Parker Comments @ Investment Conference

[BoeingBoy]

Moody's Investors Services reacts to merger:

Moody's drops America West to 'negative'

Parker's comments at NY conference:

America West CEO: Fuel costs wipe out gains

America West merger spurred by oil prices

Jim

 

[BoeingBoy]

Not about the conference, but from Business Week:

A Wing, A Lot Of Loans, And A Prayer

Jim

 

[diogenes]

Being as HP/US has wrung major costs as low as thye can go via BK, I wonder where that $600 mil in 'synergies' is gonna come from?

Got $20 bucks sez labor, as it currently exists at HP/US, is leaner 18 months from now.

 

[usair_begins_with_u]

Moody's drops America West to 'negative'

Yeah but what does Moody's really know about business risk anyway???

 

[767jetz]

Jim,

Does this mean I can tell old "you-know-who" that Wall Street sources, airline analysts, The Pittsburgh Tribune, and Business Week all think that this merger has very negative implications? And then I can repeat it over and over again, and throw in the word "shunned" 40 or 50 times.

767jetz

(for the humor-impaired, please note the sarcasm.)

 

[BoeingBoy]

If anyone is interested, Parker's presentation to both the Citigroup and Merrill Lynch conferences are available at the following link under "Webcasts". The slides used are also available at the same link under "Presentations" - as near as I can tell the same slides were used at both.

HP Investor Relations Page

Jim

 

[funguy2]

Being as HP/US has wrung major costs as low as thye can go via BK, I wonder where that $600 mil in 'synergies' is gonna come from?

Parker has addressed this question several times, including in yesterday's conference call. He has said the 'synergies' come from the following:

~ Consolodated facilities - airport and non-airport
~ Reduction of unprofitable flying at both HP and US (remember 60 less mainline aircraft, and I think there was some discussion of moving some of HP's 90-seaters to the east, not in yesterday's call, but in previous calls)
~ Placing HP's fare structure on US's flights
~ In-sourcing US's IT to HP, which is currently out-sourced
~ Additional revenue from adding HP's system to the Star Alliance
~ Additional revenue from becoming more competitive in major markets (he cited DFW yesterday, saying US in No. 7 and HP is No. 8 at DFW, but combined, they would be No. 3)

Those are the items I can recall... Maybe there are more? I don't know. Most of that, he discussed yesterday, but some of that is from the conference calls immediately following the merger announcement.

 

[BoeingBoy]

These are the three that intrique me:

~ Reduction of unprofitable flying at both HP and US (remember 60 less mainline aircraft,

[post="276044"][/post]​

At the same link posted above, there is the investor guidance HP issued 6/2/05 - scroll to the bottom of the page. In that, HP's fleet projection (not counting the US fleet) shows a drop from 143 to 140 planes in 3Q05 then back to 143 in 4Q05 and beyond. Makes it seem like nearly, if not all reductions will come from the US side.

~ Placing HP's fare structure on US's flights

[post="276044"][/post]​

Isn't this the one US "can't do" until CASM comes down, according to senior management and our resident expert?

~ In-sourcing US's IT to HP, which is currently out-sourced

[post="276044"][/post]​

Didn't US outsource this because it was cheaper? But now it's cheaper to bring it back in?

Jim

 

[LGA777]

When they say bringing IT in house does that mean those of us in the airport who use Sabre will be learing HP's system ?

LGA777

 

[RowUnderDCA]

These are the three that intrique me:


Isn't this the one US "can't do" until CASM comes down, according to senior management and our resident expert?
Jim

[post="276062"][/post]​

In reference to the fare structure. I always understood (made up on my own, because it made sense to me) that the "CANT DO" in regard to implementing a flatter fare structure without lower costs is that competitors would respond with fare sales that would bleed U to death, because U was vulnerable. If U has a mythical or real $2 billion in liquidity and broader market reach, it's less likely that competitors will stick in the blade..... however, they may try to prevent the re-capitalization before it takes place.

I could also understand that management might not want to S-P-E-L-L out its concerns about its ability to withstand such a strategy on the off chance they could catch DAL napping. No need to telegraph U's vulnerabilities. However, that strategy resulted in the only folks not 'in the know' were U's employees.

Again, this is total supposition on my part.

 

[USA320Pilot]

767jetz:

767jetz said: "Does this mean I can tell old "you-know-who" that Wall Street sources, airline analysts, The Pittsburgh Tribune, and Business Week all think that this merger has very negative implications? And then I can repeat it over and over again, and throw in the word "shunned" 40 or 50 times."

USA320Pilot comments: What's interesting is that if the US Airways - America West merger is so bad then why did US Airways select America West for a corporate combination and "shun" United's M&A attempt? It appears US Airways' "executive suite" selected America West over United because senior management believed a deal with the Tempe-based airline was better.

Regards,

USA320Pilot

 

[Rico]

You know, i think anyone on here would be hard pressed to come up with any merger senario involving any two airlines that would not have some critics, and naysayers.

I think Mr. Parker spelled it out quite nicely, this way AWA has a means to gain and use what U has, while in BK the particular items that HP really wants would probably be outbid for by those with a larger war chest.

And he is right, all other mergers would suffer from the same problems this one will, yet he has some flexibility in merging with U that he would not with others.

I am optimistic only because with HP would come the kind of CEO we have been needing.

 

[USA320Pilot]

Rico:

I agree with your last post and reason.

Regards,

USA320Pilot

 

[diogenes]

funguy2

60 fewer a/c entail fewer pilots,f/a',s etc, yes?

And with AC in on the deal, how many mechs will remain at HPUS?

I don't think we're done, vis a vis labor, yet.

And then, there's always the 'gimme or we liquidate' game that still has some life in it.

One hopes Parker does not go there; one does not bet the farm, however.

 

[notlayedoffyet]

When they say bringing IT in house does that mean those of us in the airport who use Sabre will be learing HP's system ?

LGA777

[post="276065"][/post]​

No, but it could mean that support will be provided by HP employees. I would take a look around and see who has the more robust system and more employees. Many airlines internally support Sabre driven systems.