US Air to Address Creditors on Takeover plan

[USFlyer]

At this point, your ultimate future is in the hands of the creditors, both secured and unsecured. Those groups will choose whichever reorganization plan gives them the best hope of recovering any losses each will take as a result of the bankruptcy.

Also, the prevailing notion that US brings nothing to the table is quite frankly ridiculous. US is a $13 billion per year enterprise, not some mom-and-pop airline. And, it's really what AA brings to US, not the other way around, if US is purchasing AA. Just like when HP bought US, HP got a robust east coast network + hubs in key business cities of PHL, DCA and CLT + European/Caribbean market share it never had before + two regional airlines that could one day be spun off (PDT, PSA) if desired. US would get deep market share in key business cities of ORD, MIA, DFW, etc. + Asian presence + further European exposure + the American name, which I'm fairly positive would be the name chosen going forward due to its broader name recognition and association to Oneworld.

Also, look at what DL is doing to the previous NW assets. The assets acquired are being better utilized across a much bigger network, to the benefit of the entire organization. This is all part of the analysis that the consultants look at when analyzing potential merger and acquisition options.

That's my two cents.

 

[AAviator]

At this point, your ultimate future is in the hands of the creditors, both secured and unsecured. Those groups will choose whichever reorganization plan gives them the best hope of recovering any losses each will take as a result of the bankruptcy.

Yup. Anything else is just noise.

 

[bluebird]

Not only does US not bring any significant revenue in NYC or LAX, it brings no significant revenue gain in any key business market in the USA except for WAS and PHL. No huge revenue in BOS, NYC (thanks to the slot giveaway with DL), MIA, CHI, SFO, SEA or ATL. No significant presence in Texas. Yes, a huge hub in North Carolina and a shared presence with WN in PHX. Yes, AA's problems in competing against UA and DL is that it doesn't have a huge hub (with low O&D) in CLT or a hub in Arizona.

Could we back up a moment? How could AA go from the number one airline to dog food in a decade? RDU? BNA? Crazy. :unsure:

People say they miss the days of Bob Crandall.

Sidebar: Sending maintenance overseas—Crandall said there's no reason for it.

Carry on…

 

[WorldTraveler]

let's not lose sight at any point in this whole process that US' future is absolutely dependent on acquiring or being acquired by a network carrier - they simply do not have the size to compete with the network carriers and do not have a business model to exist as a low fare/low cost carrier.
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Based on their need to do some sort of deal, there will continue to be an enormous press effort and enormous pressure internally to convince everyone that an AA-US deal is in AA's best interests.
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They are particularly interested in striking now while the pain of the BK process is hot and fresh on the minds of AA employees and as creditors begin to have doubts about whether AA can successfully restructure.

The simple answer is that as long as AMR is in the period of the BK process when it has the exclusive right to present its own POR, they do NOT have to entertain any offers. If Parker succeeds at convincing them to listen, then he might serve to shorten the time in which the creditors allow AA to maintain exclusivity.
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But it doesn't change the fact that AMR's creditors will not accept a deal from US without also making it clear they are accepting offers from other parties - and on that basis, it is far from likely that US will be able to present the best plan.
LCC has one of the weakest balance sheets in the network carrier industry, an earnings history that is below average closely tied to its average at best revenue generating performance based on its own network, pay and benefits packages that are at or near the bottom of the industry, and a pretty poor track record for integrating the companies with which it has merged.
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When competing offers come in for AMR, and they certainly will, LCC's offer will very likely be topped by others which are far more sound... whether it be by US network airlines or low fare carriers, foreign investors such as oneworld partners, or domestic investment funds.
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The simple reason that Parker wants to push the process is because US' own future is far from certain and they will face as much or more pressure thru 2012 as fuel continues to increase and because US really does not want its offer to be compared with other potential offers that AMR will receive.
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Make sure those basic principles of the way LCC will operate are clearly understood and remain affixed in your mind throughout the whole AA BK process.

 

[USFlyer]

let's not lose sight at any point in this whole process that US' future is absolutely dependent on acquiring or being acquired by a network carrier - they simply do not have the size to compete with the network carriers and do not have a business model to exist as a low fare/low cost carrier.

...

But it doesn't change the fact that AMR's creditors will not accept a deal from US without also making it clear they are accepting offers from other parties - and on that basis, it is far from likely that US will be able to present the best plan.

I still find it interesting that AS is a smaller legacy airline than US but seems able to stand alone and not be acquired. Granted, different markets, history, etc., but "size" is not the only material factor in all of this.

As for the "best" plan, the ability to get DOT/DOJ approval is a critical piece of that. DL and AA could very well present a better merger option. But, will that get approved without significant carve outs (some of which US or someone else could pick up)? That remains to be seen, but such a plan would likely generate more labor unrest than simply merging with US. (In the interest of full disclosure, I'd still prefer to see DL and US merge.)

 

[BoeingBoy]

At this point, your ultimate future is in the hands of the creditors, both secured and unsecured. Those groups will choose whichever reorganization plan gives them the best hope of recovering any losses each will take as a result of the bankruptcy.

Actually, only the unsecured creditors get a vote. The secured creditors are assumed as yes votes for any POR since secured equals not having losses, just as the current AA shareholders are assumed as no votes for any POR.

Yes, US is a $13 billion in revenue per year company, but it's also a $13 billion a year in costs company. Plus US will have to borrow the money to buy AA - a lot of money. Or line up a bunch of investors by convincing them that a US/AA combination offers a better return than a stand-alone AA offers (what Parker unsuccessfully tried to do with DL). But the more new money that gets lined up, the smaller the return for the unsecured creditors - who get a vote.

Finally, you do have to look at what US brings to the table that AA doesn't already have. 3 second-tier hubs (how much does Parker talk about the "revenue disadvantage"), a relative handful of widebodies serving mostly places AA already serves. A high CASM operation, depending on lower employee costs to subsidize the revenue disadvantage (have you even looked at the term sheets AA has given it's unions - the pilots will be making more on the 320/321 than US pays on the A330). Too many 50 seat RJ's just when AA is using bankruptcy to thin it's herd of small RJ's.

Parker has his work cut out for him...

Jim

 

[Vortilon]

I think you should hold onto that though until After the Judge imposes the companies wish list upon you. That may shed a different light on things. After that what US has to offer will appear as a gold nugget to you boys over at AA. Sad to see that most of you have no clue as to how bad things are, or where labor sits during bk. On top of that you are even foolish enough to think that you still have a say in what is done. Good luck to all.....

Too late chuckles, I've already seen the companies ASK for A&Ps. Guess what? No loss of pay! Why? Cause we are already next to the bottom in pay - right above US Airways. That is until the US Airways A&Ps secure a new contract in the next few months - then they will surely leap frog us. That puts us dead last in every category. All things considered, if Judge Sean Lane is fair - I would see no reason why we couldn't get some pay and benefits restored.

 

[wings396]

The Judge isn't about being "Fair" to labor, his primary concern is the long term viability of the company as well as the creditors return. Only time will tell....

 

[WorldTraveler]

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I still find it interesting that AS is a smaller legacy airline than US but seems able to stand alone and not be acquired. Granted, different markets, history, etc., but "size" is not the only material factor in all of this.

As for the "best" plan, the ability to get DOT/DOJ approval is a critical piece of that. DL and AA could very well present a better merger option. But, will that get approved without significant carve outs (some of which US or someone else could pick up)? That remains to be seen, but such a plan would likely generate more labor unrest than simply merging with US. (In the interest of full disclosure, I'd still prefer to see DL and US merge.)

because AS has generated substantial value by being a true niche legacy carrier - part true LFC while still being a legacy airline. They have jealously guarded their key franchise in the Pacific NW.... and they have also not tried to be something they can't do well, something the best companies in the world know as absolutely critical.
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The notion that DL has unworkable overlap with AA while US does not is simply wrong. US ALREADY has a higher percentage of slots at DCA than DL does at LGA or JFK - and there is another competitor at JFK and EWR, both viable alternatives to LGA more than IAD is to DCA.
There is no doubt that DL cannot obtain large chunks of AA's NYC operation and it may have no intentions of doing so.... but DL is already a larger airline than US and the percentage of the overlap is probably no larger than what it would be if AA and US combined their DCA operations.
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It's also worth noting that DL is expecting very large response to its current early retirement programs which include retiree health care subsidies - perhaps for the last time. If DL obtains the success with these plans that they are predicting, they may not only be significantly understaffed but also be in a much greater position to take on large numbers of AA workers, perhaps even disproportionately larger than the assets which they acquire.
Given that the employees are part of the creditors committee through their unions, DL could have an advantage in being able to pick up more of AA's people than could other bidders.
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And it still doesn't change the fact that other carriers probably could present more viable business plans than US can, driven largely by the fact that most other potential airlines have better financials than US.
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US desperately needs to come up with a merger but this time they are competing with an industry that is largely in better financial shape than it was in the past.
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And, as Jim notes, it doesn't change the fact that US really brings little to AA that AA needs - while using AA resources to help save US, something those with the money that Parker needs to make a deal work will surely realize.
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And it still explains why Parker wants to push as hard as he can to convince people that AA-US is a good idea before he has to compete with other bids and before his plan is truly vetted. Wings is indeed right that the best financials will win AA's future whether it be a standalone AA, an AA acquired in whole, or an AA acquired in parts.

 

[etops1]

Without AA employee support , this deal is dead. AA employees can say no way US /AA but in the end if a good offer is proposed , people tend to change their minds . We shall see. I am not gonna sweat it because I have no control over it .

 

[ekjkj]

I normally don't chime in on such hot topics but I think everyone on these board have forgotten some things.

First I wanted to start by saying I really do feel bad for all the AA employees and hope the best for them

Okay some things I have learned throughout the years;

1) CEO's tend to repeat what has worked for them in the past.

2) Union's are businesses also.

3) People who worship money always want more.

Now my synopsis. Doug found a plan that worked when AWA purchased US, He tried the same approach for Delta and failed (but he learned somethings from that like labor harmony is really beneficial). If Doug can persuade the secured creditor then the unsecured creditors will follow or they will have to file a claim against American during bankruptcy and possibly jeopardizing bankruptcy exit (remember union are businesses too) so I don't think that will happen. Doug did talk to Delta creditors and they told him they felt Delta exiting bankruptcy was a better option (we now know the reasons; 1) the merger with Northwest 2) the pilot labor unrest). I think Doug learned from what Delta and United did with labor and will follow a similar path (I think US pilots will sit down to strike a deal if there are 3 parties involved and no NIC award in sight). Some things I read in this article that sound like things are going Doug's way are the creditor committee seemed responsive (they will get more money this way because if someone else wants to buy American the only way to get DOJ approval is to sell off large parts or face a myriad of law suits for all the other airline not included in the transaction (possibly jeopardizing the position of exiting bankruptcy without DIP and if that happened it would almost be a certainty US would buy American). In closing I would like to say I was working for Piedmont when US bought them and long for those day again but I also would say Doug is the best CEO I encountered since that merger, he's not perfect but as a employee I'm treated better now then any time since then (the pilot group and not the norm at US), he does push the envelope on certain thing but he also will admit when he makes a mistake and learn from them so if a merger would happen I think it would go much smoother because of that. Ed

 

[etops1]

I normally don't chime in on such hot topics but I think everyone on these board have forgotten some things.

First I wanted to start by saying I really do feel bad for all the AA employees and hope the best for them

Okay some things I have learned throughout the years;

1) CEO's tend to repeat what has worked for them in the past.

2) Union's are businesses also.

3) People who worship money always want more.

Now my synopsis. Doug found a plan that worked when AWA purchased US, He tried the same approach for Delta and failed (but he learned somethings from that like labor harmony is really beneficial). If Doug can persuade the secured creditor then the unsecured creditors will follow or they will have to file a claim against American during bankruptcy and possibly jeopardizing bankruptcy exit (remember union are businesses too) so I don't think that will happen. Doug did talk to Delta creditors and they told him they felt Delta exiting bankruptcy was a better option (we now know the reasons; 1) the merger with Northwest 2) the pilot labor unrest). I think Doug learned from what Delta and United did with labor and will follow a similar path (I think US pilots will sit down to strike a deal if there are 3 parties involved and no NIC award in sight). Some things I read in this article that sound like things are going Doug's way are the creditor committee seemed responsive (they will get more money this way because if someone else wants to buy American the only way to get DOJ approval is to sell off large parts or face a myriad of law suits for all the other airline not included in the transaction (possibly jeopardizing the position of exiting bankruptcy without DIP and if that happened it would almost be a certainty US would buy American). In closing I would like to say I was working for Piedmont when US bought them and long for those day again but I also would say Doug is the best CEO I encountered since that merger, he's not perfect but as a employee I'm treated better now then any time since then (the pilot group and not the norm at US), he does push the envelope on certain thing but he also will admit when he makes a mistake and learn from them so if a merger would happen I think it would go much smoother because of that. Ed

Prepare for the wrath of AAviator .

 

[usa1]

I normally don't chime in on such hot topics but I think everyone on these board have forgotten some things.

Well said. +1

 

[TWU informer]

Sometimes,

I FEEL LIKE A LITTLE WORM, ON A BIG FRIGGEN HOOK!

 

[Buck]

Latest info from neg., expect something is going to happen pretty quick, Title I 1,200- 1,600 going to street, system wide. Last proposal from the TWU w as 4 year deal, Company wants $210M from M&E.