SOUTHWEST & AMERICAN MERGER?

[eolesen]

This isn't a new prospect... we had a whole thread on it back in January

Back in January, I wrote about how I could see a case for AMR & LUV merging, but retaining separate brands.

AA for the international/high touch, and WN remaining for the domestic, similar to how Cathay & DragonAir exist, or Virgin Australia and Virgin Blue, Qantas and Jetstar...

http://www.airlineforums.com/topic/52499-aa-swa/page__st__10#entry863088

 

[Barfbag]

We've been in a recession since Clinton's last days. WN has been successful in marketing a discounted seat throughout those year, and consistantly shown profit stability in selling that same seat.

Its been reported that we havent turned the corner toward a brighter economy yet. Housing starts still down and unemployment still higher by the minute. Thats why Obama is chasing the Cayman Islands for support.

Ineffective management and corrupt unions have bought this calamity on AMRs doorstep.

AMR is doomed.

 

[Mr Red]

We've been in a recession since Clinton's last days. WN has been successful in marketing a discounted seat throughout those year, and consistantly shown profit stability in selling that same seat.

Its been reported that we havent turned the corner toward a brighter economy yet. Housing starts still down and unemployment still higher by the minute. Thats why Obama is chasing the Cayman Islands for support.

Ineffective management and corrupt unions have bought this calamity on AMRs doorstep.

AMR is doomed.

AMR is not doomed, the employees are if they vote for this bologna!

 

[AMFAinMIAMI]

Merging with southwest or Alaska airline will be the best thing that could happen to the mechanics of AA. think about it both are represented by a craft union AMFA. Lets cross our fingers and HOPE that this HAPPENS.

 

[AMFAinMIAMI]

Another reason merging with SWA would make for the better merger is the fact they have an all B737 fleet. So we would not have to retool to work the airbus. Cut down on Pilot, F/A, A/C maintenance training. Total savings so we all can recover our lost concessions.

 

[700UW]

Never happen.

 

[WorldTraveler]

This isn't a new prospect... we had a whole thread on it back in January

Back in January, I wrote about how I could see a case for AMR & LUV merging, but retaining separate brands.

AA for the international/high touch, and WN remaining for the domestic, similar to how Cathay & DragonAir exist, or Virgin Australia and Virgin Blue, Qantas and Jetstar...

http://www.airlinefo..._10#entry863088

If AA and WN can merge, then there is no reason that AA and DL could not. At least AA and DL have a couple of major competitors in their major overlap market - NYC - while AA and WN have N. Texas locked up via not just one but two airports and there is no realistic way any other carrier could crack it in any significant way.

The logic might work as far as the domestic/int'l differences in service but there are so many cultural differences between AA and WN that the company could never launch.

AA could probably putt-putt around as a distant number 3 for years, waving bye-bye to the FFers and corporate accounts that DL and UA steal away. But if AA wants to be a player again, they need US. If US employees want long-term stability, they need AA. Who needs who more? Not an important question, seems to be just for bragging rights, much like the "who bought who?" that US east and west still argue over, so I'll keep my opinion to myself.

AA could in fact exist as a niche carrier for quite some time... AS is a high yield niche carrier alongside much larger carriers on the west coast. V America is a niche carrier in its own right generating premium revenues although lower costs notwithstanding, it is still not profitable. If fact, most of the Virgin carriers are niche carriers with strong revenue generating capabilities right beside much larger carriers.
It is a myth that AA MUST merge in order to compete.
AA STILL generates average revenues comparable to DL and UA on a system basis.

 

[signals]

You seem to deflect the AA/DL merger when I bring it up, WT. Yet you elude to it.

I don't believe an AA/WN merger is any possibility since WN is still in the process of fixing its own house.

Much like DL, AA has existed for years and has seen it all and knows the various outcome of different scenarios. Could it be that in an airline evolution, strange bed fellows come together? What if AA were to sell(or auction) what other airlines want for a profit, is it possible? If DL wants a certain market that AA has a stronghold, could it make an offer on said market?

 

[WorldTraveler]

While the US fan club and mgmt want to think otherwise, I think AA and DL have both come to the conclusion that there is not enough to be gained from any additional mergers between the large network/legacy carriers. There could be some smaller incremental growth thru mergers involving smaller players and the big carriers - but the value added with a merger between the big 4 is just not there.

1. Despite continuous noise about how AA needs US in order to be of a size to compete with DL and UA, there is no evidence that AA cannot now or will not in the future be able to compete with DL and UA given its current size. In fact, to the contrary, AA is generating unit revenues on par with DL and UA.
2. The biggest thing US brings to AA is domestic mass east of the Mississippi esp. in the SE, but UA doesn't largely have that south of Washington, DC... AA's strength in MIA and S. Florida might balance out its relative weaker position in the NE to DL and UA better than UA's strong presence in the NE but without strength in the SE. The only real way to know is via global sales accounts that need a presence in that region.
3. While the SE is a revenue rich region, AA does have a decent enough presence in the key revenue markets including ATL, RDU, and BNA etc - and again larger than UA in many of the non-Florida markets with heavy business travel.
4. US still doesn't address AA's need for more presence in Asia - and there is nothing in US' route system that provides a good foundation for building it any better than what AA already has.
5. US' larger presence in continental Europe is largely due to the Star Alliance. If AA and US merged, it is quite likely that US' European operations would be realigned to the UK and Spain along oneworld lines. oneworld overall needs more presence in continental Europe - US wouldn't fix that.

AA mgmt and creditors are probably fighting a merger with US not because AA mgmt wants to get its rewards on its own but because the case simply cannot be made that US can add enough value to AA given the cost required.


WN simply does not have enough similarity with AA's business model to justify trying to operate two completely different types of airlines together, even if they are maintained separately.
There is no evidence that such a merger has ever worked and neither AA or WN investors or mgmt are willing to try something so bold with such little evidence it could work.

WN gains very little from affiliating w/ a large network carrier and the only gain for AA is increased mass - with evidence showing that AA really doesn't need it to compete. AA and WN's combined size in D/FW and Chicago at different airports would likely create antitrust problems, and wouldn't help AA where AA needs it - in the corporate travel rich NE.

---

If AA emerges independently - as is likely - and merges with AT MOST ONE other small/medium sized US carrier - and maybe none - (the chances of a multiple merger are slim both in terms of the other two carriers both agreeing - remember most of the other carriers are healthy - they have little reason to take on risk in a double merger, regardless of the partner PLUS a double merger with AA will evoke some sort of response from DL or UA, both of which are capable of digesting another merger if they HAD TO)... the competitive environment looks like this:

DL: still needs to build its presence on the west coast, in Latin America, and at LHR. Outside of AA, there is no real US carrier solution to DL's int'l needs. AS could help in the west coast but is expensive for a bunch of domestic mass. Rumors of a DL/HA merger are growing... HA is relatively cheap and it is growing in the Pacific which is both attractive to DL but also a threat to DL's dominant and profitable position in the Hawaii-Japan market. Open Skies are coming to the few remaining markets in Latin America that don't have it now; DL may never be as large as AA but if it serves the key markets, that is enough to be a player in the game - just as AA is holding onto its relative revenue parity despite DL and UA's larger size in other markets. With the Latam merger, UA will likely lose a major partner in Latin America, esp. via JJ, which provides opportunity to DL. at LHR, DL could buy alot of slots for the money it would take to spend on a messy or difficult merger... and again the question is how big DL needs to be to attract key corporate revenue. Data shows that DL is competing well in the NYC-LHR market against much larger AA/BA as well as in the LHR markets where DL does fly.. they simply don't have the mass to serve the whole US-LHR market - but that is the same argument that should hinder AA on the east coast vs. DL - but the reality is that there isn't a difference in bottom line revenue numbers between AA, DL, and UA.

It isn't necessary to be #1 in every market for any carrier and if the price is too high to obtain it, it isn't worth trying.

UA - has a very strong network but will only address its limited presence in the SE (which is one of the largest revenue regions in the US) and in Latin America via a merger with US which would only provide the domestic piece or AA's Latin operation at MIA (which would evoke a bidding war w/ DL that could become costly for either) or internal growth with some help from alliances (most likely scenario for both DL and UA in the S. Florida-Latin America market). UA's position in the NYC market and the NE is being challenged by DL and could be even further eroded if AA and B6 pursue a merger, even if some divestitures are required.
UA still has to come to grips w/ the much higher labor costs necessary to merge the UA/CO work forces - and the fact that with comparable labor rates to DL - and perhaps even AA - UA cannot make money.

US - US simply does not have the mass necessary to compete against larger carriers, even with its mass on the east coast, predominantly in smaller markets. Again, given that DL can duplicate what US has - but AA and UA do not have it - there isn't a huge competitive disadvantage to AA and UA.

There will continue to be opportunities for the big 3 to continue to steal share from each other in key markets..... and from smaller carriers.

Growing joint ventures, equity stakes in foreign carriers within the limits that are allowed, smaller asset sales, and internal growth will be where the big 3 US carriers are likely to focus their attention.

 

[luvthe9]

Dear God, please don't ruin WN with AA "corporate culture".

Dear God, please don't ruin AA with US "corporate culture".

 

[Frank Szabo]

Dear God, please don't ruin AA with US "corporate culture".

I also believe LUV would have the most to lose.

Any tie-up with AA or US would certainly poison their water thanks to AA's recent 3 CEOs, its twu "union" (should be called a fragment), and the same pissed-off attitude from the people of US - and to think this situation never had to be that way to begin with.

I guess this is how executives get their rocks off.