UAL + CAL = AMR + NWA

[NewHampshire Black Bears]

"God help us!!!" Or should I say "God help them!!!"

=========================================================

MCI,
The struggles with AA/TW set a lot of legal presedents(SP?)

AA and NW would (IMHO) go smoother.

AA does'nt care about DOMESTIC, and with A/E why should they
(transcons, and hub point to point excluded)

The "ULTRA PRIORITY" is CHINA..CHINA..CHINA, and "QUICKLY"

ONLY NW can give AA that.

AS I mentioned before, If It's UA and CO, and NW can get $$$$$$$ "NO DOUGH", then AA/NW will be "A NO BRAINER"

Time will tell !!

NH/BB's

PS,
Lets not forget NW's Freighters, ANC to the orient,and a great replacement for AA's "tired" A-300's, NW's A-330's !!

 

[markkus757]

I'll go on record and say that US will buyout NW in about 12 months. UA and anybody else is not happening. AA and CO will get assets of DL. I personally think DL is going under as well as NW. The only problem is that no one wants DL in their entirety. NW has enough to get swallowed up by the new US to make it worthwhile.

 

[WorldTraveler]

Just for a size perspective, in Dec ’05, carriers reported the following system RPMs (on their own aircraft – not including regional carriers): Dec 05 is a good month to look at because DL had initiated its new schedules while NW’s were fairly recent. The other carriers have had more stable schedules.

AA 11.5 billion RPMs
CO 6.2
DL 7.8
NW 5.8
UA 9.5

So, UA + CO would be 15.7 billion RPMs and DL + NW would be 14.6.

DL + UA would be over 17 billion – larger than AA plus any other remaining carrier.

If you include regional carriers it looks like this:

AA 12.2 billion
CO 6.9
DL 9.1
NW 6.3
UA 10.3

And looking at regions, only NW plus CO would produce a Pacific system larger than UA’s current system. On the Pacific, UA + CO would be 1/3 larger than NW + DL. On the Atlantic, CO + UA would be 10% larger than DL + NW and 1/3 larger than AA alone but DL + NW will probably be larger than UA + CO based on DL’s European expansion planned for this summer. In Latin America, AA would be only slightly larger than CO + UA. DL + NW would be the largest domestic carrier by a margin of about 10% over CO + UA and 20% over AA.

These are December numbers and they will change based on removing duplicate capacity in a merger but it gives you some idea of the relative sizes of the carriers.

Acquiring NW’s China routes alone will not bring AA even close to parity w/ UA on the Pacific. If UA wants to be competitive with UA in Asia, it has to dramatically grow in Asia – and that means lots of 777 orders. Besides SJCNRT for SFONRT, AA and NW now only compete directly on LAXNRT so it is conceivable that AA could try to buy NW’s entire Pacific division but doing so would amount to a liquidation death sentence for NW since no one would buy them and they couldn’t survive without their Pacific routes. They still would be almost entirely Japan focused which would still leave a substantial gap with UA. AA can and should expand in Asia on its own now – or as soon as it can get aircraft. If AA ordered 777LRs now, it could fly to any point in Asia (or on the globe for that matter) from ORD. If the reallocated aircraft, they could start ORD-Seoul and ORD-Taipei service, markets that UA doesn’t serve nonstop and which allow US carriers to fly beyond them. Most of the Asian countries have open skies w/ the US. And one option that hasn’t been discussed is that AA could fly from Tokyo or Osaka to other points in Asia even without having local traffic authority. They could put 767s within Asia and funnel passengers to their transpacific flights. Given that NRT slots are very hard to get, it’s not likely AA would do that at NRT but they could elsewhere in Asia – including at Seoul or Osaka.

Asia is clearly the region that is most desired in global expansion but even if three global US airlines are left, one of them is going to be left without an acquired Pacific route system. DL and CO both have not bought any of their route authorities in Latin America, if I am correct, but they combined are as large as AA in that region. DL’s ATL transatlantic operation was “homegrown†and yet is considerably larger than its JFK operation which was acquired. While there are important assets that must be acquired it is a mistake to think that airlines cannot grow into some very significant market positions on their own.

 

[avek00]

I'll go on record and say that US will buyout NW in about 12 months. UA and anybody else is not happening. AA and CO will get assets of DL. I personally think DL is going under as well as NW. The only problem is that no one wants DL in their entirety. NW has enough to get swallowed up by the new US to make it worthwhile.

US will need to try to avoid financial ruin by decade's end as it is - the promised synergies of the merger are not likely to fully materialize (as per US' own SEC filings). Trying to integrate three large airlines simultaneously would be a recipe for disaster.

 

[WorldTraveler]

I'll go on record and say that US will buyout NW in about 12 months. UA and anybody else is not happening. AA and CO will get assets of DL. I personally think DL is going under as well as NW. The only problem is that no one wants DL in their entirety. NW has enough to get swallowed up by the new US to make it worthwhile.

I''m sorry but those kind of statements have absolutely no basis in fact and reflect only your biased perspective. If you could provide one iota of evidence to support your perspective, we might consider taking you seriously.

 

[Platinum Steve]

Acquiring NW’s China routes alone will not bring AA even close to parity w/ UA on the Pacific. If UA wants to be competitive with UA in Asia, it has to dramatically grow in Asia – and that means lots of 777 orders. Besides SJCNRT for SFONRT, AA and NW now only compete directly on LAXNRT so it is conceivable that AA could try to buy NW’s entire Pacific division but doing so would amount to a liquidation death sentence for NW since no one would buy them and they couldn’t survive without their Pacific routes. They still would be almost entirely Japan focused which would still leave a substantial gap with UA. AA can and should expand in Asia on its own now – or as soon as it can get aircraft. If AA ordered 777LRs now, it could fly to any point in Asia (or on the globe for that matter) from ORD. If the reallocated aircraft, they could start ORD-Seoul and ORD-Taipei service, markets that UA doesn’t serve nonstop and which allow US carriers to fly beyond them. Most of the Asian countries have open skies w/ the US. And one option that hasn’t been discussed is that AA could fly from Tokyo or Osaka to other points in Asia even without having local traffic authority. They could put 767s within Asia and funnel passengers to their transpacific flights. Given that NRT slots are very hard to get, it’s not likely AA would do that at NRT but they could elsewhere in Asia – including at Seoul or Osaka.

WT:

I appreciate your answer(s) to my question(s). However, I think that your comments actually make my hypothetical - if that's what it is - more realistic. I think that you're right in saying that selling off the Pacific Division is a death sentence for NW. However, if they just sell the China authorities, they still have a fairly substantial Asian presence that makes them viable - eaither alone or as a partner. (BTW, does anyone know how many weekly passenger flights NW can run to China?) Even if you extend the deal to include a handful of NRT slots (Again, anyone know the number of slots they have? - and how many they aren't using?), seems to me that the thing that makes them strong is only minimally weakened. Plus they gain much needed cash, which is more critical to them now than a handful of (possibly) unused NRT slots and rights to China. (Bear's right: if they don't get some money, they're going to have to start "dollin' up" for a shotgun marriage to someone.)

Obviously, this is a good deal for AA, but not as great as it could be if they took on the entire Pacific operation. But then again, I'm still not convinced that is what they really want. Nor do they want to set up an Asian hub operation, as you mentioned. Not only would that ruffle some serious feathers at Qantas and Cathay and JAL, but it flies in the face of their non-stop is better philosophy. The China authorities make no waves with their partners, and the limited number of NRT slots would allow for only limited growth there and can be coordinated with JAL easily enough. Plus, no merger headaches.

Remember, a deal has to make sense for both parties. While this isn't a great deal for NW, they aren't exacly in the catbird seat right now. They get what they need without gutting their reason for being. It's gonna hurt, but not as much as it could - or will if they don't get some money soon. Meanwhile, AA gets just a small part of the pie and, as evidenced by your numbers, won't begin to worry the larger players in Asia should they decide to merge up.

Steve

 

[avek00]

However, if they just sell the China authorities

What makes you think the China rights are even saleable, given the significant US Government policy considerations involved?

 

[eolesen]

Sorry to be jumping into this on Day 3, but I too find all this talk of mergers to be overly optimistic in light of $80 oil and the thought of Hamas possibly having a voice at the UN...

What makes you think the China rights are even saleable, given the significant US Government policy considerations involved?

Stranger things have happened under faltering carrier guidelines, but as long as you're dealing with carriers who are already approved for rights to China, it would be possible for route authorities to be transferrable under faltering carrier guidelines, but whether or not DOT would do that is another question. It was already determined after the PA/UA deal in 1987 that beyond-rights for NWA and UAL at NRT couldn't be transferred to anyone except the corporate successor to those companies.

Of the partners and combinations mentioned, I don't see AMR merging with another large carrier at all. Alaska, Aloha or Hawaiian? Maybe. But DL, CO or NW? Unlikely under any reasonable circumstances.

AMR already flies between 15 and 20% of domestic RPM's by US carriers (the data up above backs that up), so first of all, there's not much to be gained with a merger, and second, it's unlikely that anyone at DOJ or DOT would want to put any more eggs in one basket so to speak.

Equipment wise, it would be more advantageous for AMR to wait to see what happens with DL, and how quickly they move to affirm or reject leases with lessors.

If DL winds up a merger partner with anyone else but AMR, there's a fleet mismatch which potentially puts DL's relatively small fleet of Trent powered 777's on the market. Likewise, a merger with anyone except CO or WN (even less of a possibility than an AA/DL merger) potentially creates an orphan 738 fleet.

Another potential outcome is for DAL to reject their 777 leases now. There is really only one destination in their system which requires the 777 -- NRT.



(Un)Fortunately, the dismemberment and merger of the competition usually winds up to be pipe dreams. But it's still some useful speculation for a slow news week...

 

[NewHampshire Black Bears]

"E",

There is some merit to what you suggest.
Likewise, if my "first" scenario becomes reality(UAL+CO) You'd have to agree, that "all bets are off", with regard to AA not "wooing" NW(or visa..versa)

Another possibility that could change things for AA, is a "deal" with BA !!

I repeat again, if UA + CO hook up, "WATCH OUT" !!
CO would bring UA and even LARGER Asian presence, plus places like Guam and Micronesia.(AA CAN NOT fall further behind the ASIA "8" ball).

Jesus, look how forceful AA reacted to UA/"US", Imagine UA/"CO" !!!! (Plus the FEDS are more Inclined NOW to allow "deals", unimaginable 5 years ago) !!

Perhaps NW "may" sell the China routes to AA( ala TWA/LHR), but I feel that if NW gets the slightest "Wiff", that they can't make it, unlike TWA/IHCAN, they'll be up AA's A$$ looking to deal, and virtually NONE of it will be, because of DOMESTIC.

NH/BB's

 

[NewHampshire Black Bears]

I'll go on record and say that US will buyout NW in about 12 months. UA and anybody else is not happening. AA and CO will get assets of DL. I personally think DL is going under as well as NW. The only problem is that no one wants DL in their entirety. NW has enough to get swallowed up by the new US to make it worthwhile.

=========================================================

The ONLY thing that I agree with from the above post, is that I too think that DL will be "the bridesmaid, NOT the bride" !!

DL brings CO nothing but DOMESTIC. NO asia, NO SA, plus CO's europe "action" from EWR is almost similiar to DL's/JFK.

I'm well aware that this is the DL board, and I wish DL "No Ill will"

Now if the European carriers start "hooking up" with US carriers, then DL's got a much better chance with AF !


NH/BB's

 

[LCC_#1]

US will need to try to avoid financial ruin by decade's end as it is - the promised synergies of the merger are not likely to fully materialize (as per US' own SEC filings). Trying to integrate three large airlines simultaneously would be a recipe for disaster.

You mistated this. What was written was in the area where a company has to state POSSIBLE circumstances that could happen. I know this for a fact as the question was asked to our CEO at a town meeting in CLT and he clarified what was..again..mistated.I was there.

 

[robbedagain]

could this be a scenario:
if the govt allows it down the road, BA buys AA, but run by american's current mgmt, UA buys CO, maybe DL and NW merge would this scenario work? just curious

 

[RowUnderDCA]

Ok... look, I'm engaging in this exercise for fun. I'm not trying to 'influence' any mystery decision makers to promote any airline's fortunes. I'm pretending to put forward an fantasy industrial policy to promote an airline industry that is stable (understanding that some disruption is required in our economic system); has a shot at generating wealth within its corporate structures; that does limit unnecessary personal disruption etc.

Declared biases: enduce legacies to remove small jets from crowded airspaces; induces legacies to not artificially restrain markets with small jets; create an industrial structure that is more appropriate to the market; and maybe a slight interest in reducing disruption to Delta mainline employees.

Overall conclusions: An general idea of an industry structure that includes 3 national/international carriers with global alliances; 2 of which are traditional, full-service, multi-classed carriers; 1 of which is an experimental hybrid international carrier with global alliances; 4 to 6 national and regional lcc and niche carriers.

Airline Interests:

AMR: interested in remaining independent; learned its lesson about merging for market share; but wants more asian presence; would consider combination when/if a massive realignment gets started; but would want to minimize disruptions.

CO: wishing to remain a niche, high value business carrier; but understands that it's small and has the possibility of value erosion should combinations begin; does look to UAL to be the best fit for taking its strong brand global

DL: feels boxed in with its high cost connecting/hub centric, LCC infected, leisure MAINLINE system; recognizes its strengths in super major business markets and wishes to enhance that presence: ATL, NY, International; wishes to remain independent, but doesn't control its own destiny; doesn't want to increase its exposure to LCC vulnerable expensive, secondary hubs serving leisure traffic

NW: looking to 'hybrid' its cost structure with LCC style chicken politics with labor; less averse to combination than the other carriers; recognizing its domestic system is in largely secondary markets that are both vulnerable to future LCC incursion and that have large structural cost problems

UA: wanting to enhance it's hub system; enhance its value and market presense in major markets; feels good about its product offering; feels in a good position should a consolidation fever start spreading; looking to expand presence in major markets; probably not averse to a combination with CO.

LCC: overwhelmed; concerned about its hybrid model; realizes that a hybrid model requires more market breadth, since service amenities are not going to make it a niche carrier; looking for a last ditch effort to not masssively reorganize to a more common LCC.

That is why I conclude that all-tolled, the preferred structure of the industry, considering my priorities above, could be:

AA/DL: retaining major presence at JFK, getting rid of rj capacity at LGA, turning some rj slots in to mainline slots for other carriers; pursuing China/asian authorities by any reasonable means, including obtaining NW's NRT hub and booting JAL out; or more preferrably obtaining china authorities. SLC would continue in the sytem, equipment synergies available, regional carriers reduced. DL combination with AA is preferable, since it takes DL in the same direcion its going in now: MAJOR AIRLINE IN MAJOR BUSINESS MARKETS;

UA/CO: this will kick off the round robing of combination. The UA/CO route system would be extensive and advantageous (inducing AMR and DL to combine; possible liquidation of non-TED airbuses- 319s; both UA and CO suspect that their merger can CHANGE the game in the industry in their favor.

LCC/NW: carriers most suitable to pursue the national/international/global allliance hybrid carrier; similar equipment... to a degree... and cozy exectutives; mostly composed of hubs in secondary markets, plus PHL and DTW; might acquire airbuses from UAL; also might cede some senior employees to AMR in the prior transfer of asian operations to AA.

 

[LCC_#1]

I'll go on record and say that US will buyout NW in about 12 months. UA and anybody else is not happening. AA and CO will get assets of DL. I personally think DL is going under as well as NW. The only problem is that no one wants DL in their entirety. NW has enough to get swallowed up by the new US to make it worthwhile.

 

[formeraa]

It seems that the foreign ownership issue is the wildcard here. If foreign ownership is allowed, then I see NW selling its Asian routes to AA (along with some planes and employees) and, then, retaining its domestic routes in conjunction with KL/AF ownership with a bankruptcy-induced lower cost structure and ability to purchase newer E170/190 family aircraft.