & would smooth out the "Bar Bell" nature of the US route structure. Could be a great gateway into Canada and if there were enough flights at decent prices an alternative to ORD.
- Good fleet compatibility because IIRC, US uses the CFM engines as well
- Extra capacity used for South/Central/ Caribbean/Canadian & domestic expansion
- No "Net New" Capacity into domestic marketplace
Thanks to the USAPA, the pilots won't have a deal in place for another few years IMO which gives US time to acquire or merge with B9, NK and Hawaiian. With Frontier struggling already, Doug could pick them up for about the same as Bedford did. Since the other two actually make money they would be tougher to bring into the mix.
Face it, love or hate Doug Parker you have to give him his due as a money guy. PLUS, and this is totally my opinion, US has what I feel is their ace in the hole in Andrew Nocella who knows how to squeeze the last nickel out of a route and plan routes to maximize revenue they could very slowly quietly alter the aviation game.
redheadtempe33
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I've always thought Frontier (not all of Republic) would make an interesting partner for US. There was an interesting thread on DEN in airliners.net:
http://www.airliners.net/aviation-forums/general_aviation/read.main/5187801/
To be blunt, F9's problem isn't customer service, costs, etc. it is yields. Their yields ... suck (see thread). I believe US could improve these yields and make DEN profitable. There is no reason for F9 to so aggressively undercut SWA.
The issue is of course, that F9, is actually quite small airline wise. Smaller than Alaska, JetBlue, and Airtran. Even SkyWest has a bigger market share. Is it worth the trouble? I don't know. It US were to buy F9 just to shut it down ... I'm sure there are wiser uses of US Airways' money.
OP
SparrowHawk
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Well I think the question really is what is the real plan for US?
If you want to spruce up the bottom line and polish the airline to be merged into another large carrier with a big pay day for the Executives then the last thing you do is go after a series of smaller airlines.
However, if the goal is to survive & grow as a stand alone then you get into doing some bottom feeding. Picking up capacity by killing off the weaker members of the herd. Nothing wrong with a little corporate Darwinism so long as it's you doing the eating of the weak. If AA hits the BK Crapper then sure you go after them, but IMO you can hang your hat on that happening.
IMO US Airways has less than nothing to lose in maintaining a dual strategy of acquiring smaller carriers while being open to a mega merger. I mean suppose they buy NK and absorb their 40 plus planes and AA hits the crapper and goes C-11. You just use the BK laws and park a few more MD-80's and do the deal.
ChockJockey
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Even more difficult than finding a merger/acquisition partner/victim of any size or color is getting the pilots to not only solve their outstanding seniority issues but formulate how another group of pilots can be integrated in addition. Even if some spectacular opportunity came along (someone else's BK or whatever) how does US overcome the leprosy that is its pilot dispute? Sure would be a shame to miss out on some real growth because the flyboys are having too much fun shoveling money at lawyers and hissy fitting on the internet...
Or is there any conceivable way that an m/a could somehow be used as an opportunity to end the deadlock?
Or is there any conceivable way that an m/a could somehow be used as an opportunity to end the deadlock?
