Ual Lobby‘s For Industry Consolidation

[USA320Pilot]

737nCH11:

Considering the history of the United unions interfering with United's attempts to merge with US Airways and the fact that the employees lost their ESOP and ability to block strategic decisions, do you really think that the Untied Board would allow employees to be involved in a decision regarding M&A activity?

In my opinion, if the business partners had merged in 1995 neither company would have entered bankruptcy and per the United EF&A strategic analysis it is likely the combined business enterprise would be the strongest airline in the world, instead of two carriers that became insolvent.

Separately, didn't you say just this week you believed there would be a merger? If so and you believe United would be the surviving airline, where would United get the money to fund the acquisition?

In conclusion, I am tired of arguing about this, let’s agree to disagree, and see how things play out. With the winter travel drop off, the United DIP financing issue and the POR deadline (now less than four months away), we should know more shortly.

Regards,

Chip

 

[cavalier]

Cav:

P.S. Who predicted such things as the previous United merger attempt in front of the US Airways MEC on the same day the UAL APA MEC Chairman directed their Merger Committee to draft a "pre-nuptial" seniority list, who predicted the AMR carve out on December 23, 2000 (16 days before the announcement), the AMR merger ambivalence reported by USA Today, the 21-day Hart-Scott-Rodino Act notice to the Justice Department, the United-US Airways domestic alliance, and the Star alliance before these events occurred?

Who Loves Ya Baby...of course YOU made those predictions, Chip.

I know you keep up with it to just about an obsession and you have been on target.

Me… if you only knew what life changes I have endured, and my life is changing yet again as always. This team will make sure of it too!

 

[USA320Pilot]

Cav:

I know you are a good man and I do not like what's happening to our company, United, or the industry.

I keep informed and I try to provide information, that's all I do on this forum (well...let's be honest here...I debate as well).

By the way, if I was King for a day, I would not have United and US Airways merge and I would make both companies strong, independent business entities, where employees had good jobs and were motivated.

Unfortunately, I'm not a King and my desire may not happen.

Sincerely,

Chip

 

[Busdrvr]

Chip, they still let you come to union meetings? . Please name one airline merger that worked as planned. NWA-republic? nearly resulted in BK, DAL-Western? Went from #1 to #3 in LAX, AMR-TWA?, USair-Peidmont? Amr-Aircal? Pan am-national? SWA-morrris? U's routes used to owned by UAL (when we merged with Capital). what makes you think we'd keep the money losing east coast routes this time?

 

[USA320Pilot]

Busdrvr:

Delta & Western, Northwest & Republic, and Continental & Peoples Express have worked just fine.

Again, I am not for a merger and I would like both of our companies to independently prosper, but according to your company and its strategic analysis' the business opportunity is significant.

Separately, I understand from the highest levels of US Airways that the network carriers will consolidate and it's not if, but when because it's inevitable.

Furthermore, United had an executive last week who indicated the weakest airlines could liquidate if there is not consolidation. Who are considered the two weakest network airlines and the only ones to become insolvent post September 11?

Regardless of how we discuss CASM, RASM, and Yield, the numbers do not work for either airline and it appears management now believes the answer is to the problem is consolidation because of the economies of scale and "S" curve revenue gains.

Regards,

Chip

 

[767jetz]

Furthermore, United had an executive last week who indicated the weakest airlines could liquidate if there is not consolidation.

Let's clarify that it is your opinion that those comments were in reference to United and US Air.

It is of course possible that after UA emerges from BK with the lowest cost structure of all the legacy airlines and the best route structure and revenue, airlines like USAir, American, and Northwest will be considered the weakest links in the industry.

You can spin it however you want. Like you said, I guess we will see what happens in the spring.

Question: When will you ever admit that your sources are often wrong? If UA beats their expectations again for Q4 as we did in Q3, will you admit it then? If UA emerges without an equity sponsor like RSA or TPG will you admit it then? If UA again meets it's DIP covenants after you predict we will not, will you admit it then? If RSA pulls the plug on US, and UA ends up with significant US assets will you admit it then? What will it take?

You remind me of the knight in Monty Python And The Holy Grail who was guarding the bridge, saying "none shall pass!" Even with his arms and legs cut off he was bouncing around claiming it was "just a flesh wound!"... What are you gonna do now,... bleed on me?

 

[W:EXCH:INVOL]

You remind me of the knight in Monty Python And The Holy Grail who was guarding the bridge, saying "none shall pass!" Even with his arms and legs cut off he was bouncing around claiming it was "just a flesh wound!"... What are you gonna do now,... bleed on me?

Thanks for the first laugh of my day! Now, go away, or I shall taunt you a second time!

INVOL

 

[AOG-N-IT]

You remind me of the knight in Monty Python And The Holy Grail who was guarding the bridge, saying "none shall pass!" Even with his arms and legs cut off he was bouncing around claiming it was "just a flesh wound!"... What are you gonna do now,... bleed on me?

Thanks for the first laugh of my day! Now, go away, or I shall taunt you a second time!

INVOL

Thanks for the laugh !!

"come back here you coward..I'll bite your bloody leg off " (LOL)

 

[Cosmo]

Regardless of how we discuss CASM, RASM, and Yield, the numbers do not work for either airline and it appears management now believes the answer is to the problem is consolidation because of the economies of scale and "S" curve revenue gains.

Chip:

You haven't convincingly explained how a United/US Airways merger would be better for United than if the carrier simply proceeded on its own. For instance, looking at 3rd quarter results, United had a higher load factor (80.2% vs. 76.9%), a lower CASM (9.88¢ vs. 10.98¢), a longer average stage length (1,260 miles vs. 795 miles) and a longer average passenger haul (1,603 miles vs. 975 miles) than did US Airways. Even in the one important category where US Airways' result was better than United's, Operating RASM (10.56¢ vs. 9.95¢), it was primarily due to US Airways' much shorter average passenger haul where it is expected that RASM would be higher. Moreover, United's year-over-year trends were much more favorable than those seen by US Airways in several important categories, such as Operating RASM (+8.9% vs. +7.8%), CASM (-9.4% vs. +0.2%) and yield (+5.1% vs. +0.2%). Given that United is still in bankruptcy and can continue to wring additional costs out of its system, particularly in the area of aircraft leases, combined with the strong return of Pacific traffic and slowly firming Pacific yields, it appears that these trend relationships will continue to be seen in United's favor in subsequent quarters.

So where are the efficiencies and economies of scale that US Airways would bring to a merger with United that United couldn't get on its own? You talk about the added leverage that US Airways' flying would bring to United, but I don't see it. For one thing, United is already getting much of the traffic benefit from US Airways' route system through the domestic code-sharing alliance. In addition, not only does US Airways not have a significant amount of long-haul, lower-CASM flying to contribute to the merged entity, but United can more easily add its own longer-haul flights as a way of lowering its CASM. For instance, if United reinstated merely four of the daily long-haul B747-400 international flights that it dropped during the past few years (LAX-AKL, LAX-HKG, LAX-MEL and SFO-TPE), United would literally overnight add to its operation the equivalent of fully 14 percent of US Airways' system ASMs (based on 3rd quarter 2003 numbers) with only 8 additional aircraft and perhaps just 1,000 or so additional employees. So to be brutally blunt, if United can overcome its remaining hurdles, what does US Airways add to the equation?

 

[Cosmo]

And speaking of United's hurdles on its path to emergence from bankruptcy, Dow Jones has reported this evening that Congress appears likely to pass pension relief legislation for airlines and other troubled industries before the end of this session. This would be tremendously helpful to United's prospects, and I believe it would be good news for the US Airways pilots as well.

Here's the Dow Jones article.

 

[Busdrvr]

Cosmo, two great posts!!!

Chip,
The only "consolidations" that TRUELY worked well were, the integration of EAL assest into U. the integration of EAL ATL assests into DAL, Pan Am Pac routes to UAL, Pan Am europe into DAL, Braniff DFW into AMR, FRNT (1) and CAL DEN routes into UAL, and EAL MIA into AMR. Do you get a common theme? I fully think there will be consolidation, I just don't think anybody will be paying for it. as for "s-curve economics", that typically applies to market share at a single hub. Last time this thing was proposed, UAL was offering to GIVE AWAY hub market share as a condition of the deal. In any case, the "s-curve" has flattened significantly with the erosion of legacy revenue premiums.

 

[USA320Pilot]

Cosmo & Busdrvr:

You're right about the bill being good for employees, but it doesn't change the cost revenue gap for the companies.

From a US Airwasy perspective, if H.R. 2719 is passed, the bill would lower the company's pension obligation and its CASM from the current DC/DB plans to all DB plans.

Nonetheless, thanks for creating the hyperlink.

Meanwhile, if a corporate combination does occur the pension problem must be fixed first, otherwise United cannot come out of bankruptcy. Furthermore, if there is legislative relief one of the four obstacles for Bronner to finance the deal would now be complete.

In regard to whether a deal is good for employees or not, there is reason to believe without a deal United and US Airways may not survive. Thus is it better to emerge to create a stronger company or fail and liquidate?

Busdrvr, I disagre with your opinion and it's not me discussing a deal with their counterparts in the WHQ Executive Suites.

Regardless, I believe we are all a little tired of this debate and I am willing to suspend the discussion until and if there is more relevant news. Will a deal occur? Maybe, maybe not, but it's being discussed.

Regards,

Chip

 

[ClueByFour]

Busdrvr, I disagre with your opinion and it's not me discussing a deal with their counterparts in the WHQ Executive Suites.

If that is meant to imply that such dicussions are taking place, please provide a source and a means for verification.

And I don't mean that anyone from either airline was in either CCY or Elk Grove, but that the substance of such a meeting/meetings is what you seem to be implying.

 

[Cosmo]

Chip:

Despite making another one of your vague and unsupported "there is reason to believe" statements, you didn't answer my question. Since you believe that United and US Airways must merge in order to survive, please re-read the first of my two posts above. And so I'll ask you again: Where precisely are the efficiencies and economies of scale that you claim US Airways would bring to a merger with United that United couldn't get just as easily on its own? Some specifics this time to support your argument would be much appreciated.

 

[delldude]

if all said is true...the acid test shall and will be shortly this spring.we shall see, if DIP is a major obstacle and a problem,UAL should have shed many assets by then to make the DIP schedule.