UAL + CAL = AMR + NWA
- Thread starter NewHampshire Black Bears
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WorldTraveler
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you do think out of the box, Fly. Two airline people in one family. Thanksgiving and Christmas must be really interesting.
I disagree that every post-deregulation merger has been a disaster. DL-Western was one of the best airline mergers ever. It was an end-on-end merger (little overlap). It was almost flawlessly executed. And I don't think anyone got laid off or got a pay cut. Perhaps it was the success of the WA acquisition that prevented DL from seeing the problems w/ the Pan Am acquisition when that occurred - and the PA acquisition and the subsequent losses and the cost cuts that followed were the end of the Delta culture as it used to be known.
I remain an optimist and believe the legacies have learned how to adapt and are learning to make good business decisions. I'm also reasonably optimistic that the new US will be successful although its success may be determined not by its actions but by what other legacies do around it. HP and US combined are just not big enough to be significant against the massive airlines that AA, DL, and UA and their potential merger partners would be. Yes, US could make it but they will continue to be upstaged by the big three and will have to rely on lower costs and fares. Problem is that it's hard to get US' costs much lower (ask their employees) and fares are already pretty low. Being a hub and spoke LCC is a tough act but it's even more difficult when you are overshadowed by legacies with comparably low costs but much bigger networks.
I disagree that every post-deregulation merger has been a disaster. DL-Western was one of the best airline mergers ever. It was an end-on-end merger (little overlap). It was almost flawlessly executed. And I don't think anyone got laid off or got a pay cut. Perhaps it was the success of the WA acquisition that prevented DL from seeing the problems w/ the Pan Am acquisition when that occurred - and the PA acquisition and the subsequent losses and the cost cuts that followed were the end of the Delta culture as it used to be known.
I remain an optimist and believe the legacies have learned how to adapt and are learning to make good business decisions. I'm also reasonably optimistic that the new US will be successful although its success may be determined not by its actions but by what other legacies do around it. HP and US combined are just not big enough to be significant against the massive airlines that AA, DL, and UA and their potential merger partners would be. Yes, US could make it but they will continue to be upstaged by the big three and will have to rely on lower costs and fares. Problem is that it's hard to get US' costs much lower (ask their employees) and fares are already pretty low. Being a hub and spoke LCC is a tough act but it's even more difficult when you are overshadowed by legacies with comparably low costs but much bigger networks.
OP
NewHampshire Black Bears
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(Some great replies........THANX)
2 HUGE Indicator's to watch.
A. "IF" UA climbs "into the hay" with CO.
B. How successful, or UN successful BIG RED is able/unable to get $$$$$$$$$ (exit financing)
We all saw how VICIOUS AA came out "SWINGING" at UA/US, so logically WHAT would they do with a UA/CO
Dougie STEALIN" and Neil CO..HEN (*UCK YOURSELF), have been given very specific "marching orders" by the NWA/BOD's. That being, "GET US THE BEST POSSIBLE DEAL", or ELSE
Back to A + B above.
If NW cannot get the $$$$$$$, then you'll see NW getting "all doll'd up", for a "Justice of the peace" wedding, via AA's instructions, ala TWA !!
NH/BB's
2 HUGE Indicator's to watch.
A. "IF" UA climbs "into the hay" with CO.
B. How successful, or UN successful BIG RED is able/unable to get $$$$$$$$$ (exit financing)
We all saw how VICIOUS AA came out "SWINGING" at UA/US, so logically WHAT would they do with a UA/CO
Dougie STEALIN" and Neil CO..HEN (*UCK YOURSELF), have been given very specific "marching orders" by the NWA/BOD's. That being, "GET US THE BEST POSSIBLE DEAL", or ELSE
Back to A + B above.
If NW cannot get the $$$$$$$, then you'll see NW getting "all doll'd up", for a "Justice of the peace" wedding, via AA's instructions, ala TWA !!
NH/BB's
Oh no, that's nothinhg. My cousins are flying at Northwest and American too. (I was the first and they all followed me
)RowUnderDCA
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whlinder-
I agree with your observations and concerns. It's basically what I've been observing too.
Look, I agree that DL doesn't want to merge. I agree that AA doesn't want to merge. The question I have is what will happen if UA/CO start making moves and LCC starts putting itself out there, because the business plan still doesn't work quite right.
I would recommend, in the fantasy world in my head, that UA/CO try to make IAD work as a SE hub. But that UA/CO should be looking to connect the SE to the NE, Midwest, west coast and ASIA over IAD and IAH. It should cede the intra southeast traffic.
Whereas, I think that UA/DL is better than DL/NW for all involved, I agree that it leaves the south central U.S. a bit sparse.
I am still very skeptical that AA is actively considering acquiring NW Asian routes. Again, I'm wondering what conversations JAL and AA had when JAL joined oneworld recently.
I agree with your observations and concerns. It's basically what I've been observing too.
Look, I agree that DL doesn't want to merge. I agree that AA doesn't want to merge. The question I have is what will happen if UA/CO start making moves and LCC starts putting itself out there, because the business plan still doesn't work quite right.
I would recommend, in the fantasy world in my head, that UA/CO try to make IAD work as a SE hub. But that UA/CO should be looking to connect the SE to the NE, Midwest, west coast and ASIA over IAD and IAH. It should cede the intra southeast traffic.
Whereas, I think that UA/DL is better than DL/NW for all involved, I agree that it leaves the south central U.S. a bit sparse.
I am still very skeptical that AA is actively considering acquiring NW Asian routes. Again, I'm wondering what conversations JAL and AA had when JAL joined oneworld recently.
Kev3188
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Cosmo
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WorldTraveler:
While I agree with much of what you said in your post yesterday afternoon regarding a potential UA/CO merger, I disagree with the following comment:
1.) As RowUnderDCA points out above, IAD can be especially useful to the merged company to connect: a.) the Southeast with the Northeast, Eastern Canada and Europe; b.) the Northeast to Mexico, the Caribbean, Central and South America, and Africa; and c.) the Midwest and West to those European destinations that cannot support nonstop service from UA/CO's other hubs (except EWR -- I'll get to that in a moment). And once some current and planned construction is completed in the next 3-5 years (underground trains replacing the "Mobile Lounges", a new UA concourse with 40-50 gates and perhaps even Metrorail access to IAD from the city), the travel experience for both local and connecting passengers at IAD will be immensely improved.
2.) As an article in today's Washington Post points out, UA's IAD hub actually performs very well and will be expanded (after United exits Chapter 11 next week) since it taps into the substantial (and relatively high-yield) O&D traffic generated by the Washington area. And remember that most of the growth in the Washington area is occurring in the city's western suburbs around IAD.
3.) Finally, IAD has something that none of the other UA/CO coastal hubs (EWR, LAX and SFO) have, and that "something" is the ability to add substantial new runway capacity. IAD can add at least two (and possibly three, depending on the configuration) new runways to serve an increasing number of flights in the future. But while the additional runways at IAD might not be needed immediately (particularly after the recent demise of Independence Air), this capability is nonetheless an incredibly valuable asset for a hub to have. Can LAX, SFO and especially EWR make the same claim? So this is where the argument comes back around to the potential traffic flows at a UA/CO IAD hub mentioned in my first point -- while those flows can also be handled at EWR now, in the future a merged UA/CO would be better able to use EWR's scarse runway resources to concentrate on the huge amount of higher-yielding local New York O&D traffic as more connecting traffic is steered towards an arguably better-positioned mid-Atlantic IAD hub that will have the added capacity to handle it (together with Washington's own substantial O&D traffic).
Thus, I'm confident that IAD would most assuredly have a future with a merged UA/CO as an important hub.
While I agree with much of what you said in your post yesterday afternoon regarding a potential UA/CO merger, I disagree with the following comment:
I disagree with your comment for three reasons:
1.) As RowUnderDCA points out above, IAD can be especially useful to the merged company to connect: a.) the Southeast with the Northeast, Eastern Canada and Europe; b.) the Northeast to Mexico, the Caribbean, Central and South America, and Africa; and c.) the Midwest and West to those European destinations that cannot support nonstop service from UA/CO's other hubs (except EWR -- I'll get to that in a moment). And once some current and planned construction is completed in the next 3-5 years (underground trains replacing the "Mobile Lounges", a new UA concourse with 40-50 gates and perhaps even Metrorail access to IAD from the city), the travel experience for both local and connecting passengers at IAD will be immensely improved.
2.) As an article in today's Washington Post points out, UA's IAD hub actually performs very well and will be expanded (after United exits Chapter 11 next week) since it taps into the substantial (and relatively high-yield) O&D traffic generated by the Washington area. And remember that most of the growth in the Washington area is occurring in the city's western suburbs around IAD.
3.) Finally, IAD has something that none of the other UA/CO coastal hubs (EWR, LAX and SFO) have, and that "something" is the ability to add substantial new runway capacity. IAD can add at least two (and possibly three, depending on the configuration) new runways to serve an increasing number of flights in the future. But while the additional runways at IAD might not be needed immediately (particularly after the recent demise of Independence Air), this capability is nonetheless an incredibly valuable asset for a hub to have. Can LAX, SFO and especially EWR make the same claim? So this is where the argument comes back around to the potential traffic flows at a UA/CO IAD hub mentioned in my first point -- while those flows can also be handled at EWR now, in the future a merged UA/CO would be better able to use EWR's scarse runway resources to concentrate on the huge amount of higher-yielding local New York O&D traffic as more connecting traffic is steered towards an arguably better-positioned mid-Atlantic IAD hub that will have the added capacity to handle it (together with Washington's own substantial O&D traffic).
Thus, I'm confident that IAD would most assuredly have a future with a merged UA/CO as an important hub.
Don't get me wrong, WT...I am not saying that fleets are the primary reason to merge (in fact...didn't I list a slew of items...all summed down to one word...synergy?) While routes can be manipulated (i.e. pull down of some JFK int'l flights to appease the DOJ and moving them to ATL or MIA) but fleets can not as easily be changed as that is cost prohibitive. And actually...much more important in ANY merger with NW is the labor tension. Again...this is far worse than the US situation was prior to merging with HP so I don't think many are looking very seriously at NW. If I were to rate factors of a merge of any airline with NW, I would say it would be dependent on: 75% labor issues, 15-20% routes and rights, and 5-10% fleets. To ignore the labor issues would be a foolish mistake. AA didn't anticipate the issues they had with acquiring TW. WN didn't anticipate the issues they had with acquiring Morris Air. Both of these situations seemed to have resulted from labor strife that was essentially repressed or held back until after the mergers. I would hope that the industry has learned a lesson and wouldn't go for a company that has quite outward labor strife.
Business people tend to value nonstops, so I can't imagine that JAL's access to China (I don't know how much access JAL has to China) would suddenly satiate AA's desire to fly there. I also don't know how the economics of the alliance and codeshares work, but I doubt that JAL's OW membership will result in anywhere near as much additional revenue from JAL China flights as the 29 weekly China frequencies NW possesses.
Rumors are that AA's upcoming ORD-PVG (beginning April 2) has a potential to be worth more than $200 million in annual revenue. If that's anywhere near accurate, then I gotta think that someone at AA is wetting themselves over the revenue bonanza potential that NW represents.
Counterbalancing the argument that nonstops are the be-all, end-all to business flyers, NW doesn't even fly its China flights as nonstops - last time I looked, they all were flown from NRT. No requirement under the US-China bilateral that the flights use the NRT 5th Freedom rights; they could be flown from mainland USA nonstop to China if NW desired.
Also counterbalancing the argument that China and NRT 5th Freedom rights are goldmines are the Ch 11 filings of the two airlines possessing both; those supposedly lucrative routes weren't enough to keep NW or UA solvent.
If I had to guess about JAL's Oneworld admission, it has to do with access to NRT and the connections JAL offers from that base, much the same way CX offers the same from HKG. Top-notch airline offering 3 class service on prime routes - an attractive partner. Especially since it doesn't look like NRT is gonna be slot-free anytime soon - there's no chance that Oneworld airlines would get any additional access to Japan without adding someone like JAL to the fold.
I'll try to avoid beating the horse too much, but my prediction is that Arpey and AA come to some agreement with NW (completing their merger discussions begun and then abandoned six years ago) and that UA and DL finally complete their hookup. AA gets equal access to Asia as has long been enjoyed by UA and DL finally gets what its business travelers want: online nonstops to LHR as well as Asia via the substantial access enjoyed by UAL. UAL gets more coverage on the East coast and in the South. NW flyers get the same thing DL's flyers get: nonstops to LHR instead of just LGW.
I love the picture in the story. I think right after the photographer took the picture, the guy put his head right back into his arms and started weeping uncontrollably again......
WorldTraveler
Corn Field
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Also quoting the Post article,
"At that time (Dec 2002), most industry consultants said Dulles was one of United's weakest hubs and that the carrier should close it."
Given that Indy just went belly up, things may look up at IAD but only until someone else of the low fare carrier variety comes in and sets up shop as they are certain to do. All of the positives about IAD you mention are true but the modernization of IAD will be expensive for its tenants and there are other carriers that see the same wide open spaces and growing markets and want a piece of it.
The value of AA's ORDPVG route is actually pretty public knowledge since they submitted a forecast to the DOT as part of the application process, as do all carriers in selection proceedings. They don't put a dollar figure on it but they provide traffic projections which can easily be married with fare data which the DOT also collects and happily provides to anyone that would like to buy it.
NW WILL NOT be selling its China authorities to AA unless the whole airline goes to them. Surely we all remember TW and PA's death by a thousand cuts as they sold off one price asset after another. NW has very little value without their restricted access Pacific routes and they are smart enough not to sell them off unless they are ready to shut it down. Further, no other airline is going to get messed up w/ the remainder of NW after they have gutted the best parts from the airline.
While some people want to see one airline die in order for another to acquire them, that is not likely to happen. This business cycle for the airlines will undoubtedly result in all four of the legacy airlines that filed for bankruptcy emerging as successfully restructured companies. That ratio of "success" has never been achieved in the airline industry. Therefore, any mergers that result will have to be from willing participants that will move in their own best interests - which means mergers will not result in significant, sudden downsizing at either carrier.
In all of these merger scenarios, it is frequently overlooked that NW has the right to approve or reject any business combinations that involve CO. Although the language is highly confidential, it is apparent from NW and CO's public securities filings that CO cannot acquire or be acquired without NW's approval. It is highly unlikely that NW would approve a merger involving CO if it would result in a combination that is detrimental to NW. NW will wait to approve a merger until it is ready to merge itself and will extract whatever it feels is necessary to ensure its future success.
Although it is likely that NW, CO, and DL (although w/ US) will gain the right to fly to LHR, slots will be expensive and facilities will not necessarily be readily available. I believe that if UA and CO merge, part of the "peace offering" that NW will extract from UA is access to facilities if they haven't been obtained at that point and a certain number of reasonably satisfactory slots. Some of those slots or route authorities could also come from other airports in Asia
but I suspect LHR will be a part of the equation. NW along w/ DL could demand that UA relinquish more of its S. American slots and authorities which they will need less of when combined w/ CO.
I love these conversations where all the participants are knowledge of the current facts but make unique assumptions that change the potential outcome. Thank you all for your input.
Mergers in this industry may seem relatively easy in comparison to a world where Hamas is in power.
"At that time (Dec 2002), most industry consultants said Dulles was one of United's weakest hubs and that the carrier should close it."
Given that Indy just went belly up, things may look up at IAD but only until someone else of the low fare carrier variety comes in and sets up shop as they are certain to do. All of the positives about IAD you mention are true but the modernization of IAD will be expensive for its tenants and there are other carriers that see the same wide open spaces and growing markets and want a piece of it.
The value of AA's ORDPVG route is actually pretty public knowledge since they submitted a forecast to the DOT as part of the application process, as do all carriers in selection proceedings. They don't put a dollar figure on it but they provide traffic projections which can easily be married with fare data which the DOT also collects and happily provides to anyone that would like to buy it.
NW WILL NOT be selling its China authorities to AA unless the whole airline goes to them. Surely we all remember TW and PA's death by a thousand cuts as they sold off one price asset after another. NW has very little value without their restricted access Pacific routes and they are smart enough not to sell them off unless they are ready to shut it down. Further, no other airline is going to get messed up w/ the remainder of NW after they have gutted the best parts from the airline.
While some people want to see one airline die in order for another to acquire them, that is not likely to happen. This business cycle for the airlines will undoubtedly result in all four of the legacy airlines that filed for bankruptcy emerging as successfully restructured companies. That ratio of "success" has never been achieved in the airline industry. Therefore, any mergers that result will have to be from willing participants that will move in their own best interests - which means mergers will not result in significant, sudden downsizing at either carrier.
In all of these merger scenarios, it is frequently overlooked that NW has the right to approve or reject any business combinations that involve CO. Although the language is highly confidential, it is apparent from NW and CO's public securities filings that CO cannot acquire or be acquired without NW's approval. It is highly unlikely that NW would approve a merger involving CO if it would result in a combination that is detrimental to NW. NW will wait to approve a merger until it is ready to merge itself and will extract whatever it feels is necessary to ensure its future success.
Although it is likely that NW, CO, and DL (although w/ US) will gain the right to fly to LHR, slots will be expensive and facilities will not necessarily be readily available. I believe that if UA and CO merge, part of the "peace offering" that NW will extract from UA is access to facilities if they haven't been obtained at that point and a certain number of reasonably satisfactory slots. Some of those slots or route authorities could also come from other airports in Asia
but I suspect LHR will be a part of the equation. NW along w/ DL could demand that UA relinquish more of its S. American slots and authorities which they will need less of when combined w/ CO.
I love these conversations where all the participants are knowledge of the current facts but make unique assumptions that change the potential outcome. Thank you all for your input.
Mergers in this industry may seem relatively easy in comparison to a world where Hamas is in power.
Walmartgreeter
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Mergers in this industry may seem relatively easy in comparison to a world where Hamas is in power
Excellent. In fact, the rest of the message was not required. Oil is nearing 70 again, Iran WILL have a nuke, and the simple politics of US airline mergers will be rendered meaningless. I think this is a major calm before the storm. DL might just be better off in BK for a while. I can even see a scenero where Far East routes become a liability rather than an asset. But you pegged it WT, very little in the present day logic will soon matter. Best. Mark.
Excellent. In fact, the rest of the message was not required. Oil is nearing 70 again, Iran WILL have a nuke, and the simple politics of US airline mergers will be rendered meaningless. I think this is a major calm before the storm. DL might just be better off in BK for a while. I can even see a scenero where Far East routes become a liability rather than an asset. But you pegged it WT, very little in the present day logic will soon matter. Best. Mark.
MCI transplant
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(Some great replies........THANX)
2 HUGE Indicator's to watch.
A. "IF" UA climbs "into the hay" with CO.
B. How successful, or UN successful BIG RED is able/unable to get $$$$$$$$$ (exit financing)
We all saw how VICIOUS AA came out "SWINGING" at UA/US, so logically WHAT would they do with a UA/CO
Dougie STEALIN" and Neil CO..HEN (*UCK YOURSELF), have been given very specific "marching orders" by the NWA/BOD's. That being, "GET US THE BEST POSSIBLE DEAL", or ELSE
Back to A + B above.
If NW cannot get the $$$$$$$, then you'll see NW getting "all doll'd up", for a "Justice of the peace" wedding, via AA's instructions, ala TWA !!
NH/BB's
"God help us!!!" Or should I say "God help them!!!" 
