US, AA merger could cost Charlotte

[WorldTraveler]

PIT was closed because US realized it had too much capacity post 9/11 and had committed to an expensive facility that it would likely not be able to profitably use - so it took the bold step of closing the hub and ditching the lease in BK.

AA is in BK and they can make changes to their leases but US cannot.

Since Parker specifically said that his intention was to create a merger while AA was in BK, it is very likely that there will be terms of AA's business plan that will be altered; no significant changes have been made to AA's business plan since the merger so it is very possible that they could be coming.

Since AA's hubs are in larger cities that largely have the ability to support other carrier hubs, AA might not be as successful in forcing down lease rates down as carriers have been in cities where there is a risk of losing the hub altogether.

While Parker has the ability to cut out duplicate costs while AA is still in BK, if he chooses to do so the new AA will not be a simple sum of AA plus US as they currently exist.

 

[dash8roa]

Parker stated the hubs will survive and everyone at AA has to reinterview with him.

You have to remember US is making money, AA isnt.

And Parker is finance man.

US went twice through chapter 11 and pays some of the lowest wage scales. AA went the longest before going into chapter 11 and that was with a sizable chunk of cash in the bank.
US made money by paying low wages, if AA had similar wage scales, they might have been profitable or at the least the losses would have been quite a bit lower.
It seems the legacies can only make money with a trip through chapter 11.
US brass has said in the past that even without the merger, they will be fine. Look who was chasing who. AA wanted to emerge as a standalone, US knew this was their last chance for a merger.

 

[traderjake]

AA wanted to emerge as a standalone, US knew this was their last chance for a merger.

Horton wanted to emerge as a stand alone to maximize his paycheck.

 

[yoyodyne]

PIT was closed because US realized it was a ....

 

[FWAAA]

Horton wanted to emerge as a stand alone to maximize his paycheck.

And with the merger he gets $20 million. Seems his fat paycheck was going to happen no matter what.

One reason that Horton wanted to wait to merge was so that US stockholders wouldn't get 28% of the new company. If Parker had been rejected by the creditors (ala Delta in 2007), the wind would have left US' sails and the stock would have deflated to probably about $5/sh, enabling Horton to buy US on the cheap in 2014.

 

[AirwAr]

No they both currently survive and make a profit for AA and US.

700UW, here's one writer that supports your view...of course he lives in Charlotte though.

Quote from article - "He suggested that in some international markets where American has multiple daily flights to Miami, a flight could shift to Charlotte."

http://www.thestreet...oo&cm_ven=YAHOO

 

[700UW]

But he is quoting the analyst in regards to CLT, not Ted Reed's view on CLT.

 

[usa1]

http://www.bizjournals.com/charlotte/blog/queen_city_agenda/2013/03/us-airways-ceo-calls-merger-fabulous.html


US Airways CEO calls merger 'fantastic news' for Charlotte

 

[FWAAA]

Some interesting tidbits in that article:

He reiterated previous statements that the US Airways hub will probably grow after the merger, but he said it’s too soon to say by how much. In February, the airlines announced the deal and formed teams to begin sifting through consolidation planning. Nothing can be implemented until the merger is approved.

"Probably grow"? That's not a very strong commitment.

Here's the real telling portion:

US Airways controls more than 90 percent of the airline traffic at CLT. The hub ranks as the fourth-largest in the world and affords the city air service it wouldn’t otherwise have based on population alone. Parker called the relationship between the airline hub, the low-cost airport and the city “a virtuous cycle.” The efficiency of the airport keeps US Airways growing, and businesses in Charlotte benefit, spurring more economic growth. The city estimates the impact of the airport to be in the range of $10 billion to $12 billion per year.

The message is clear: CLT is an oversized hub in part because the airport expenses (rent, landing fees, etc) are so very low and if that situation were to change, the size of the hub could be impacted.

As eolesen pointed out recently, CLT is over-served, much like DFW is over-served. Even though this merger is about growth, the employees in the "over-served" hubs have every reason to be mildly concerned about their future. Schedule rationalization and hub optimization could mean some "right-sizing" at various hubs.

 

[jimntx]

For those of you who may not be conversant in corporate-speak, and since I have been through it more than once...

Downsizing is a reduction in force in a business/locality/organization where managers also lose their jobs.

Rightsizing does not result in a loss of management positions. Though, some managers may be "re-classified."

When I was at Texaco, 13 managers in the Information Technology department got re-classified as Systems Analysts (though most of them had never done such work); however, they experienced no loss in pay and benefits. We just had to "right-size" 13 Systems Analysts (real ones) out of their jobs to make positions available for the re-classified managers.

 

[zethya]

http://www.bizjourna...r-fabulous.html


US Airways CEO calls merger 'fantastic news' for Charlotte

We all know Parker's LOVE for obscenely low cost CLT. Even though he seems to favor staying neutral in the change of control process, IMO, most of his purported statements send a clear message that he expects whatever regime prevails, to retain the airport's fee structure - or else.

Now, what I'd really like to see, is for him to pay the same type of visit to PHL (with reporters in attendance), where the political environment is significantly more intense, and present the same assessment, particularly as it relates to JFK. I'd salivate being a fly on the wall at that event.

 

[700UW]

http://www.youtube.com/watch?feature=player_embedded&v=93idItKswKk

 

[zethya]

We all know Parker's LOVE for obscenely low cost CLT. Even though he seems to favor staying neutral in the change of control process, IMO, most of his purported statements send a clear message that he expects whatever regime prevails, to retain the airport's fee structure - or else.

Now, what I'd really like to see, is for him to pay the same type of visit to PHL (with reporters in attendance), where the political environment is significantly more intense, and present the same assessment, particularly as it relates to JFK. I'd salivate being a fly on the wall at that event.

Well here is what Parker said in Philadelphia yesterday (3/26) - which, if you want to believe, supports the theory that JFK will be primarily international O&D and PHL both international O&D and connecting traffic. Really, you have to give the guy credit, he knows exactly what to say at each hub to ensure political support for the forthcoming regulatory reviews. http://www.philly.co...h_American.html

 

[AirwAr]

http://www.youtube.com/watch?feature=player_embedded&v=93idItKswKk

<sarcasm on>

Ahhh....that is a cute little airport. I can't wait to fly through there...oh, but wait...why would I want to fly through CLT. If I'm going to LA or Caribbean I'm going through MIA. If I'm going to Europe, I'm going through JFK. If I'm going to Asia, I'm going through JFK, ORD, or LAX.

Hold on a second...I think I found it! Florence, SC...that's where I'm going through CLT for! Who wants to meet at "Five Points"...should be a blast!

<sarcasm off>

 

[700UW]

Little airport?

It is US' largest hub.