Us Airways Keeps Door Open For A Better Deal

[USA320Pilot]

Whlinder:

There is nothing to make up my mind about. Where did I voice an opinion on whether or not US Airways would remain in Star and where did I say I had contacts at United?

In regard to how discussions will play out with United, which has been "shunned" by US Airways, I cannot predict at this time. Maybe you should read my posts a little closer.

By the way, the Hub does provide good information.

Regards,

USA320Pilot

 

[Fly]

You are a laugh a minute Cap. SHUNNED?!? LMAOOOOOOOOOOOOO

(If you repeat the SAME info over and over, doesn't make it true)

 

[EyeInTheSky]

You are a laugh a minute Cap. SHUNNED?!? LMAOOOOOOOOOOOOO

(If you repeat the SAME info over and over, doesn't make it true)

[post="272892"][/post]​

Tell him to "Shun This!" It's really getting boring. Fly is that a dog getting whipped or a horse? I can't tell

 

[FrugalFlyerv2.0]

UA is going to be hurt by this deal with the loss of code share revenue and Air Canada moving away from UA and towards US and it appears there may not be much UA can do with US at this point.

[post="272839"][/post]​

Are you sure about AC walking away from UA? If I were AC I would want to keep the current codeshare arrangement with United AND at the same time codeshare with US/HP. I just can't understand the advantage to AC dumping the UA codeshare. (I would imagine that with the UA codeshare AC takes in more $$$ on ORD-YYZ by lunch than AC would get on PHL+CLT+PHX+LAS to YYZ all day.)

 

[hp_fa]

hp_fa:

You said the same thing I did. If another business enterprise puts together a better offer than US Airways negotiated, then yes, they could take control of the Arlington-based company.

Regards,

USA320Pilot

[post="272865"][/post]​

You said the starting point would be $1.6B. That is an incorrect number andthat is what I was saying. The HP/U deal provides only a fraction of that to settle the claims of the unsecured creditors. Whatever that number is, that is what needs to be beaten by other bidders.

 

[enilria]

I suspect it will be the DOJ that plucks US from Star. I think that is what Boyd was saying. UA is already #1 or #2 in the West. WN is really UA's only competitor and they have a very limited product offering compared to UA's transcons and int'l service.

If you add PHX and LAS hubs it is pretty extensive. SFO-LAS, for example, would be a Star monopoly.

One more note, the break-up fees are actually pretty small compared to past deals. That tells me they aren't really there as a disincentive to breaking up the deal...which is the usual purpose.

 

[USA320Pilot]

Bids could challenge US Airways merger

In an interview Tuesday with the Observer, America West Chief Financial Officer Derek Kerr said the company believes its proposal will emerge on top. He said he hasn't heard of companies assembling competing offers.

"We believe there could be somebody who could come out there and do something," Kerr said. "Any bid you would see would be more for pieces" of US Airways. Creditors, he said, would also be hard-pressed to sign onto another deal.

The key to submitting a better bid for US Airways' assets, analysts say, is wooing US Airways creditors by making a sweeter offer. Typically, the bankruptcy process is designed to recoup as much money as possible for creditors. In this case, US Airways and America West have crafted a deal they say accomplishes that goal while preserving jobs and allowing creditors to continue supplying the airline.

Indeed, many of the biggest creditors have already signed on to the America West deal.

The ATSB will likely favor the America West offer, said Helane Becker, a transportation analyst and managing director of The Benchmark Co. With the two airlines planning to merge, the ATSB would have the opportunity to consolidate the two loans and restructure them in taxpayers' favor, she said.

"If I were the ATSB, I would be wildly thrilled," she said.

Complete Story

USA320Pilot comments: The ATSB is comprised of the DOJ, DOT, and Federal Reserve. The DOJ and DOT will conduct the regulatory review.

In regard to Government/Regulatory reviews, US Airways posted the following Q&A on the Hub, its internal website:

Q. Does the Air Transportation Stabilization Board (ATSB) have to approve this merger?

A. Since both America West and US Airways have loans that are guaranteed by the federal government, we have kept the ATSB fully informed of our discussions. We will now be in negotiations with the ATSB on how the combined loans of the two companies will be treated after US Airways’ emergence from Chapter 11 and the transaction is completed.

Q. What other government approvals are required?

A. The U.S. Department of Justice will review the competitive nature of the transaction under the Hart-Scott-Rodino Act. The U.S. Department of Transportation has regulatory oversight as it relates to ownership, economic fitness, and international route authority, among other matters. And the U.S. Securities and Exchange Commission has oversight over the financial transaction, since both companies are publicly traded. We will be quickly filing the necessary paperwork and supporting documentation and pledged all available resources in order to ensure a speedy regulatory review. Because of the pro-competitive nature of the transaction and the prospect of spreading the many public benefits of a national, low-cost, low-fare airline to more cities, we are hopeful of prompt regulatory action.

Q. How is this deal any different from past merger attempts that regulators called anti-competitive?

A. Mergers and other transactions must be reviewed on their own merits, and not on the strengths or flaws of past transactions. This is a merger of the nation’s seventh and eighth largest airlines that creates the nation’s sixth largest airline as measured by available seat miles (ASMs). The important point here are the numerous benefits associated with this transaction for consumers and the communities we serve. This is a pro-competitive, pro-consumer transaction, with little overlap and the prospects of bringing enhanced competition and low fares to more cities.

Regards,

USA320Pilot

 

[USA320Pilot]

Fly & Busdrvr:

It appears the Wall Street Journal does not have the same opinion of United as you do. Maybe today's WSJ column has something to do with why US Airways' "executive suite" shunned M&A offers from United and why the Board selected the America West deal. Here's what the Journal said:

Send United to the Great Hangar in the Sky

NEW YORK (Wall Street Journal) - What's wrong with this picture? A federal government agency is getting stuck with United Airlines' pension obligations, and in return for this favor United is going to keep flying. By now, shouldn't the price be that United do the decent thing and disappear, vanish into the night, so the industry can begin to work off the problem of too many companies chasing too few passengers?

Federal bankruptcy law and the post 9/11 airline bailout have already done enough damage. US Airways and America West, both recipients of federal bailout loans, are merging mainly to make sure they will be "too big to fail" and thus entitled to a United-style cosseting next time they get in trouble.

Now United itself will dump its pensions on a taxpayer-backed government agency, a step that may well provoke other airlines to do the same. United even gave the government a stake in seeing this outcome come to pass -- in the form of $1.5 billion in convertible notes held by the federal Pension Benefit Guaranty Corp. The PBGC now finds itself in the weird position of cheering for United's success at the expense of carriers whose pension obligations it might have to assume next.

Let's dry our eyes. We've had two weeks for grieving over the pension plans of United Airlines ; maybe we can have a few minutes of realism. What was lost, really? United's plans still hold $7 billion in assets, which could have been divvied up among retirees and employees by seniority. But this option was never considered -- it would have meant giving up the opportunity to collect, at government expense, an additional $6.6 billion in benefits promised by United but never backed by real money.

Be mindful of how these vapor benefits came into being. Until bankruptcy wiped out its vaunted experiment in worker empowerment, United was 55% owned by its employees and virtually dominated by the pilots union and machinists union.

From 1994 on, they controlled two seats on the board, held sway over a majority of others, and effectively hired and fired the CEO. To boot, labor didn't hesitate to reinforce its clout by threatening strikes and engaging in illegal work slowdowns -- a process that eventually led to the highest wages in the industry. As Rick Dubinsky, head of the pilots union, told management in 2000: "We don't want to kill the golden goose. We just want to choke it by the neck until it gives us every last egg."

Well, the goose is on government life-support now. But labor could always have used its clout to steer more eggs to the pension basket rather than the paycheck basket. A dirty little secret, however, is that it would have been crazy to do so. Pension underfunding (really, benefit overpromising) is too good a bargain to pass up -- a cheap option on government-paid pension benefits in the event of bankruptcy.

We specify "cheap" rather than "free," because the PBGC does charge a premium for insuring private pension plans, just not enough to make it uneconomic for troubled employers to engage in such flimflam. Look at the agency's main offenders: steel, autos, airlines -- companies with little hope of long-term prosperity and large, unionized work forces to keep placated in the meantime.

The pilots at United were in a particularly odd position, since many of the most senior were nominally entitled to pension benefits far in excess of the $46k-a-year the PBGC was willing to guarantee. No wonder their union was quick to propose a bankruptcy workout that would have given them a big new ownership stake in the carrier in return for dumping their plan -- oh yes, and on the condition that United also terminate the plans of lesser-paid employees.

But the larger point here is that defined-benefit pension plans aren't going out of style because they're structurally defective. They're going out of style because of a government-created incentive for weak companies to award more benefits than they have any hope or intention of funding.

In the wake of United's pension default, those worried about too much risk being placed on employees to manage their own savings might consider a solution: Abolish or privatize the PBGC. We might find that traditional pensions, if properly funded, have some life in them yet as a way for workers to guarantee predictable retirement income and insure against longevity. In fact, there's no reason such plans couldn't be adapted to fit today's more fluid corporate environment and personal job histories.

In the meantime, the whole purpose of trying to legislate away some of capitalism's hard edges for workers and companies has come sadly unstuck in the airline business. Somehow the industry has to reduce itself to a smaller handful of more efficient network carriers that can maintain service to smaller markets even in the face of cherry-picking by Southwest, Jet Blue and their low-cost brethren. And if ever a company has earned the fate of being the odd man out, United is it.

It's spent nearly three years in bankruptcy, shucking off labor contracts, debts and now employee pensions, but still loses money. United hasn't yet received its hoped-for federal bailout loan, but the bailout board did stretch its own rules to keep the window open, helping forestall a harsher fate in the private capital markets. House Speaker Denny Hastert, who lobbied fiercely on United's behalf, told the Chicago Tribune later that dismemberment at the hands of Delta and American would have been the likely result for United.

Dismemberment is still a good idea -- in fact, we proposed it here two years ago and even nominated Treasury Secretary John Snow to be in charge, given his role in a remarkably similar dissection of Conrail when he was a private railroad executive. An orderly liquidation of United is an even better idea now that the federal government and taxpayers face an urgent need to get off the hook for a potential industry-wide airline pension default.

Regards,

USA320Pilot

 

[funguy2]

I have heard Doug Parker say that US-HP intends to be in Star. If the new US-HP were to be booted from Star Alliance, he believes the company could easily join one of the other alliances.

In my opinion, if US-HP is not in Star, it will be in oneworld. US-HP's "coastal" hubs compliment AA's mid-continent hubs nicely for USA coverage. Also, America West already has in place code-share relationships with British Airways and QANTAS, while it has no code-shares with current Star members. Also, while it is not a happy history, US Airways has some history with BA as well.

As for DOT/DOJ approval of US-HP's entry into Star... Well, they allowed DL-CO-NW codeshare, despite some monopoly markets... I think the DOT/DOJ would have little to no problems with US-HP in Star. To the extent it does, it can require limits, similar to the limits imposed on DL-CO-NW.

I would bet that there's an 75% probablility that US-HP remains in Star, a 15% probability for oneworld, a 5% probability for SkyTeam, and a 5% probability of not participating in an alliance.

 

[funguy2]

US Airways and America West, both recipients of federal bailout loans, are merging mainly to make sure they will be "too big to fail" and thus entitled to a United-style cosseting next time they get in trouble.

Dismemberment is still a good idea -- in fact, we proposed it here two years ago and even nominated Treasury Secretary John Snow to be in charge, given his role in a remarkably similar dissection of Conrail when he was a private railroad executive. An orderly liquidation of United is an even better idea now that the federal government and taxpayers face an urgent need to get off the hook for a potential industry-wide airline pension default.

These are interesting opinions. In fact, the stated goal of US and HP management is not what is noted above, although there may be some truth to the author's assertion.

By the way, who is the author of this article? It appears to be an opinion/editorial. Hardly factual.

 

[USA320Pilot]

Funguy2:

Funguy2 asked: "By the way, who is the author of this article?"

USA320Pilot answers: The Op-Ed article above was printed in the Wall Street Journal and written by Holman W. Jenkins, Jr.

Regards,

USA320Pilot

 

[EyeInTheSky]

Again, another mean-spirited article. It's an op-ed piece by HOLMAN W. JENKINS, JR.

Holman W. Jenkins Jr. is a member of the editorial board of The Wall Street Journal and writes editorials and the weekly Business World column.

Mr. Jenkins joined the Journal in May 1992 as a writer for the editorial page in New York. In February 1994, he moved to Hong Kong as editor of The Asian Wall Street Journal's editorial page. He returned to the domestic Journal in December 1995 as a member of the paper's editorial board and was based in San Francisco. In April 1997, he returned to the Journal's New York office. Mr. Jenkins won a 1997 Gerald Loeb Award for distinguished business and financial coverage.

Born in Philadelphia, Mr. Jenkins received a bachelor's degree from Hobart and William Smith Colleges in Geneva, N.Y. He received a master's degree in journalism from Northwestern University in Evanston, Ill., and studied at the University of Michigan on a journalism fellowship.

Mr. Jenkins invites comments to [email protected].

I think the UAL employees should send him lots of e-mail.

 

[RowUnderDCA]

I have heard Doug Parker say that US-HP intends to be in Star.  If the new US-HP were to be booted from Star Alliance, he believes the company could easily join one of the other alliances.

In my opinion, if US-HP is not in Star, it will be in oneworld.  US-HP's "coastal" hubs compliment AA's mid-continent hubs nicely for USA coverage.  Also, America West already has in place code-share relationships with British Airways and QANTAS, while it has no code-shares with current Star members.  Also, while it is not a happy history, US Airways has some history with BA as well.

As for DOT/DOJ approval of US-HP's entry into Star... Well, they allowed DL-CO-NW codeshare, despite some monopoly markets...  I think the DOT/DOJ would have little to no problems with US-HP in Star.  To the extent it does, it can require limits, similar to the limits imposed on DL-CO-NW.

I would bet that there's an 75% probablility that US-HP remains in Star, a 15% probability for oneworld, a 5% probability for SkyTeam, and a 5% probability of not participating in an alliance.

[post="272929"][/post]​

You're reading my mind.

Except I say:

70% remain in Star
15% oneworld
12% none or also ran alliance with Virgin
3% SkyTeam

 

[Corinth2103]

Tell him to "Shun This!" It's really getting boring. Fly is that a dog getting whipped or a horse? I can't tell

[post="272898"][/post]​

"beating a dead horse"
You are beating a dead horse when you insist on talking about something that cannot be changed. Example: "I'd like to talk with you again about what happened." Reply: "Oh, come on. Let's not beat a dead horse."

Beating a dead horse is an action that has no purpose, because no matter how hard or how long you beat a dead horse, it is not going to get up and run. Example: "Let's not talk about it any more. Okay?" Reply: "You're right. We're just beating a dead horse."

-from GoEnglish.com

 

[EyeInTheSky]

"beating a dead horse"
You are beating a dead horse when you insist on talking about something that cannot be changed. Example: "I'd like to talk with you again about what happened." Reply: "Oh, come on. Let's not beat a dead horse."

Beating a dead horse is an action that has no purpose, because no matter how hard or how long you beat a dead horse, it is not going to get up and run. Example: "Let's not talk about it any more. Okay?" Reply: "You're right. We're just beating a dead horse."

-from GoEnglish.com

[post="272997"][/post]​

Corinth2103, wow, I am impressed you can cut n' paste like a pro!