US/UA Merger Master Thread

[767jetz]

This time United is in serious financial trouble with the Chicago-based carrier losing about $6 million per day in Q1 and needing financial relief from its lenders.

Ummm... Isn't this what you said so many times, over and over and over again during UA's bankruptcy? Is United suddenly in worse shape now than during it's bankruptcy? How many times did you say that UA would miss it's loan covenants, only to be completely wrong? How many times did you say that UA would be unable to raise capital from banks and would would be forced to pursue private equity, only to be proven wrong.

Look, I'm not claiming that UA didn't have a bad quarter. But claiming that that suddenly means UA is heading for another bankruptcy is an absurd leap to the wrong conclusion.

I'm also not saying that Tilton is not hell bent on a merger. But he won't pull the trigger if he sees that the mounting opposition will diminish his ability to cash out. UA certainly has options other than a merger. And so does US. Let's remember that UA flatly said no to USAirways the last time, even in UA's darkest hour.

There is no amount of money that will get UA's powerful unions on board without a strong prenup that integrates labor on our terms and protects UA's name, heritage, culture, and worldwide reach. That, my friend, you can take to the bank.

 

[Bear96]

My question is why do these two companies talk merger every couple of years with different people sitting in the "executive suites"?

A better question would be why, with all this talking, does nothing ever come to fruition?

 

[nycbusdriver]

A better question would be why, with all this talking, does nothing ever come to fruition?

It's a perennial juggling act where the company boards need to juggle stockholders, politicians, government agencies and (to a lesser extent) the employees/unions. So far, neither of the companies has had the talent in the head-shed to keep all of the above in the air at once. Inevitably, one falls to the floor and the juggler gets the hook.

 

[USA320Pilot]

Bear 96 asked: “A better question would be why, with all this talking, does nothing ever come to fruition?â€￾

Nycbusdriver answered: “It's a perennial juggling act where the company boards need to juggle stockholders, politicians, government agencies and (to a lesser extent) the employees/unions. So far, neither of the companies has had the talent in the head-shed to keep all of the above in the air at once. Inevitably, one falls to the floor and the juggler gets the hook.â€￾

USA320Pilot comments: Nycbusdriver, I agree. The difference this time might be that Doug Parker and Glenn Tilton are very pro-merger and there appears to be no other legacy carrier or other large airline suitor for United. Heaven knows that these two companies have tried over-and-over to execute a corporate transaction and maybe this time there will be a different result.

Regards,

USA320Pilot

 

[Bear96]

It's a perennial juggling act where the company boards need to juggle stockholders, politicians, government agencies and (to a lesser extent) the employees/unions. So far, neither of the companies has had the talent in the head-shed to keep all of the above in the air at once. Inevitably, one falls to the floor and the juggler gets the hook.

Really? Yet in the past LCC (U) and UA have managed to successfully merge various entities to make themselves what they are today, showing they can indeed be successful at "juggling" when they want to be.

So why have the stockholders, politicians, government agencies and employees/unions always thought a U/UA merger was such a bad idea that it couldn't all come together after (according to USA320pilot) many, many attempts and many different sets of executives?

 

[FWAAA]

From Captain Wallach's letter:

“We also believe that it is unrealistic to assume that the merger will receive Department of Justice approval. Nothing has changed since 2001 when the DOJ raised objections, and there are additional concerns over a possible reduction in coast-to-coast competition, especially the Washington, DC to Los Angeles and San Francisco routes.

Nothing?

The industry lost something like $40 billion combined since 2001 and he thinks "nothing has changed?"

Low cost carriers have expanded like crazy in those seven years, flying many transcon routes, and he thinks "nothing has changed?"

Fuel has climbed from $0.75/gal to $3.50/gal yet yields have still not recovered to the levels of 2000 and he thinks "nothing has changed?"

Captain Wallach's lack of antitrust expertise is showing.

 

[Art at ISP]

Really? Yet in the past LCC (U) and UA have managed to successfully merge various entities to make themselves what they are today, showing they can indeed be successful at "juggling" when they want to be.

So why have the stockholders, politicians, government agencies and employees/unions always thought a U/UA merger was such a bad idea that it couldn't all come together after (according to USA320pilot) many, many attempts and many different sets of executives?

The merger of US/HP has been ANYTHING but a success to this point. It has been one inept step after another.

Here we are three years later, and you still have 2 separate operations under one certificate because of inept management and hostile unions.

They should not be permitted to even THINK of another merger until they finish this one......

And Lord Help you all if Dougie remains in command......

 

[Bear96]

The merger of US/HP has been ANYTHING but a success to this point. It has been one inept step after another.

Here we are three years later, and you still have 2 separate operations under one certificate because of inept management and hostile unions.

They should not be permitted to even THINK of another merger until they finish this one......

And Lord Help you all if Dougie remains in command......

I agree. I did not mean every merger was a success from a passenger point of view, only that they successfully figured out how to "juggle the balls" identified above by figuring out how to clear the stockholder / regulatory / etc. hurdles identified above and at least complete mergers in a technical sense. (And really I was referring to United/PanAm and Allegheny/Piedmont, although I was not clear on that.)

 

[700UW]

United never merged with Pan Am.

And it was US Air and Piedmont.

 

[Bear96]

United never merged with Pan Am.

And it was US Air and Piedmont.

I see. So entities named "United" and "PanAm" did not come together in some form to form the UAL of today?

And no entities callied "Allegheny" and "Piedmont" came together in any form to form the LCC of today?

The United and USAirways of today were born decades ago, as is?

It is amazing how you can totally miss very obvious points sometimes. Let me help you connect the (very obvious) dots. Who knows what the exact transaction will be (if any) that will combine LCC and UAL. It might be a merger - or one of those entities might purchase or acquire the other. In any case, the point is there will be "juggling" to accomplish among regulators, unions, stockholders, etc.. UAL and LCC have each been able to accomplish that in the past when combining various airlines, or parts of airlines, in the past. See?

 

[Itestwell]

Pretty much sums it up in one paragraph, taken from another website...

"Over the last 30 years since deregulation, U.S. consumers have been treated to astoundingly low fares and have been unwilling to pay for what it actually costs to run an airline. The American public has given the federal government a free ride on all of their many failings - both with the airline industry and with so many other public policy problems, and refused to demand real change in Washington. Customers want top-notch services at Orbitz prices, every time, and they don't care how they get it: if it means outsourcing reservations to Manila, baggage service to Bangalore, or maintenance to Beijing. All they care about is price, price, price. And as long as that is how consumers behave, then chaos, bankruptcies, poor service and long delays is what they'll get."

 

[Bear96]

That's it in a nutshell.

 

[Art at ISP]

Yep that is right on the money. The American Public needs to get real. Fares are going to go up. If you don't like it, drive....OOOPS that now costs a heck of a lot more too.......

Of course, the government has done NOTHING about the investors and speculators who have falsely inflated the price of oil either--but that's a topic for another thread.......

People have to get real. It's going to cost more to fly.

Time for RATIONAL fares......

With proper management UA could PROBABLY make it on their own, but if you look at the labor strife at US today, it ain't NOTHING compared to what would happen if the unions are not on board for a US/UA marriage.

 

[Art at ISP]

Bear,

UA never actually "merged" with PA. They purchased its London authority and its Pacific system, in effect helping break it up. The balance went to Delta.

And there are those who would question the validity of the success of the US/PI merger--it may have been a success in some areas, but I am sure there are those who would not agree......

 

[700UW]

Actually the balence did not go to DL, DL bought PA's European operation and some A310s, PA stayed in business a bit longer and then went Chapter 7.

Bankruptcy
Pan Am was forced to declare bankruptcy on January 8, 1991. Delta Air Lines purchased the remaining profitable assets of Pan Am, including its remaining European routes and the Pan Am Worldport at JFK Airport, and injected $100 million as a 45% owner of a reorganized, but smaller Pan Am serving the Caribbean, Central and South America from a hub in Miami. The airline's creditors would hold the other 55%. During that time, Pan Am began to relocate its offices to Miami. The new airline would have operated approximately 60 aircraft and generated about $1.2 billion in annual revenues with 7,500 employees.[29] During this interim period, Pan Am continued to sustain heavy losses as Wall Street, the traveling public and even Delta became less confident in the reorganization plan. Revenue shortfalls materialized throughout October and November of 1991. The Boston-New York LaGuardia-Washington National shuttle service was taken over by Delta in September 1991.[30] Delta later obtained all of Pan Am's remaining transatlantic rights, except Miami to Paris and London, in November 1991. Plaskett was replaced by Russell Ray, Jr. as Pan Am's new chairman and CEO.

Pan Am ceased operations on December 4, 1991, when Delta's CEO Ron Allen and other senior executives reached a decision to cut off its scheduled final payment due to Pan Am of $25 million the weekend after Thanksgiving. This was at a time when Pan Am's senior executives outlined a projected shortfall of between $100 and possibly $200 million, with the airline requiring an $25 million installment just to fly through the following week. On the evening of December 3, Pan Am's Creditors Committee advised U.S. Bankruptcy Judge Cornelius Blackshear that it was close to convincing an airline (TWA) to invest $15 million to keep Pan Am operating. However, the following morning a deal with TWA owner Carl Icahn could not be struck. Pan Am opened for business at 9:00 AM and within the hour, Ray was forced to withdraw Pan Am's plan of reorganization and execute an immediate shut-down plan for Pan Am. Over 9,000 employees lost their jobs. As a result of this action, Delta was sued for more than $2.5 billion on December 9, 1991 by the Pan Am Creditors Committee.[31] Shortly thereafter, a large group of former Pan Am employees also sued Delta. Delta was able to combine and move the cases from New York to Atlanta, and the lawsuits were later dismissed.

The airline's last scheduled flight was Pan Am Flight 436 from Bridgetown, Barbados, to Miami. The plane was a Boeing 727-200 named Clipper Goodwill. After serving only two months as Pan Am's CEO, Ray was replaced by Peter McHugh to supervise the sale of Pan Am's remaining assets by Pan Am's Creditor's Committee. Pan Am's last remaining hub at Miami International Airport was split during the following years between United Airlines and American Airlines. TWA's Carl Icahn purchased Pan Am Express at a court ordered bankruptcy auction for $13 million and promptly renamed it "TWA Express." The Pan Am brand was sold to Charles Cobb, CEO of Cobb Partners and former United States Ambassador to the Republic of Iceland under President George H.W. Bush and Under Secretary of the US Department of Commerce under President Reagan. Cobb, along with Hanna-Frost partners invested in a new Pan American World Airways headed by veteran airline executive Martin R. Shugrue, Jr, a well regarded former Continental president and Vice Chairman of the original Pan Am.