US Airways Confirms It Has Hired M&A Advisors For Possible AMR Takeover

[Phoenix]

The King of spin cracks me up... How did he miss these highlights from Swelbar?

http://www.swelblog.com/articles/swelbar-pondering-more-of-americans-bankruptcy-news.html


But there we go again, speculating. In order of least employee/corporate disruption I rank today’s possibilities as follows:

American as a stand-alone
American and IAG/oneworld
American and TPG Capital
American and IAG/oneworld, TPG Capital
American and IAG/oneworld, TPG Capital and US Airways
American and US Airways
American and most anything Delta
Liquidation of Assets

Least employee/corporate disruption in one way to look at it.

Which scenario is the most profitable for the people that get to make the decision?

 

[AAviator]

Least employee/corporate disruption in one way to look at it.

Which scenario is the most profitable for the people that get to make the decision?

Probably 1-4. 😀

You're failing to realize that the people making the decision aren't behaving as though this is an auction. Clearly its not.

A scenario that includes LCC would ultimately include an additional 16-19 Billion dollars of debt. Debt that the suggested combination would have to service. Was it you who suggested DAL +1% payrates?? ( I fully understand you didn't specifically state LCC, but I don't think Bill Gates has the hots for AA like LCC does)

LCC doesn't have the luxury of a $50+ share price like it did when the DAL offer of $10 billion was made. In fact LCC's market cap is currently well south of $1 billion.

Then we have the little problem of LCC's under-performing network, and industry's highest consolidated CASM,....being dismantled to "improve AA's revenue generation" ....


I would think the people making the decisions, who ultimately already have some skin in the game are bristling at the idea of adding LCC to the mix, given the opportunity for clean sheet, new hire, non legacy cost growth.

Looking down the road, LCC make less sense with each passing day.

 

[etops1]

LCC 's market cap is listing over a billion . Just so
You know .

 

[AAviator]

LCC 's market cap is listing over a billion . Just so
You know .

My bad. I was using LCC share price from last week.. 🙄

Think the shorts are loading up?

BTW, how are you going to get that $20 gift card to WT?

Now then, looking at market cap.... jblu is at 1.85 $b... Hmmmmmmmmm Could jblu become be a gift from BA / TPG?

 

[etops1]

This ain't over by a long shot .. ;-)

 

[Phoenix]

Probably 1-4. 😀

You're failing to realize that the people making the decision aren't behaving as though this is an auction. Clearly its not.

A scenario that includes LCC would ultimately include an additional 16-19 Billion dollars of debt. Debt that the suggested combination would have to service. Was it you who suggested DAL +1% payrates?? ( I fully understand you didn't specifically state LCC, but I don't think Bill Gates has the hots for AA like LCC does)

LCC doesn't have the luxury of a $50+ share price like it did when the DAL offer of $10 billion was made. In fact LCC's market cap is currently well south of $1 billion.

Then we have the little problem of LCC's under-performing network, and industry's highest consolidated CASM,....being dismantled to "improve AA's revenue generation" ....


I would think the people making the decisions, who ultimately already have some skin in the game are bristling at the idea of adding LCC to the mix, given the opportunity for clean sheet, new hire, non legacy cost growth.

Looking down the road, LCC make less sense with each passing day.

No, I am not the one that suggested DAL + 1, or anything else about a possible AA, LCC, XYZ merger. We are all just used gum on the bottom of the pawn's shoes. If my paycheck doesn't bounce I show up for another two weeks. Other than that I 'm not smart enough to speculate on much. (except back when Stephen Wolf came I bought 5,000 shares )

 

[BoeingBoy]

AA to weigh airline acquisitions after bankruptcy exit...

Article

Talk of a big airline merger is taking off...
"American would prefer taking over, or merging with, US Airways than being bought by Delta," he said. "I do not think American would agree to be taken over by US Airways." If American sees the benefits of a merger, "they would orchestrate a deal, but on their own terms."

Article

Jim

 

[USA320Pilot]

For a company at the beginning of a large complex formal reorganization I believe it's way too soon for Tom Horton to be discussing his company purchasing other airlines for many reasons.

If Tom Horton is successful and AMR exits bankruptcy as an independent company he stands to make tens of millions of dollars in performance based compensation. Management's exit plan bonuses will drive decision making and a POR that projects $1 billion in additional revenue by focusing their flights on LGA/JFK, MIA, DFW, ORD, and LAX seems overly optimistic.

For an airline not previously interested in merging Horton has gone out of his way the past 3 days to tell the news media his views on US Airways and that AMR is considering potential acquisition targets is way too premature. The company is losing about $4 to $5 million per day, almost every one of its assets is encumbered, it's formal reorganization is likely to last 2 years, the airline has not been able of obtain concessions from its unions for the past 5 years, and I believe AMR's unions will not immediately agree to concessions. AMR's cash drain will continue and management will likely be forced to file a S.1113 motion.

AMR's union's have gone on record stating they will fight their cuts that are as deep as LOA 93 and they do not want a merger. I suspect another one of Horton's motivations is to appease labor as much as possible to try to get consensual union cost cuts, which is why Horton went public the past 3 business days following the release of the union restructuring term sheets.

I believe S&P analyst Betsy Snyder was right when she said, “It seems premature to be talking about an acquisition for them at this point. If you know there’s another 1 1/2 to 2 years to even exit bankruptcy, who knows what the industry is going to look like at that point?”

Two other points that I believe concern Horton is that he wants his management team himself to remain employed following a merger and I believe he suspects the big investors and money people want a deal. Why? M&A activity can produce big profits and more can be done inside of bankruptcy than outside of bankruptcy to cut costs with the help of the court.

I sense a lot of fear in Horton's comments. I believe he knows he may lose control of AMR and he is attempting to appease the unions and business partners; while simultaneously trying to reduce outside pressure by people interested is seeing his company acquire.

here

here

 

[FWAAA]

If Tom Horton is successful and AMR exits bankruptcy as an independent company he stands to make tens of millions of dollars in performance based compensation. Management's exit plan bonuses will drive decision making and a POR that projects $1 billion in additional revenue by focusing their flights on LGA/JFK, MIA, DFW, ORD, and LAX seems overly optimistic.

Earlier today, Delta announced that January consolidated unit revenue was up 14.5% year over year. If AA manages to increase unit revenue by half that increase (just 7%) for the whole year, revenue would climb by well over a billion dollars.

For an airline not previously interested in merging Horton has gone out of his way the past 3 days to tell the news media his views on US Airways and that AMR is considering potential acquisition targets is way too premature. The company is losing about $4 to $5 million per day, almost every one of its assets is encumbered, it's formal reorganization is likely to last 2 years, the airline has not been able of obtain concessions from its unions for the past 5 years, and I believe AMR's unions will not immediately agree to concessions. AMR's cash drain will continue and management will likely be forced to file a S.1113 motion.

There's no need to embellish or exaggerate AMR's losses. For December, AMR had a net operating loss of $3 million, excluding special charges for aircraft writedowns. The net loss (including interest expense) was $61 million, excluding special writedowns or reorganization items, or just under $2 million per day, not your exaggerated claim of "$4 to $5 million per day."

http://www.amrcaseinfo.com/pdflib/960_15463.pdf

AMR's union's have gone on record stating they will fight their cuts that are as deep as LOA 93 and they do not want a merger. I suspect another one of Horton's motivations is to appease labor as much as possible to try to get consensual union cost cuts, which is why Horton went public the past 3 business days following the release of the union restructuring term sheets.

You're exaggerating again. Cuts as deep as LOA 93? Under the company's proposal, AA's 737 and A320 captains would still earn $166/hr, or $41 more than you do. That's more than US pays its A330 captains. LOA 93? Hardly.

 

[USA320Pilot]

FWAAA said: "Earlier today, Delta announced that January consolidated unit revenue was up 14.5% year over year. If AA manages to increase unit revenue by half that increase (just 7%) for the whole year, revenue would climb by well over a billion dollars."

USA320Pilot responds: I believe the federal government would never allow DL and AA to merge. The anti-trust issues in NYC, LAX, and other airports would be too large.

FWAAA said: "There's no need to embellish or exaggerate AMR's losses. For December, AMR had a net operating loss of $3 million, excluding special charges for aircraft writedowns. The net loss (including interest expense) was $61 million, excluding special writedowns or reorganization items, or just under $2 million per day, not your exaggerated claim of '$4 to $5 million per day'."

USA320 responds: AA;s cash position went down over $100 million in December. With the first quarter the slowest time of the year and energy prices climbing I believe the cash burn is about $4 to $5 million per day. The cash burn will begin to slow as the industry enters the busy time of the year. However, during q3 2011 the company lost $286, which is more than an average of $3 million per day.

FWAAA said: "You're exaggerating again. Cuts as deep as LOA 93? Under the company's proposal, AA's 737 and A320 captains would still earn $166/hr, or $41 more than you do. That's more than US pays its A330 captains. LOA 93? Hardly."

USA320Pilot responds: Pay rates are only one part of a contract.

Significant loses will occur by eliminating the E-time and G-rig duty period and increasing the F-time duty rig means a 4-day trip with 72 hours on duty could pay as little as 18 hours. Furloughing 400 pilots on top of the 1,600 pilots already on furlough, and creating a "B" scale with the Commuter Air Carrier Exception. The company would have the option to place into mainline service 255 aircraft up to 88 seats or 50% of mainline aircraft that pay $109.64 for Captains and $74.55 for F/Os.

The potential of having 255 E170s, E175s, etc. replace B737s or MD88s would be a serious blow to pilot pay and working conditions and be a very deep cut.

When you look at the downgrades that could happen even with the age 65 retirements that's a significant pilot group financial loss. AA has over 1,600 pilots on furlough, it will furlough another 400 pilots, and with the scope/work rule changes the losses are significant. In US Airways' case the airline is hiring with an expectation that 25 pilots will be hired every month for the next 5 years due to attrition.

In my opinion, AMR's formal reorganization will drag on and the airline will request POR extensions because its case is complex, which is normal. This is no different than DL, UA, NW, or US's cases. However, other airlines can speak with AMR's creditor's committee and other companies will have their chance to present their POR to acquire AMR in whole or in parts to the bankruptcy court. With new labor contracts in place and the pilot group seniority integration DJ case likely completed at the District Court level with a Summary Judgment, it would not surprise me for Doug Parker to go USAPA and APA with a pilot contract offer to support a deal to acquire AMR.

Like last time Parker wanted to merge with United he offered USAPA the DL + 1% contract in exchange for the Nicolau Award, the CoC clause, and supporting a merger with UA. I believe Parker could take the same approach with a joint pilot group contract offer, with the same type of offers for the other employee groups too. This time the deal could include either a MacCaskill-Bond amendment seniority integration process or management proposing a seniority integration solution to the approach Gary Kelly used with AirTran. And, Parker could take of page out of Tom Horton's play book and negotiate directly with the employees by going public with a website proposal.

The option for AA's employees? Support a merger with US and have industry leading contracts or get a S.1113 haircut,, if necessary, to become bottom of the barrel paid employees.

 

[FWAAA]

FWAAA said: "Earlier today, Delta announced that January consolidated unit revenue was up 14.5% year over year. If AA manages to increase unit revenue by half that increase (just 7%) for the whole year, revenue would climb by well over a billion dollars."

USA320Pilot responds: I believe the federal government would never allow DL and AA to merge. The anti-trust issues in NYC, LAX, and other airports would be too large.

While I agree wirh you, there's nothing in my post talking about an AA merger with DL. My point is that increasing revenue by a billion dollars is child's play if AA can increase unit revenue by half of DL's January increase. In 2011, AMR increased revenue by nearly $2 billion over 2010.

USA320Pilot responds: Pay rates are only one part of a contract.

Significant loses will occur by eliminating the E-time and G-rig duty period and increasing the F-time duty rig means a 4-day trip with 72 hours on duty could pay as little as 18 hours. Furloughing 400 pilots on top of the 1,600 pilots already on furlough, and creating a "B" scale with the Commuter Air Carrier Exception. The company would have the option to place into mainline service 255 aircraft up to 88 seats or 50% of mainline aircraft that pay $109.64 for Captains and $74.55 for F/Os.

The potential of having 255 E170s, E175s, etc. replace B737s or MD88s would be a serious blow to pilot pay and working conditions and be a very deep cut.

You're assuming that AA will replace mainline planes with its new scope flexibility while it is just as possible (and more likely, IMO) that AA would use 70-88 seaaters to replace its 200+ 37/44/50 seat ERJs. As many analysts have said recently, the economics of 50 seat (and smaller) RJs just isn't viable any longer with $3/gal fuel.

Yes, AA is demanding that its pilots fly more hours per month and more flight hours per paid hour, but the fact remains that their W-2 income will not fall, and right now, AA pilots are paid substantially more than US pilots - and that won't change under AA's proposals.

When you look at the downgrades that could happen even with the age 65 retirements that's a significant pilot group financial loss. AA has over 1,600 pilots on furlough, it will furlough another 400 pilots, and with the scope/work rule changes the losses are significant. In US Airways' case the airline is hiring with an expectation that 25 pilots will be hired every month for the next 5 years due to attrition.

Very few AA pilots will reach 65 in the next five years due to about 1,000 pilot retirements from 2008 thru last year. The rush to claim the DB A plan as a lump sum and the 60-90 day lookback for the DC B plan cleared out the ranks of older AA pilots. Very few 60-64 year olds remain.

Merger with US? Maybe, but it seems premature to focus much energy on that possibility now given the likely 12-18 months of management exclusivity to present their own POR.

 

[AAviator]

The option for AA's employees? Support a merger with US and have industry leading contracts or get a S.1113 haircut,, if necessary, to become bottom of the barrel paid employees.

LMAO!!!!!!!!!!!

 

[FA Mikey]

While American holds exclusive rights to file a reorganization plan with the bankruptcy court, rivals can talk with its unsecured creditors committee. That panel, which includes the airline’s three biggest unions and the U.S. Pension Benefit Guaranty Corp., is involved in all American’s major decisions outside routine business.

Horton refused to identify any potential acquisition targets and played down the risk of a takeover by US Airways, noting two failures in merger talks with UAL (UAL) Corp.’s United Airlines and in a hostile approach to Delta when that carrier was in bankruptcy.


“My view is, this will be every bit as successful as their prior three attempts,” he said. Tempe, Arizona-based US Airways has acknowledged hiring bankers to study AMR; Delta is doing likewise, a person with knowledge of that effort has said.

Any future mergers among U.S. airlines are likely to see smaller carriers, including Alaska Air Group Inc. (ALK) and JetBlue Airways Corp. (JBLU) and perhaps US Airways, gobbled up by bigger rivals, Horton said.

full story here

Here you go CAPT. straight from the horses mouth, VS where you get your info from.

 

[AAviator]

Chip said: For a company at the beginning of a large complex formal reorganization I believe it's way too soon for Tom Horton to be discussing his company purchasing other airlines for many reasons.



He didn't. Here's what he said, from the article:


“It’s not hard to envision how we could be a force in the industry and, potentially, a consolidator,” Horton said in a Feb. 3 interview at Bloomberg’s New York headquarters. “I don’t think we need to combine with anybody, but I think there will be ample opportunities to.”




Chip said: If Tom Horton is successful and AMR exits bankruptcy as an independent company he stands to make tens of millions of dollars in performance based compensation.

Yep. Its the American way.... Would you prefer he did it for free?


Chip said: Management's exit plan bonuses will drive decision making and a POR that projects $1 billion in additional revenue by focusing their flights on LGA/JFK, MIA, DFW, ORD, and LAX seems overly optimistic.


Are being a bit disingenuous with your first remark? And, tweeking and growing MIA alone should bring in $1B. And that 1Billion represents less than a 5% increase in total revenues.


Chip said: For an airline not previously interested in merging Horton has gone out of his way the past 3 days to tell the news media his views on US Airways and that AMR is considering potential acquisition targets is way too premature.

He hasn't. The interviews always touch on LCC's interest in AA. What would you prefer him to say? BTW he has said, since day one, even in front of a bunch of pilots in Miami that we don't need a merger, but if we do, it would be on our terms, not someone else's.

Chip said: The company is losing about $4 to $5 million per day, almost every one of its assets is encumbered, it's formal reorganization is likely to last 2 years, the airline has not been able of obtain concessions from its unions for the past 5 years, and I believe AMR's unions will not immediately agree to concessions. AMR's cash drain will continue and management will likely be forced to file a S.1113 motion.

I think we'll have deals in place before the end of summer. Regarding the 1113, you know thats a starting point..... Right?

Chip said: AMR's union's have gone on record stating they will fight their cuts that are as deep as LOA 93 and they do not want a merger.

We've never said a word about LOA 93 or LA 9300, in fact I can't name a single AA pilot that knows what you're talking about. And yes, we have no desire to merge with LCC.

Chip said: I suspect another one of Horton's motivations is to appease labor as much as possible to try to get consensual union cost cuts, which is why Horton went public the past 3 business days following the release of the union restructuring term sheets.

???? yea,.... so?

Chip said: I believe S&P analyst Betsy Snyder was right when she said, “It seems premature to be talking about an acquisition for them at this point. If you know there’s another 1 1/2 to 2 years to even exit bankruptcy, who knows what the industry is going to look like at that point?”


A little sensitive there dude? Did you forget AA's desire is to emerge independent? All the while reporters are asking about a combination with LCC.. A combination you find so gleeful? Seriously dude??

Chip said: Two other points that I believe concern Horton is that he wants his management team himself to remain employed following a merger and I believe he suspects the big investors and money people want a deal. Why? M&A activity can produce big profits and more can be done inside of bankruptcy than outside of bankruptcy to cut costs with the help of the court.

A couple of problems here: First, Tom Horton has no shortage of job opportunities going forward no matter what happens. One just need to look back and see where guys like Steve Wolf end up..
http://en.wikipedia.org/wiki/Stephen_Wolf

Or Gangwal
http://en.wikipedia.org/wiki/Rakesh_Gangwal

Or Don Carty
http://en.wikipedia.org/wiki/Donald_J._Carty

Need I go on????

Secondly, the M&A people can make a lot of money, even making money on losing combinations. Such combinations are ones that neither you or I should hope for.

Chip said:I sense a lot of fear in Horton's comments.

I sense panic in yours.

Chip said: I believe he knows he may lose control of AMR and he is attempting to appease the unions and business partners; while simultaneously trying to reduce outside pressure by people interested is seeing his company acquire.


What?

here

here

 

[signals]

I receive The Kiplinger Letter that seems to think the odds are in favor of an US/AA merger. It points out that a Delta and AA merger would set off antitrust concerns because Delta's route overlap with AA would reduce competition. Meaning higher airfares.