UA + CO

[FWAAA]

I don't doubt that the consumer protection wackos would flood the politicians with cries of "we can't let the six legacies combine into three - that would screw the consumer" nonsense. But I would hope that the Justice Department lifers would remind everyone that Southwest, jetBlue, Airtran, Frontier and the other LCCs can adequately cover the "we fly whoever is cheapest that day" crowd and allow the legacies to combine and reduce their capacity. That would, yes, result in higher RASM for the combined legacies, because they could focus less on the bottom-basement fare classes, leaving those pax to the LCCs listed above.

We don't really need six different airlines offering First Class from a variety of midwestern and eastern hubs to the west coast. We've got too many hubs competing for the declining numbers of high-fare paying pax.

 

[Bear96]

You're not dense, maybe I did not make myself clear, or it required some thinking on the readers part

To me it's clear: The politicians have to hide behind something, and allowing foreign airlines to buy up US airlines would do this. This would be a green light for the legacies to merge...

Forgive me if I am misunderstanding you, but are you saying that since there will be negative public reaction about letting airlines merge, the politicians will use the foreign ownership card as a carrot to assuage the public's reaction about mergers?

If so, I have to disagree. Right now I think foreign ownership would be received terribly by the public. Think Dubai Ports Deal. I think there would be a stronger backlash against foreign ownership than there would be by allowing mergers. I don't see how that lets politicians "hide behind" anything. Both would tick off the masses.

Really, I'm not trying to be difficult, but I see no connection between these two distinct issues or why one would be contingent on the other.

We don't really need six different airlines offering First Class from a variety of midwestern and eastern hubs to the west coast. We've got too many hubs competing for the declining numbers of high-fare paying pax.

That is very true. $70/barrel oil may well take care of this problem pretty efficiently.

 

[whaledriver]

I thought Northwest had a poison share.

Yes, NWA does has the final say on how any merger plays out with regard to CAL. It was part of the Dept of Justice CAL/NWA stock sale. NWA sold it's majority share of CAL and in return, received the 'merger/buy-out rights'...very few understand the terms of the agreement. In short, NWA says WHO and IF CAL even merges with down the road. I believe it is good for 25 or 30 years. However, I believe NWA will allow UAL to buy CAL, for the right price. It will be a combo of gates and $$$ that will ultimately benefit the future DAL/NWA merger.

 

[RowUnderDCA]

DL+NW= bad idea.

 

[FWAAA]

DL+NW= bad idea.

For several reasons.

One of which is this: It would enjoy good access to Japan and China, but would still lack access to Heathrow. Additionally, it would lack coverage to South America.

A much better combo would be for UAL to buy DL and for AA to buy NW. Both mega-carriers would have access to Asia and Heathrow, and both would have coverage to S America. UAL would gain DL's strong East coast and ATL presence, and AA would get what it has coveted forever (well, for a while now) - Lotsa China frequencies.

 

[RowUnderDCA]

ok, with AA/NW divesting some domestic assets to LCC, or simply abandoning a lot of domestic markets by parking NWA aircraft. Also, JAL jumps out of oneworld.

 

[Fly]

Delta has nothing to offer that United can't get on it's own. It would make more sense to let DL die and pick at the pieces than add all the headaches of a merger.

 

[FWAAA]

Delta has nothing to offer that United can't get on it's own. It would make more sense to let DL die and pick at the pieces than add all the headaches of a merger.

Sort of, Fly. Delta has no overseas routes that aren't open-skies (other than one NRT flight). Slots and gates at LGA and DCA (which DL has a lot of) perhaps aren't as valuable as they once were. Delta's airplanes are nothing special - UA could order them from Boeing if it really wanted more airplanes.

But none of the above is what's gonna drive the next round of mergers/consolidations.

What United needs desperately (and what AA needs as well) is a larger concentration of Y, B, H and K fare payors than they currently have. Well, and more F, C and J than they have now, too.

And one source of more high-fare payors is the top 50% or so of Delta's customer base. If you wait for DL to die, you stand a much smaller chance of capturing that revenue. And United (and AA) needs that revenue. You buy the airline, comp all the frequent flyers to the equivalent UAL Mileage Plus level, convert their outstanding mileage balance to Mileage Plus miles, and odds are you'll keep them. Unless, of course, they have bad experiences that drive them to another legacy.

Since DL is in Ch 11, you don't have to take all their aircraft or employees or other unwanted assets. And you don't have to take on all their liabilities, either. Just like AA's purchase of most of TWA, UAL can pick and choose what you want. You take the valuable components and abandon the rest (let the creditors fight over the liquidation of the unwanted crap).

Same thing with AA and Northwest.

When all is said and done, UA and AA probably divest some of what they bought to satisfy the antitrust division and neither is as large as the combined separate airlines. Consolidation isn't gonna be about getting bigger - it's gonna be about dumping your cheapest fare payors and replacing them with the top half or so of the pax of the acquired airline. Total revenue would likely be much, much larger (that's what happens when you fire your most unprofitable pax and replace them with other, more profitable pax). Some hubs would close (CVG, SLC) and some others would be right-sized.

 

[US Express-PSA Agent]

Interesting discussion and thought process. Consider working these numbers into your legacy merger mixture...

Charlotte Business Journal - April 11, 2006

"ACE Aviation Holdings Inc., the parent company of Air Canada, has agreed to sell 1.75 million shares of US Airways Group Inc. to PAR Investment Partners."

PAR Investments seem to be acquiring as much LCC(US) shares as possible. They are now the largest single share holder in LCC(US) and possibly another airline.

In a recent SEC filing, it appears that PAR Investment Partners now hold the lion share of US as well as AA.

"LCC(US)...................10,768,485
AMR(AA)..................134,607,126

Swa..........................250,000
Alaska.......................205,000
Frontier.....................117,581"

For those thinking AA and NW, I believe these numbers may prove something entirely different. Just food for thought.

 

[FWAAA]

In a recent SEC filing, it appears that PAR Investment Partners now hold the lion share of US as well as AA.

"LCC(US)...................10,768,485
AMR(AA)..................134,607,126

Swa..........................250,000
Alaska.......................205,000
Frontier.....................117,581"

For those thinking AA and NW, I believe these numbers may prove something entirely different. Just food for thought.

The AMR number listed above is the VALUE of PAR's 6 million AMR shares on the date of the SEC filing, not the number of shares:

http://www.sec.gov/Archives/edgar/data/106...11486_13fhr.txt

AMR has about 189 million shares outstanding with a market cap of just under $5 billion. AMR's larges shareholder at present is Fidelity, with something like 20-25% (all those mutual funds owning AMR).

PAR is a small player in AMR - I wouldn't call 3% a "lion's share" of anything. B)

 

[whaledriver]

AA will not be merging with anyone...look at the huge TWA mistake. AA will be without a dance partner on this round of the big 6 consolidations. The only chance the worlds largest airline would receive government approval in this game, would be IF a smaller airline ch.7 takes place, not likely. AA is going to be the one at a serious disadvantage once DAL and NWA emerge much leaner from the Ch. 11 process.

It will be some form of UAL/CAL and NWA/DAL. NWA will authorize CAL the merger rights they need for a UAL/CAL deal. This legal requirement stems from the Dept of Justice stock deal...very few understand. The exchange of certain gates/routes (i.e. south america/asia) may take place for this merger to occur. Afterwards, DAL/NWA will lock up Asia. Leaving the new UAL/CAL and NWA/DAL combo practically owning Asia and leaving AA out of that market.

 

[oneofus]

Yes, NWA does has the final say on how any merger plays out with regard to CAL. It was part of the Dept of Justice CAL/NWA stock sale. NWA sold it's majority share of CAL and in return, received the 'merger/buy-out rights'...very few understand the terms of the agreement. In short, NWA says WHO and IF CAL even merges with down the road. I believe it is good for 25 or 30 years. However, I believe NWA will allow UAL to buy CAL, for the right price. It will be a combo of gates and $$$ that will ultimately benefit the future DAL/NWA merger.

I thought that didn't apply if CO was the purchaser...

 

[FWAAA]

AA will not be merging with anyone...look at the huge TWA mistake. AA will be without a dance partner on this round of the big 6 consolidations. The only chance the worlds largest airline would receive government approval in this game, would be IF a smaller airline ch.7 takes place, not likely. AA is going to be the one at a serious disadvantage once DAL and NWA emerge much leaner from the Ch. 11 process.

You may be right. But my thinking is that AA already has a $4.3 billion head-start on the others: the unrestricted cash balance on 3/31/06. Add to that the money it could easily borrow (look at the financing HP got to buy US) to finance a purchase of NW, and AA is likely the high bidder, and high bidder is gonna be the winner in a bankruptcy proceeding.

As to antitrust objections - those can easily be overcome with divestitures of some assets, and AA is unlikely to want to buy all of NW anyway. The deal is probably gonna be a multi-party deal like the one proposed in 2001 (where UA and US were to sell AA various assets to try to satisfy the regulators).

NW pilots have ratified their paycuts - as soon as the other two NW unions ratify theirs, the race will be on.

But then again, you may be right - NW and DL may marry, leaving AA as the odd man out.

 

[Bulscu]

AA will not be merging with anyone...look at the huge TWA mistake. AA will be without a dance partner on this round of the big 6 consolidations. The only chance the worlds largest airline would receive government approval in this game, would be IF a smaller airline ch.7 takes place, not likely. AA is going to be the one at a serious disadvantage once DAL and NWA emerge much leaner from the Ch. 11 process.

It will be some form of UAL/CAL and NWA/DAL. NWA will authorize CAL the merger rights they need for a UAL/CAL deal. This legal requirement stems from the Dept of Justice stock deal...very few understand. The exchange of certain gates/routes (i.e. south america/asia) may take place for this merger to occur. Afterwards, DAL/NWA will lock up Asia. Leaving the new UAL/CAL and NWA/DAL combo practically owning Asia and leaving AA out of that market.

 

[LGA Fleet Service]

DL/NW still won't be able to put you on into LHR on their metal though.

Interesting speculation though.