Merger Relief for American Airlines: April 24, 2012

[WorldTraveler]

WT and others,

I posted the following thoughts about the current AA situation:

-AA should have gone Chapter 11 in 2003.
-Horton's plan for growth at the cornerstones will not work
- AA needs to merge with USAirways (preferbaly while in BK) to get the hubs in CLT/PHL/PHX. With these addedroutes, AA can compete with DAL and UAL. Without this capacity, the future of AA sounds doubtful
-AA has given up competing. In the past, an attack at a hub would be met with a response. Boston is an example of not competing
-AA should send the Embraers back to Brazil.
-There has to be changes in AA management.
-No confidence in Horton and the rest of senior management.


They weren't mine, but I've been thinking the same way. I mentioned them for those that have been offering their opinions about the subject. They are those of someone who should know a little bit more than the average poster regarding the issue.

They were reported to come from Robert L Crandall within the last two days.

later, gotta go.

WorldTraveler, sorry about getting your leg caught in the bear trap. Feel free to chew your leg off attempting to escape.

I'm glad you felt comfortable borrowing from Crandall... he doesn't run AA anymore but more significantly he isn't on the UCC. He also didn't say that he necessarily agrees with a merger with US based on savings thousands of jobs... and if he does, then I can assure you he will be disregarded as quickly as Parker was. The simple fact is that the non-labor creditors are not going to support a plan that results in higher risk to themselves with less chance of return by buying labor peace. It's just not going to happen.
An AA merger w/ a lot of entities might make sense once AA has cleaned itself up in BK - but that is precisely why everyone recognizes the need for AA to cut now.
Only if the creditors believe AA has very little or no chance of successfully restructuring under its own plan will they resort to competitive plans. Based on AA's revenue performance since they filed, they are performing ABOVE average for the industry - and better than UA and US. There is little reason for AMR's creditors to choose to merge with a company half the size of AA that is performing WORSE than AA is with respect to revenue - the key attribute that AA would bring to the merger. Throw in that BK gives AA enormous ability to get its costs in line and there is no logical reason why the creditors would support a merger with a company that has lower revenue generating ability but will have higher costs (in at least several key categories) than AA will after BK.
And it still remains that if AA's creditors do decide it is necessary to pursue competing alternatives that US will not be able to provide the strongest bid.

I said the day AA filed and will repeat it that AA's best course of action is to restructure in BK and emerge as an independent company and that involves taking deep cuts to reposition the company to effectively compete.
It just so happens that is the same line AA mgmt - not Crandall but the current set who work for the creditors - supports. Given that the non-labor creditors don't appear interested in pursuing a US merger and neither does AA mgmt, I think I'm actually on pretty solid ground. It actually is the first time in quite some time that I have been on the same page as AA mgmt - but I'm quite sure that the vision of Crandall and a whole lot of others to see an AA-US merger is not likely to come to pass.

 

[BoeingBoy]

I'd be surprised if Crandall said that the cornerstone strategy has failed, since a lot of that has to do with AA's costs being out of line with it's competition. "Cornerstone strategy" is nothing but a fancy way of focusing on the hubs with are among a hub/spoke carrier's strengths. Losing money because of high costs tends to make whatever you attempt look like a failure (even if it's the perfect strategy) and certainly he should know that.

Jim

 

[WorldTraveler]

I'd be surprised if Crandall said that the cornerstone strategy has failed, since a lot of that has to do with AA's costs being out of line with it's competition. "Cornerstone strategy" is nothing but a fancy way of focusing on the hubs with are among a hub/spoke carrier's strengths. Losing money because of high costs tends to make whatever you attempt look like a failure (even if it's the perfect strategy) and certainly he should know that.

Jim

precisely...which is why the focus has to be on cutting costs which can best be done in BK - and the greatest results will accrue to AA's creditors if AA remains standalone.
No ONE - Crandall included - has yet to demonstrate that AA/US could generate the revenue premiums necessary to compete with DL and UA. In fact, Parker et all use DL/NW and UA/CO as evidence of how AA/US would generate revenue benefits but they don't acknowledge that AA/US does virtually nothing to improve AA/US' position in key markets... where AA is strong, it will remain strong regardless of the merger.... all AA/US does is add two very different route systems that have limited ability to add strength and combine them. That is VERY different than what DL/NW or UA/CO did.

 

[wings396]

I'm glad you felt comfortable borrowing from Crandall... he doesn't run AA anymore but more significantly he isn't on the UCC. He also didn't say that he necessarily agrees with a merger with US based on savings thousands of jobs... and if he does, then I can assure you he will be disregarded as quickly as Parker was. The simple fact is that the non-labor creditors are not going to support a plan that results in higher risk to themselves with less chance of return by buying labor peace. It's just not going to happen.
An AA merger w/ a lot of entities might make sense once AA has cleaned itself up in BK - but that is precisely why everyone recognizes the need for AA to cut now.
Only if the creditors believe AA has very little or no chance of successfully restructuring under its own plan will they resort to competitive plans. Based on AA's revenue performance since they filed, they are performing ABOVE average for the industry - and better than UA and US. There is little reason for AMR's creditors to choose to merge with a company half the size of AA that is performing WORSE than AA is with respect to revenue - the key attribute that AA would bring to the merger. Throw in that BK gives AA enormous ability to get its costs in line and there is no logical reason why the creditors would support a merger with a company that has lower revenue generating ability but will have higher costs (in at least several key categories) than AA will after BK.
And it still remains that if AA's creditors do decide it is necessary to pursue competing alternatives that US will not be able to provide the strongest bid.

I said the day AA filed and will repeat it that AA's best course of action is to restructure in BK and emerge as an independent company and that involves taking deep cuts to reposition the company to effectively compete.
It just so happens that is the same line AA mgmt - not Crandall but the current set who work for the creditors - supports. Given that the non-labor creditors don't appear interested in pursuing a US merger and neither does AA mgmt, I think I'm actually on pretty solid ground. It actually is the first time in quite some time that I have been on the same page as AA mgmt - but I'm quite sure that the vision of Crandall and a whole lot of others to see an AA-US merger is not likely to come to pass.

And if it does, they will most likely be scraping you and your laptop up off the pavement in Peachtree Plaza..
What a maroon, give it a rest already.

 

[enough already]

It's funny to call somebody MORON and spell it wrong!! :-D

 

[FWAAA]

It's funny to call somebody MORON and spell it wrong!! :-D

You do realize that the misspelling was likely intentional, right?

This clip should make it clear: http://www.hark.com/clips/nsvdjzkfdz-what-a-maroon

 

[WorldTraveler]

It doesn't change that wings came out of the woodwork supporting this merger and there remains no evidence other than US' press hype that anyone other than US or AA labor leaders are buying into it.
.
But hey if you can't win on the facts, resort to character assassination because that will surely show them that you were right all along.

 

[signals]

Usually, I jump in and answer anyone that says something of interest. Instead let me sum up my thoughts...

Ha-ha

As far as a US/AA merger, well look at US's past record. Many times on a merger run only to come back empty. The one that did go through, well to hear US tell it now was very successful. But most know better(see US pilot thread that never ends) and with that in mind proves that Parker is an airline CEO and not labor friendly.

If a merger is in order, maybe US is the wrong way to go.

I find it laughable that most at US despise Delta. Perhaps from the failed takeover by Parker and company. Yet the genius at US sees a slot swap as a great idea. Yeah, for Delta!

Whatever the outcome everything will be analyzed under the microscope. If US does merge with AA, I'm sure there will be plenty of "Told you so" to go around.

 

[eolesen]

But hey if you can't win on the facts, resort to character assassination because that will surely show them that you were right all along.

Pot, meet kettle.

 

[Buck]

WT

It is OK for them to be jealous. Those of us with higher IQ's have to live it .

 

[robbedagain]

i as a us employee i think the slot swap deal was geared tofavordelta and us did nothing to try to get more out on the return. as for the merger as much as i dont want a merger i believe that there is something in the works labor at aa is supporting for as they have no confident in their mgmt team the pilots at aa and us are meeting to try to come to somekind of agreement in the event of one. US has not announced any merger but they sure arelaying the ground work though

 

[Buck]

MAY 02, 2012

Analyst: AMR may have sensed bankruptcy court is attracted to US Airways plan The executive shuffling and retirements announced by American Airlines on Tuesday has led one Wall Street analyst to believe that the company may be worried about a potential US Airways bid.

Gimme Credit analyst Vicki Bryan said American's labor troubles have lasted for more than decade and under former senior vice president Jeff Brundage's watch, the carrier's relationships with its union have deteriorated to the point where the unions are publicly supporting US Airways.

"AMR seems to be signaling that it has become alarmed enough by recent developments to suddenly sack the veteran wrangler of its decade-long position toward labor. This could mean AMR has sensed that either the bankruptcy court is becoming attracted to the US Airways plan versus its own restructuring plan or that the court is just plain losing confidence in AMR management's ability to manage its way out of this mess," Bryan wrote in an investor note on Wednesday.

-Andrea Ahles

 

[wings396]

WT

It is OK for them to be jealous. Those of us with higher IQ's have to live it .

You scored yourself with some major points by siding with this Delta cheerleader....
Way to go...
IF his IQ was even close to being high, he wouldn't be spending 23 hours a day posting on a subject that he
CLAIMS to have no affiliations with......

 

[wings396]

Usually, I jump in and answer anyone that says something of interest. Instead let me sum up my thoughts...

Ha-ha

As far as a US/AA merger, well look at US's past record. Many times on a merger run only to come back empty. The one that did go through, well to hear US tell it now was very successful. But most know better(see US pilot thread that never ends) and with that in mind proves that Parker is an airline CEO and not labor friendly.

If a merger is in order, maybe US is the wrong way to go.

I find it laughable that most at US despise Delta. Perhaps from the failed takeover by Parker and company. Yet the genius at US sees a slot swap as a great idea. Yeah, for Delta!

Whatever the outcome everything will be analyzed under the microscope. If US does merge with AA, I'm sure there will be plenty of "Told you so" to go around.

FWIW, I nor most others here despise Delta at all. However, we do get sick of listening to this bafoon blowing Delta's horn 24/7 when he claims to have no affiliation with them. I along with most others find this to be a bit absurd, and believe that he has some sort of an agenda given his dedication to this subject.

 

[Buck]

You scored yourself with some major points by siding with this Delta cheerleader....
Way to go...
IF his IQ was even close to being high, he wouldn't be spending 23 hours a day posting on a subject that he
CLAIMS to have no affiliations with......

The question is will he respond?