The End Game

cubfan02us

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Sep 10, 2002
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From a USA today piece in airline news...


Federal officials have been lobbied more quietly on another sensitive topic: airline consolidation. Faced with the possibility of financial failure, US Airways has been building a case in Washington that an airline merger wouldn't be a bad thing.

"We've been very frank with regulators and legislators that consolidation is the inevitable next step," says US Airways executive Chris Chiames.

US Airways is in far worse shape than it was three years ago when Justice nixed its deal with United, citing the likelihood of higher fares and reduced competition. The airline hasn't made money since leaving bankruptcy protection last year. Its CEO and chief financial officer recently resigned, and the airline suggested in a securities filing this month that it might be headed back into Chapter 11.

In the case of US Airways, a prospective buyer could use the "failing firm" argument to win Justice's approval. That means the company being acquired can't survive on its own, and letting it disappear from the marketplace would be worse for consumers than a merger. In the only big airline acquisition in recent years, American Airlines used that defense against antitrust action when it bought TWA in 2001. TWA was entering bankruptcy court for the third time.

Gerchik, the former DOT official, says federal policymakers should recognize that the environment has changed for airlines, and that some consolidation may be unavoidable. "For the next two, three or four years, this industry will have a lot going on," he says. "Airlines are going to need a lot of support."

Contributing: Dan Reed

There is nothing new here but while all Airways employees are focused on
the third round of cost cuts,the company is also moving foward with it's "Plan B".

PIT's end as a hub is just another signal of the plan,but cost cuts are needed to
keep us alive till the merger.I'm not sure what each labor group has in place for
seniority integration,but during these upcoming talks protection for the employees
should be a high priority.

Many posters have discussed this merger scenario before and in greater
detail than I can,but if you listen you can hear the sound of inevitability.
 
I agree. Consolidation is inevitable. I just don't think they will take the employees. Ours are far too senior. I think it will be more like an asset sale and a chance for U employees to hire on with another company. I hope I'm wrong.
 
networking said:
I agree. Consolidation is inevitable. I just don't think they will take the employees. Ours are far too senior. I think it will be more like an asset sale and a chance for U employees to hire on with another company. I hope I'm wrong.
Chances are they'll take the employees but they'll do so on their terms ie starting at the bottom of everything from pay to seniortity etc. Assets can be bought without the employees and then staffed most likely by those that use to work the assets for the former company.
 
MrAeroMan said:
Chances are they'll take the employees but they'll do so on their terms ie starting at the bottom of everything from pay to seniortity etc. Assets can be bought without the employees and then staffed most likely by those that use to work the assets for the former company.
Why would they when many of them have their own employees on furlough????
 
Midway never merged with NW, Midway had an agreement and NW pulled the plug and ML when out of business.
 
700UW said:
Midway never merged with NW, Midway had an agreement and NW pulled the plug and ML when out of business.
Thanks 700UW. Maybe that will switch on the light bulb for anyone thinking of a possible NWA merger.
 
ITRADE said:
Why would they when many of them have their own employees on furlough????
It would be much cheaper to buy the assets and then hire the former UAIR workers at entry level wages than to staff with furloughed employees. That being said I doubt whichever carrier obtains the assets they won't have the number of employees in the cities that the assets are to cover the need. While some could relocate and fill the vacancies there still wouldn't be enough interest to staff the entire operation with those from the furloughed ranks. For example let's talk about Charlotte. How many people on furlough would accept a job in Charlotte if most of their family and friends are in let's say Phoenix? Some would but not in the numbers to cover the need to staff CLT.
 
The sad reality is that there is likely no one who is able or needs to buy another airline right now. The quest to gain further market share is more likely a long war of cost competition and new routes. Acquisitions may meet the "come rescue us" fantasies of some, but simply aren't realistic under the current competitive and financial environment. If struggling airlines aren't able to restructure on their own, there are many companies with better costs and under utilized assets and furloughed employees that will gladly take up the slack.

Consolidation doesn't necessarily mean someone will buy a struggling carrier. It just as easily means that fewer airlines will survive. A purchase would satisfy the wants of someone who has a very large investment at risk, or is facing a very uncertain employment future. I feel for all who work for any struggling carrier, but there is probably no inevitable purchase of anything other that the odd bunch of slots, gates, or parts of the shuttle.

No one has the cash or is that foolish to buy more than that, and no investment banker would under-write such risk IMO,

JB Guppy :(
 
jbguppy said:
The sad reality is that there is likely no one who is able or needs to buy another airline right now. The quest to gain further market share is more likely a long war of cost competition and new routes. Acquisitions may meet the "come rescue us" fantasies of some, but simply aren't realistic under the current competitive and financial environment. If struggling airlines aren't able to restructure on their own, there are many companies with better costs and under utilized assets and furloughed employees that will gladly take up the slack.

Consolidation doesn't necessarily mean someone will buy a struggling carrier. It just as easily means that fewer airlines will survive. A purchase would satisfy the wants of someone who has a very large investment at risk, or is facing a very uncertain employment future. I feel for all who work for any struggling carrier, but there is probably no inevitable purchase of anything other that the odd bunch of slots, gates, or parts of the shuttle.

No one has the cash or is that foolish to buy more than that, and no investment banker would under-write such risk IMO,

JB Guppy :(
HUH?? :wacko:

There are a host of LCC's (JetBlue, Southwest, America West, AirTran) that could purchase various pieces of UAIR easily. They have access to the capital markets that the legacy carriers don't have and with their cost structure would be immediately profitable. The "Rescue Us" fantasy you speak of is very realistic if and when those assets become available but what you won't see is a legacy carrier as the purchaser.
 
I think that jbguppy is responding to the notion that US would be acquired in a major hunk - or in one whole piece - and simply integrated into the acquiring carrier's system (a la TWA).

Both you and guppy hypothesize about the likely fact that US Airways would be liquidated and parted off in very, very little pieces (i.e. 40 aircraft to JetBlue, 1 set of gates at LGA, 1 set of gates and slots at DCA, etc.)
 
jbguppy said:
The sad reality is that there is likely no one who is able or needs to buy another airline right now. The quest to gain further market share is more likely a long war of cost competition and new routes. Acquisitions may meet the "come rescue us" fantasies of some, but simply aren't realistic under the current competitive and financial environment. If struggling airlines aren't able to restructure on their own, there are many companies with better costs and under utilized assets and furloughed employees that will gladly take up the slack.

Consolidation doesn't necessarily mean someone will buy a struggling carrier. It just as easily means that fewer airlines will survive. A purchase would satisfy the wants of someone who has a very large investment at risk, or is facing a very uncertain employment future. I feel for all who work for any struggling carrier, but there is probably no inevitable purchase of anything other that the odd bunch of slots, gates, or parts of the shuttle.

No one has the cash or is that foolish to buy more than that, and no investment banker would under-write such risk IMO,

JB Guppy :(
jpguppy:

I agree, and have stated this many times. Consolidation can simply mean that one company ceases to be. Consolidation does not equate to mergers. For example, the in-state Alaska market place "consolidated" when MarkAir ceased service leaving only Alaska Airlines in the market.

Unfortunately, while I think a number of the parts of US Airways may be attractive to other airlines or investors, I think the whole company will not be. The problems are too large to fix.

While I hate the comparison, I think this is looking more and more like Eastern Airlines liquidation. After Lorenzo and all that, no other airline would touch Eastern with a ten-foot pole, because their problems were just too big. At the time, I thought that what was left of Eastern, primarily a hub at ATL, some aircraft, slots, and prime facilities in a number of spots, would make a nice addition to UAL or American or Northwest, or even completely merged into Continental. However, none of those other companies wanted to deal with the internal problems at Eastern Airlines. Of course, it was also the Gulf War I, and cash was tight at all the airlines. Thus, Eastern was left to die, with a few takers taking pieces in liquidation.

I think the same will happen to US Airways... They will sell the Shuttle assets, the Wholy-owneds, etc, until their is just not enough left for anyone to worry about. I don't hope for this to happen, but the circumstances are just to similar in my opinion.
 
MrAeroMan said:
HUH?? :wacko:

There are a host of LCC's (JetBlue, Southwest, America West, AirTran) that could purchase various pieces of UAIR easily. They have access to the capital markets that the legacy carriers don't have and with their cost structure would be immediately profitable. The "Rescue Us" fantasy you speak of is very realistic if and when those assets become available but what you won't see is a legacy carrier as the purchaser.
With 250-300 aircraft being delivered in the next few years between them, Southwest, JetBlue, and AirTran could simply replace US Airways without needing to acquire any part of them. While they may have the resources, they may not have the need or desire. Their investors already seem quite pleased with their performance (overall).
 

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