This is the first step that was necessary in order to make AA an attractive merger partner.
As with the case of US Airways, America West told US, not once, but twice, that it needed to lower it's employee costs and business standards to "TRASH-AIRLINE" status in order for them to even think about taking them on as a merger partner. They, US Airways, needed to become as low-class/low-cost as possible for the time being so that they could be compatible with - well, the "trash airlines" still around. As soon as this was accomplished, HP agreed to marry US. The resulting product of this merger, the US Airways of today, became a permanent trash airline itself by stripping out everything for both employees and passengers in order to make them as successful as they are today. If you wanna call that successful. After all, they did have to slightly step back from the ghetto business model. To this date, US is in this so called twilight zone (or shall we call it identity-crisis zone) between "trash-ghetto" and "full-service" airline, not really sure of what model to really follow. AA will have to assimilate to that through this bankruptcy.
In short, US Airways (aka America West) is just a few years away. Doug Parker was never going to allow a merger with a high cost airline.
Mark my words on this.... This is the preparation for a merger with US... like it or not.
I'm continually amazed that the US people who regularly trash US mgmt now expect US will be the savior for another airline and THAT other airline's creditors will want to run their airline.
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To somehow think that LCC with the lowest market capitalization in the US will win a contest for AA's hand when other carriers have multiples more value than LCC - in some cases up to TEN TIMES more value - is nothing short of an absence of reality.
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Further, I have yet to hear a single AA employee say they want to be bought by US.... if AA has to be bought by someone else, the employees can very well influence the outcome....
US' last attempt at buying a bigger airline was thwarted by the vocal objections of DL mgmt and employees - you can bet AA employees would be even more interested in avoiding a long-term relationship with US.... a dozen other airlines could provide better employment outlook for AA employees than US - as well as better returns for the creditors.
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AA has an incredibly valuable franchise, even if they may cut 10-15% of their capacity in the next 6 months as they cut their losses and get rid of aircraft they do not wish to keep long term.
There is a list of airlines as long as your arm that can run AA as good as US could - including AA by itself after its employees endure massive cuts the size of which US employees have endured. If AA employees take cuts as deep as US employees have, AA will be swimming in profits and have absolutely no need of US - and the creditors know that.
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Even if the creditors decide there is more value in selling out after AA is cleaned out than waiting for AA to return to health on its own, the fact is that every one of those other airlines can pull the same financing tricks that Doug Parker can do - and they have much more valuable companies to offer the creditors as collateral as well.
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The only way US could buy AA is with borrowed money. The deciding factor if it comes down to a choice between carriers is who can offer stock in their own company as well. IN a competition for AA vs any other airline, LCC will never have the market value to tilt the contest in its favor.
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You can take THAT to the bank.
