Hi Magsau:
Magsau said: It would be really nice to see you not tie UAL to the breeze of USAir. Over the weekend I spoke to a union offical at UAL that said in the event that NW gained control of the CLT and PHL, shuttle ops. Then the DL codeshare with NW would definitely not be allowed and most likely UAL and DL would become codeshare partners. This would have a very negative affect to USAir and most importantly AMR. Please do not read the tea leaves and see UAL and U linked at all cost because UAL does have more options than only USAir.
Chip comments: The Bush Administration is looking at ways to help the industry and Andrew Card’s staff has been discussing this issue with the ATSB. Should the ATSB decide in favor of a consolidation as the best way to protect taxpayer investment, there will be little for other departments to do.
The board has extraordinary authority, but in the case of UA the biggest issue is governance, whether it’s the US code share, DL code share, or a “unique corporate transactionâ€. There have been reports from sources close to the discussions that the ATSB might require UA to enter bankruptcy to eliminate the ESOP, reconstitute the BOD, and change the corporate governance structure.
Interestingly, if NW and US would merge, the current market share of the two airlines would increase to 17.84 percent making NW the second largest airline in the world. When combined with the CO alliance, would increased the combined network to 27.28 percent.
At DL & UA alliance would take their combined network to 31.76 percent, but both airlines would still have big cost problems post US emergence. AMR, which is trying to cut $3 billion in costs and will park 83 jets, would be the third largest network with 19.07 percent.
Proposed market share scorecard:
UA & DL - 31.76 percent
NW, CO, & US – 27.28 percent
AA – 19.07 percent
WN – 7.16 percent
Will consolidation occur, will UA enter bankruptcy, and would any of these changes happen? I do not know, but one thing I do know is that all of these events have been discussed and the DOT’s decision on the UA-US code share is due on September 23.
Chip