Merger Relief for American Airlines: April 24, 2012

[diamondcutter]

since you are enjoying digging around in the archives, let me remind you that the merger has not even been approved, let alone implemented or tested to the same standards of the other megamergers that went before.

Perhaps it would be fair to assess AA-US 4-5 years after it actually occurs to see how accurate what was said now actually relates to what occurred, don't you think?

That's your come back , really? Just be a man and own up to your post.

 

[wings396]

Anybody remember when the Fonz tried to say he was wrong on Happy Days, and he couldn't get it to come out of his mouth? Kinda reminds me of that episode...

 

[WorldTraveler]

I offered to pay the only person who made a bet as to whether AA would emerge as a standalone or not.... that is the only part of what I have written that can be determined to be true or not - and that is based solely on a plan that might not be executed for another six months.

Parker has made promises to the AA creditors which they believe will yield a better return than what AA standalone could have done; that is true.

But it will be years before we know whether all of the promises about growth, pay raises, and number of employees turns out to be true or not.

I can absolutely assure you that if you want to keep digging around trying to prove me wrong, I will be right behind you with a clipboard - and it won't be very difficult to find evidence showing who actually was more accurate.

 

[mistified]

I can absolutely assure you that if you want to keep digging around trying to prove me wrong, I will be right behind you with a clipboard - and it won't be very difficult to find evidence showing who actually was more accurate.

Keep it coming

BUMP!

 

[wings396]

So you are willing to carry around a clipboard in order to prove that you're right some of the time? I'm thinking that perhaps you should have been a weather forecaster instead. That's one of the few jobs that enables you to only be right some of the time, while still keeping your job.

 

[WorldTraveler]

yet, you and mystified, and diamondcutter want to claim victory because AA labor forced the creditors into a merger with Parker who has yet to deliver on any of the promises he has made, including even getting the merger approved w/o significant divestitures?

You want to click your heels in the air w/ glee about what you have accomplished - when in reality all US labor has done is play real nice with your CEO who pays US labor the lowest among any network airlines. If I were a creditor of AA, I'd be tickled pink at the prospects that Parker can pull off a snake charming routine with its own people and AA labor leaders think that will be beneficial for them.

We won't even get into all the basic facts of the merger including that AA's labor costs which have yet to be the lowest in the industry will jump dramatically, AA has yet to turn a profit and the US' profit is far smaller than AA's losses, and AA's revenue performance along with US' is middle of the pack average - which makes all the talk of growth and maintaining this massive network even more far-fetched. Average revenue growth and the fastest growing labor costs over the next few years - if Parker delivers on what he has promised - are no formula for financial success. Add in that AA has committed to tens of billions of dollars in aircraft purchases more than his peers who will still be able to match his fleet efficiency and $10B or so in pension obligations, and the chances of the new AA being a long-term financial success are somewhere between slim and none.

Again, I'll check back and remind you on how well the merger delivers on what was promised when something is actually delivered 'cause that's what you seem to want to do.

If even 25% of what I've said in this thread about AA's finances are true, you should be running-for-the-hills-scared about the future.

 

[mistified]

More "quoteable quotes"

You want to click your heels in the air w/ glee about what you have accomplished - when in reality all US labor has done is play real nice ....

We won't even get into all the basic facts of the merger...

Again, I'll check back and remind you on how well the merger delivers on what was promised when something is actually delivered 'cause that's what you seem to want to do.

These sound like the quotes of a very angry person. What do you folks out there in the peanut gallery think?

 

[WorldTraveler]

how about you spend a couple minutes looking in a mirror with your collective peanut gallery and then you might see who is really angry.

Who pulled out a nearly year-old thread in order to try to discredit me?

Who has voted down my posts thousands of times regardless of the topic in an attempt to silence me into shame, yet without success?

Who has been unable to engage in a discussion of the very real facts regarding the industry and its dynamics which I have repeatedly posted regarding AA and US and from which far too many of you somehow think AA/US will be exempt?

I have repeatedly engaged the tough questions regarding the airline industry and tackled them day in and day out, yet far too many people have thought that calling me a manipulator of the post voting system - while they did the very same thing - will win votes (as if that changes the truth) instead of discussing the real issues.

The reality is that despite the fact that AA/US have announced a merger, they have yet to turn around the fundamental aspects of the way both airlines have been run for years with very apparent results.

AA has yet to report a profit on a consistent basis and US' profits are nowhere close to being large enough to cover AA's losses.

AA has committed to tens of billions of dollars in debt for new aircraft that are not going to produce efficiencies above what other carriers are achieving with far less expense.

AA and US will both see labor costs soar far higher than the rest of the industry as the price of getting labor to support the merger.

Neither AA or US have reported revenue growth on par with the best in the industry - yet costs will grow far faster than the rest of the industry which means capacity will have to come out of their system.

AA and US continue to lose market share to competitors in key markets throughout their system; about the only place where that has not happened is in Latin America and protected markets such as N. Texas where competitors have not had the opportunity to compete on an equal and fair basis.

AA and US still have enormous labor issues to resolve in order to obtain the true benefits from the merger.

AA/US have thousands of employees more than other airlines have for networks of comparable size.

Regulators have yet to indicate that they are anywhere close to approving the merger w/o significant divestitures, or else if they forego divestitures they provide an opening for competitors to expand in key markets because AA/US will avoid divestitures only if the US government allows market concentration far higher than it has ever allowed in other mergers.

AA/US still has major strategic weaknesses in key parts of the world such as Asia for which they have no reasonable or viable ability to resolve.

and we could go on.....

no, I'm not angry. I've repeatedly raised issues which you and others don't want to hear so have tried to shut me down so that you can say what you want; several of you have been open and honest enough to say as much so I don't even have to jump to conclusions.

Participate in the conversation on the basis of what was presented.

Continued attempts to shame me into silence including thru mob appeal only emboldens me to keep publishing the notes on my clipboard...

or you can worry yourself with discussions of pass benefits, jumpseating policies, and broken jetway air conditioning and I'll stay far from those conversations.

 

[robbedagain]

WT just the other day on the www.justplanenews.com website there was a link to an article that had something like this... asia may not be as essential as first thought i dont remember what day i had seen that but it seems like it was just a few days ago.. i still think though with the massive aircraft orders some or a lot of those are going to be replacement planes and combined with us' orders i would imagine that its possible that they can open new cities thru out the world as they take deliveries

 

[WorldTraveler]

There will always be justification as to why being small in any part of the world is acceptable but it doesn't change the fact that Asia is a very fast growing region of the world, like Latin America, but Asia is a much larger market.

Asia also has far more open markets, which means that the performance of airlines in that region today is far more indicative of the long term than in Latin America where AA has done as well as they have because they have a protected monopoly from MIA, one of the largest gateways to the region, and competitors have had little ability to grow there.

Airplanes do not translate into profits. AA has been flying to Asia for years but has dramatically underperformed its US rivals UA and DL in the region for most of the time. The only current AA route to Asia where AA is not outperformed financially by DL or UA is DFW-NRT because AA has no competition on that route.
Thus there will be a whole lot of people watching how AA does in DFW-ICN against KE which is not only financially strong but also is allied with DL.

AA mgmt. said early in the BK - while they were still pushing a standalone plan - that they would grow the airline by 20%. With the merger, those words have been dropped but no one has yet to admit that AA and US are not generating the revenues necessary to support current costs, let alone the costs that will come as a result of the labor cost increases that will come with the merger.

It isn't necessary to be the biggest in any region; AA clearly has advantages in Latin America that it is doubtful DL or UA will touch and the same is true of DL and UA in Asia relative to AA. AA will grow some in Asia - PHL is a decent enough gateway that they can mount some int'l growth. But it is not the NYC and LAXs of the world which are the largest markets to Asia and where AA has had the opportunity to grow its presence to Asia - yet without success.

To think that US is going to change that when US is smaller than AA in those cities requires leaps of logic that most of us are still trying to understand.

AA/US has a good chance of being better for many AA and US people on many levels than as a standalone. But it won't fix all of the strategic issues or bolt the new AA to positions neither company had before. And most significantly, there will be losers in the transaction likely in the form of far fewer employees than the combined companies have today. Hopefully the gains for the most will be larger than the losses but don't expect the rules of business to suddenly change for AA/US when they have been well-proven elsewhere, including in other airline mergers.

AA/US isn't the first rodeo.

Thanks for the civil and productive conversation. Others could learn from your example.

 

[robbedagain]

NP WT... as for growth you said PHL can grow.. do they have what it takes to actually handle asia nonstop with either a 777 300 or a 787 or if so which aircraft be better or even a 350 for that matter bec i know us has orders for both 350 8 and 350 9 models

secondly with all of the aircraft orders... lets hypothetically say for example the us 76s are replaced with 330 2 n 300s is it possible to open new asia routes from mia phl clt to asia as well as expand europe n mid east and latin america

 

[mistified]

And the question remains what difference does it make in the discussion at hand whether God himself or an alien from Mars is speaking. If what is being said is truth, then that will become apparent in time.
The notion that anyone has more of a "right" to speak or assert their ideas because of some proximity to the situation goes out the window when you participate in a public discussion. If you want to convince AA employees this is a good deal, talk to them in person at their work locations (assuming AA mgmt doesn't get you kicked off the property). When you choose to participate in a public forum, you have to live with input from everyone, regardless of how "connected" they are or not to the situation and whatever "right" they have or do not have to speak on the topic.
Since lists are in order, I'll make mine:
1. AA is in BK for the 1st time… morally and legally they get their chance to restructure their company using the same laws and processes that everyone else in the legacy segment has used at least once - and notably US, multiple times. The exclusivity period remains in AA mgmt and creditors' favor.
2. Only if AMR's creditors believe they cannot successfully restructure the company will they seek alternate bidders – and likely before AA emerges they will be forced to entertain alternate bids just to verify that the AA standalone plan is best for all involved. If anyone can top AA's standalone plan at the time that competing bids will be received, AA will probably NOT emerge as a standalone.
3. For now, AA is delivering ABOVE AVERAGE RASM growth, helped in part by problems at UA which continue to grow. While US is running as good of an airline as they have for years, AA is still producing superior revenue to US.
4. The largest piece of AMR's BK that remains to be done is reworking their labor contracts. History strongly supports AA's ability to succeed in the 1113 process since it has been used MULTIPLE times in the industry so far – and the law protects the company from actions by its employees. Legal actions or not, the vast majority of employees will show up the day after the cuts are made and thousands of employees are laid off; that has happened multiple times before at other airlines – and it happened at AA in 2003.
5. If a competitive bidding process emerges, it is unlikely that US, one of the financially weakest airlines in the US will be able to succeed at mounting a successful bid against other parties, including airlines outside of the US and investors outside of the airline industry. That is just hard, cold reality.
6. Despite multiple mergers and BKs, US still underperforms the industry in many key revenue-generating metrics, exactly the largest benefit they SHOULD be able to offer AA. AA can cut costs to levels necessary to compete; that is what BK does. IF AA merges with anyone, it will be based on the ability to significantly raise AA's revenue profile. Given that AA produces superior quality revenues and has a larger presence in the largest competitive markets in the country while US' revenue comes from smaller markets, US could offer very little to AA in terms of revenue.
7. Further consolidation remains likely in the airline industry. As fuel prices rise and demand consolidates among fewer players, it will continue to be necessary to have fewer airlines with broader networks. Thus, AA and US both have structural issues that put them at disadvantages to DL, UA, and WN. Given that UA and WN are still involved in mergers which are years away from being completed and are currently encountering significant difficulties, DL and US do have an advantage in being able to push consolidation but the largest and most successful players in the industry do and will have an advantage in consolidation. If AA successfully restructures, it will have considerable leeway in picking its merger partners - and it could involve B6 or AS - but probably not both at the same time. If UA completes its current merger w/o imploding, they could very well be interested in other assets, the most valuable of which remains US' CLT hub. But for now, given that everything DL needs, US also needs (but not vice-versa), it is highly unlikely that smaller US will succeed at outbidding DL in gaining the pieces necessary for DL to complete its network, particularly given that DL is generating financial returns close to the top of the network carrier segment of the industry. Throw in that there are several niche carriers including AS and B6 that also generate strong financials and could easily be interested in consolidation that involves picking up key industry assets, and it makes it even more unlikely that US will succeed at picking up one of the larger network carriers that all have very valuable industry assets.

Instead of worrying about who is posting and for what reason, how about focusing on those key realities?

 

[mistified]

AA has yet to report a profit on a consistent basis and US' profits are nowhere close to being large enough to cover AA's losses.

Neither AA or US have reported revenue growth on par with the best in the industry - yet costs will grow far faster than the rest of the industry which means capacity will have to come out of their system.

and we could go on.....

no, I'm not angry. I've repeatedly raised issues which you and others don't want to hear so have tried to shut me down so that you can say what you want; several of you have been open and honest enough to say as much so I don't even have to jump to conclusions.

 

[mistified]

more quotable (contradicting ) quotes:

-------------------------------------------------------------

on 3 May 2012 -2:32pm WT said:

For now, AA is delivering ABOVE AVERAGE RASM growth,

on 18 March 2013 - 12:02 PM, WT said:

Neither AA or US have reported revenue growth

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[700UW]

This is fun, let me get my popcorn, sit back and just read, lol!