United To Consider Acquisitions

[UnitedChicago]

Very well put JAMAKE.

Your point is well-taken with regard to the imbalance between executive pay and labor in this country, however, Tilton was the only one WILLING to take on the challenge. When Jim Goodwin was asked to resign, Jack Creighton came to UAL on a very temporary basis and the BOD had difficulty finding a successor to Goodwin. Jack Creighton practically pleaded with Tilton to come to UAL. So, yes there may have been others who could have done the job, but the others who had been offered the top job, declined it. Naturally, Tilton was in a position to leverage himself in terms of his compensation package. I still believe that it was quite an accomplishment to keep the franchise intact, pacify the creditors' committee, and successfully renegotiate all of the union contracts and emerge with $3 billion in exit financing. I personally do not begrudge Tilton for negotiating the best contract he could, for himself. If I possessed his unique skill-set, his experience, and his credentials, I too would negotiate the best compensation package for myself. Who wouldn't?

 

[JungleClone]

Anyone who thinks NW would part with their NRT operation is completely ignorant. Asia is the crown-jewel of NW's route network. If they sell that off, they might as well turn off the lights cause the party would be over. If anything, they need to continue to leverage their Asia strength.

As for Tilton's claim that UA won't sit by and watch consolidation without taking part, he is merely laying the foundation by running the PR playbook page by page. Get your employees and investors used to the idea that UA will take part in consolidation. That way, when it finally happens, you've overcome a huge hurdle because your constituents have already been expecting it. But I don't see UA being a traditional buyer. The best I could see is a merger of equals. It's true that equity investors are willing to throw cash at such deals. That's because equity investors tend to make a fortune on airline mergers with extremely favorable terms.

Get ready for UA/CO folks. It's going to happen. Sooner than you think.

 

[jimntx]

Even if NWA ends up in Ch. 7 (highly unlikely) or shuts down due to a pilot or f/a strike, I doubt seriously that UAL would be ALLOWED to purchase the NWA NRT rights/slots. That would give UAL near 'bout a monopoly for USA-NRT flights. Don't think the U.S. or Japanese governments would allow any such thing to occur.

 

[JAMAKE1]

While there is much speculation and rumors about a possible United-Continental combination, I wouldn't entirely rule out a possible United-Delta combination. I think that DL's JFK European routes and its powerful Atlanta fortress would plug the holes in United's network quite nicely. United clearly needs the NYC market. Even if the CO-UA scenario were to play out, I would prefer to see it unfold in the form of minority stake, with CO joining the Star Alliance. I'd like to think that the legacies have learned a thing or two from the merger wave of the mid-1980's, but as we all know, history continues to repeat it self.

P.S. United Chicago, thank you.

 

[jimntx]

While there is much speculation and rumors about a possible United-Continental combination, I wouldn't entirely rule out a possible United-Delta combination.

An interesting possibility which, as you say, would plug the holes in both airlines' systems. However, given the size of UAL and DL, do you really think that the gummint would allow such a merger without major route divestitures by one or both?

Also, given duplication of jobs between two competitors, a merger of the two would create massive layoffs on both sides of the fence. Not something any government--Dem or GOP--is going to be wild to support. Lots of people out of work just ain't all that politically attractive.

 

[JAMAKE1]

If such a combination were to happen (UA-DL) the route divestitures would come in the form of a pull-down at DL's SLC and CVG hubs. In terms of ATL and JFK, there are very few overlapping routes. To address the latter part of your comment, layoffs ocurr all the time during mergers and acquisitions. Case in point: HP/Compac

 

[TechBoy]

Actually 24.9% (just like when BA bought into US years ago and wrote the whole thing off...) but hey you'll discover that in school with your "legal lessons" --- and Congress will inevitably act to relax the foreign ownership restrictions.

Kinda nervous about working for the dreaded Germans eh sport?

Ummm, no, it really is 25%. Look it up.

I also find it curious that everyone on this board thinks that everyone else works for an airline. Never have, never will, given the low compensation. So I don't fear the Germans or anyone else. German ownership might actually raise service levels, which would be great for a customer like me.

It's always possible that Congress will relax the rules, but I wouldn't bet the mortgage on it. Just ask Dubai ports . . .

 

[jimntx]

If such a combination were to happen (UA-DL) the route divestitures would come in the form of a pull-down at DL's SLC and CVG hubs. In terms of ATL and JFK, there are very few overlapping routes. To address the latter part of your comment, layoffs ocurr all the time during mergers and acquisitions. Case in point: HP/Compac

Don't be too sure that UA-DL will get to decide which routes are divested. Simply closing non-profitable hubs is not what I meant. I'm not talking about overlaps. It may be seen that the combo has an unfair advantage otherwise.

 

[WorldTraveler]

Any talk of UA acquiring anything is way premature. UA still has the highest costs in the legacy industry behind NW which is slashing them w/ a vigor unseen for years. UA's inability to get its costs down to industry leading levels after three years in bankruptcy is simply inexcusable. And don't tout the fact that UA is chasing such premium revenue because every other carrier is doing the same including AA which does a very respectable job of competing against UA and still has lower costs. Further, UA has significant revenue exposure to low fare carrier growth which means those premium revenues will be even harder to obtain. In addition to the cost/revenue problem, UA's balance sheet is still far from sustainable.

I'm sorry to be the bearer of bad news but UA will be back in bankruptcy within 5 years and probably much less than that.

It is far more likely that DL will be acquiring a substantial portion of UA's route network than the other way around. Yes, there are investors that are willing to invest in airline combinations but they have to see that airlines can turn themselves around and run viable businesses and UA has yet to prove that it can do that - regardless of the challenges that confront both UA and the industry. Unless UA can turn itself around, it will not control its destiny and will instead find that its far-flung empire will be dismantled and sold while it still has value.

again, sorry to be the perpetual wet blanket. If you don't want me to post my negative assessment of UA, then don't post things that say that UA is on the verge of dominating the industry and taking over other carriers. Or if you do, back it up with demonstrable proof that such optimism is warranted.

 

[boeing787]

World your so full of crap...UAL is gonna stomp you. It was nice that your game plan was for UAL to fold and DAL to get all the goodies. Didn't happen and it looks like the Airtrannies are going to be eating DAL up at it's "fortress" hub. Go back and put your head in the sand and maybe the big D will pull it out but I doubt it. As far as UAL's demise...not gonna happen

 

[JAMAKE1]

It is far more likely that DL will be acquiring a substantial portion of UA's route network than the other way around...

...If you don't want me to post my negative assessment of UA, then don't post things that say that UA is on the verge of dominating the industry and taking over other carriers. Or if you do, back it up with demonstrable proof that such optimism is warranted.

WT: I know that you have this deep running love affair with Delta Airlines as you've made that abundantly clear in the numerous aviation internet forums in which you post, however I think you're getting a little worked up over nothing. We're merely having a chatroom discussion and throwing some ideas around based on Glenn Tilton's comments at a recent industry webcast. I did not suggest that United was on the verge of dominating the industry. But I would venture to guess, that SHOULD industry consolidation occur, United will be a key player. I would also venture to guess, based on United's brand recognition in KEY markets around the globe, that whomever acquires whom, the UNITED brand name would survive. Let me also say, with the exception of JFK and ATL, Delta's ability to generate revenue is problematic, as the company's own lawyers have publicly stated during bankruptcy hearings.
While United may have a few holes to plug up in in its route network (notably the NY market), Delta has a considerably weaker network especially in Asia and along the west coast (I'm running for cover...)

 

[ualdriver]

Here we go again......

Any talk of UA acquiring anything is way premature.

I agree. So is any talk of DAL exiting bankruptcy successfully as any sort of player.

UA still has the highest costs in the legacy industry behind NW which is slashing them w/ a vigor unseen for years.

It's the same "vigor" that every other airline went through with their employees. The same playbook, the same story, over and over and over. The only "vigor" that NW displayed is that they put a bunch of AMFA guys on the street due to strategic errors on AMFA's part, in my opinion, but that's for another thread.

As far as unit costs go please post each legacy's airline's unit costs (preferrably mainline only, non-fuel) with your source so we can all make the comparison. I just finished viewing the bts.gov statistics site, AMR's and UAL's latest 10Q's and I'm not seeing what you are talking about so I give up. I suspect I'm chasing ghosts- AGAIN. But that wouldn't be the first time I guess.

I suspect when the industry is done shaking out, UAL will be middle of the pack. The two big costs, fuel and labor, will be about like everyone else.


And don't tout the fact that UA is chasing such premium revenue because every other carrier is doing the same including AA which does a very respectable job of competing against UA and still has lower costs.

Actually, UAL can tout the fact that it's working. We have some of the fastest growing PRASM's in the industry. Check out the press releases on UAL's investor relations section of UA's website and see for yourself.


UA mainline CASM 2005 10.59 for 2005 (latest data I could find)
AMR mainline CASM 2005 from latest 10Q 10.16 (first 9 months of '05)

http://ir.united.com/phoenix.zhtml?c=83680...9546&highlight=

http://www.shareholder.com/aa/EdgarDetail....05-65&SID=05-00


They have a 4.06044% advantage on us, mainline to mainline. Wow. I'll drop an e-mail to Tilton and let him know to start shutting down World Headquarters.


Further, UA has significant revenue exposure to low fare carrier growth which means those premium revenues will be even harder to obtain. In addition to the cost/revenue problem, UA's balance sheet is still far from sustainable.

Well, they're getting premium revenues so far. When UAL is getting SWA/JetBlue yields, I'll start to worry. And you think UAL is the only carrier out there with exposure to low fare carrier growth? Give me a break. You keep bringing up this point as if LCC's are UAL's special little problem. You might not have noticed, but DAL has a "little" LCC problem in its backyard.

Far from sustainable? A 360M net loss (excluding bankruptcy costs) on 17B for '05 far from sustainable? Do you know what is REALLY unsustainable? 2B+ in net losses (excluding reorganization items) just for the first 9 months of '05. Guess who?

I'm sorry to be the bearer of bad news but UA will be back in bankruptcy within 5 years and probably much less than that.

Maybe. Who knows? Perhaps Delta will be right there with them, if they make it out of bankruptcy at all? All it will take is one dramatic event between now and when DAL exits bankruptcy (if they do) and they'll be a lot of MD-88's sitting in Arizona waiting to be turned into Schlitz Light beer cans. Mmmmmm. Schlitz Light.

It is far more likely that DL will be acquiring a substantial portion of UA's route network than the other way around.

World, only you would write something like that. Is Grinstein your uncle or something?

again, sorry to be the perpetual wet blanket. If you don't want me to post my negative assessment of UA....

You can post all the negative assessments of UA that you want, especially if they're factual. Heck, I could post all kinds of negative stuff about UA (and have). But you can see by the reaction by the people who read your posts that your "negative assessments" go way beyond just being a wet blanket. You seem to have this obsession with Delta that kind of biases your opinions to the point where they they are unbelievable. Take a look at your wild 5 year bankruptcy prediction for UAL. Give me a break. You say you're not a DAL employee (I have my doubts) but c'mon man. You're far more attached (and I mean attached) to DAL than I am to my own company, and I work here!

edit: Sorry guys. I've been informed that Schlitz Light is no longer being sold. Please substitute "Keystone Light" for "Schlitz Light."

 

[ualdriver]

oooppps. 579M on 17B for UAL vs. 2B+ for the first 9 months of DAL. Hey, it was late.

 

[SoftLanding]

If you are British Airways/Lufthansa/Foreign airline, would you look to buy a UAL/CAL/LCC/DAL or a secondary/smaller US airline?

Airtran, JetBlue etc. might just be the ticket...

 

[maddogdriver]

For those who don't think it won't/can't happen, just look at K-Mart just over a year ago....fresh out of Chpt 11. A merger/aquisition depends ENTIRELY on where/who investors want to put their money. Don't rule out anything:

Updated: 6:41 p.m. ET Nov. 17, 2004
Kmart to acquire Sears in $11 billion deal

Surprise merger will create the nation's third-largest retailer


NEW YORK - A resurgent Kmart, home of the blue light special, is buying the once-dominant Sears department store chain in a surprising $11 billion gamble it is counting on to help both better compete with Wal-Mart and other big-box retailers.

Led by Kmart Holding Corp. chairman Edward Lampert, the new Sears Holdings Corp. would be the nation’s third largest retailer. Both chains would survive, but several hundred stand-alone Kmarts throughout the country are expected to be transformed into Sears stores. The goal: A quick kick-start to sales away from Sears traditional base of shopping malls.

Lampert and Sears chairman and CEO Alan Lacy, in announcing the deal on Wednesday, promised up to $500 million a year in savings within three years from store conversions, back-office job cuts, more efficient buying of goods and possible store closings.