Wsj: Us/awa Seek Allies For Merger

[USA320Pilot]

Robbedagain & Madders:

I do not want to see United or any other carrier fail, but they have serious problems more extensive than US Airways faced last winter. Why? Their problems are larger in scope, there are more of them, and they ahve not completed their labor restructuring like US Airways. Can United survive? Absolutely, but the sentiment I am hearing is that they are in very, very serious trouble, which is not good news for US Airways without an America West merger.

A United failure will hurt US Airways in the short-term and with the POR because of the loss of code share revenue and the Chicago-based company’s relatively small East Coast operation. US Airways and United do not have a lot of overlap, thus an incremental benefit to a United capacity reduction will provide US Airways with less benefit than other companies, which is another problem for the Arlington-based airline.

In regard to the 1938 law, Glenn Tilton is pushing for a change in global corporate integrations and it could be that is United’s best chance of survival. United may want to integrate with a foreign company and obtain a cash infusion for exit financing, but can this be accomplished in-time before their cash runs out? Right now there is not a lot of Washington support, especially with the continued terrorism and war threat, to place commercial airline assets in the hands of foreign nationals. At some point in the future that could change, but I do not believe it will be in the near-term.

I will contact ALPA Legislative Affairs and obtain their opinion on the subject and post my findings.

In regard to America West becoming a Star Alliance partner, I have not discussed that with anybody with knowledge of the situation, however, with US Airways branding likely surviving and the Star North American problem, I believe America West will become a Star Alliance member after the corporate transaction is complete and before the two companies fully integrate. Separately, Lufthansa has a vested interest in seeing both United and US Airways survive, but it's unclear if they're willing to provide capital. Up to this point, Lufthansa has been willing to provide other joint cooperative support, but has not been willing to provide moeny.

Madders, there are people in high level positions who agree with your last post.

Regards,

USA320Pilot

 

[whlinder]

Except that LH has more interest seeing UA survive than US.

 

[USA320Pilot]

Whlinder:

I agree with you that Lufthansa has more interest in United surviving over US Airways because of the breath of United’s network, but is it easier to turn a battleship or destroyer around in a harbor?

US Airways’ saving grace may be its size, which makes it easier to transform itself into a LCC/network carrier hybrid. I know for fact US Airways has “shunnedâ€￾ United’s recent request for a corporate transaction and one has to ask why; as well as why management has now apparently worked out the America West merger details less financing.

United’s fate and its effect on US Airways, the domestic alliance, the Star alliance, and foreign investment will come more into focus after the Chicago-based airline releases its first quarter earnings report this week and March operating report to the bankruptcy court.

These reports will also give a clearer public picture of how United’s financial situation could effect US Airways going forward.

Regards,

USA320Pilot

 

[FrugalFlyerv2.0]

It would not surprise me to see Lufthansa, Mesa, and RSA provide the US Airways' exit financing and merger capital. Then US Airways and America West would merge followed by a strategic transaction with Air Canada, which would then create the new Star Alliance North American anchor.

Regards,

USA320Pilot

[post="265998"][/post]​

What is the advantage of AC investing in US/HP?

AC just went through a Canadian version Chpt. 11 reorganization, and although I think AC managed a small profit recently, they aren't exactly sitting on a large pile of money. Also, AC already has terrible employee-management relations, I'm sure the unions (they just gave huge concessions) would be thrilled that AC is spending money to invest into foreign airlines.

On the other hand, AC did invest in CO about a 12-(or so) years ago - but - at that time there was no * alliance and the extensive UAL codeshare. Maybe AC management thinks this is a relatively easy way to make some money by putting a few hundred million into a US-HP entity, getting some stock (~25%) then selling at a good price.

Alternatively, AC may be willing to invest into US-HP in return for getting the aircraft maintenance work (AC recently got a contract to work on DL's 757s/767s). Since AC is considering spinning off their aircraft maintenance division a contract to do work for US-HP would be huge.

Also, can somebody explain the advantage to US in dumping UAL in favor of AC? There is no advantage to it. Consider connecting to Asia or Europe: on a AC codeshare (from YVR or YYZ or YUL) a US customer would have to clear customs twice - how convenient.

Lastly, what is the advantage to LH dumping UAL? While LH may provide financing to its * alliance partner - it did so to AC a few years ago to prevent it from being taken over by AA/CP and leave * for 1 world - I think LH is pretty happy with the current arrangement it has with UAL (and AC and US).

 

[700UW]

You also have to remember LH and UA own some of AC's planes, as AC was having money problems several years back LH and UA financed some of their planes by buying them and leasing them back to AC.

 

[whlinder]

Whlinder:

I agree with you that Lufthansa has more interest in United surviving over US Airways because of the breath of United’s network, but is it easier to turn a battleship or destroyer around in a harbor?

I don't know I've never tried.

US Airways’ saving grace may be its size, which makes it easier to transform itself into a LCC/network carrier hybrid. I know for fact US Airways has “shunnedâ€￾ United’s recent request for a corporate transaction and one has to ask why; as well as why management has now apparently worked out the America West merger details less financing.

US Airways' size should have made it easier to transform into whatever it wants to transform to (I still haven't figured it out and neither has managment), however we're in the middle of the 2nd bankruptcy and where are we? Still extending the POR and begging for financing. No real signs of being anything close to an LCC, other than employee wages being cheap.

I don't know why UA would request a corporate transaction with US, I don't see anything they have to gain from any sort of transaction at this point, unless they want to make all of US a separate subsidiary flying around like Ted or something. But if you say UA approached US for a transaction, I'll take it for what it is worth. When there is confirmation or media talk about it, maybe I'll put more faith in your 'facts'.

We'll see how UA does this quarter. I am a little bit encouraged by US showing an operating profit for March, but the full numbers for the month will be interesting.

 

[Busdrvr]

I know for fact US Airways has “shunnedâ€￾ United’s recent request for a corporate transaction and one has to ask why;

Let me guess, you had Wolf, Bronner, and Lakefield on you J.S. all at the same time....

Dellllllllllusionallllllllllll

BTW, who is this so called "Chicago based airlined"? Chicago Express?

 

[funguy2]

One theory about AC's involvement is that they will be looking to dispose of their A330/A340 fleets as they transition into the Boeing order made the other day. A merged HP-US seems could potential candidate for placing AC's A330's given that a merged HP-US would need to settle on one type of international aircraft (B767 vs A330), potential for int'l expansion from LAS/PHX for the combined US-HP, both HP and US relationship with Airbus, and the fact that HP wants to get into overwater flying (remember they are running ETOPS on their B757's).

Just a thought. It might depend on the range of the AC A330's... Can they make PHX/LAS Europe? I see they have an A330 on YVR-LHR.

 

[robbedagain]

thanks usa320. i will be interested in seeing the findings and the opinions. i would think that if bush wanted to see us or even ua fix themselves, then a foreign ownership (especially with codeshare airlin) would be the way to do it

 

[SpinDoc]

One thing you have to admit.. who ever forks up cash for Uair right now is going to get quite a bargan... no better time to get in than at the bottom.

[post="266104"][/post]​

Texas Pacific Group (TPG) buys distressed
companies that have potential and makes
a killing every time. Even though they
aren't front and center on the US/HP merger
right now, just wait until the deal is done
and I am sure they will be right in the
middle of it.

 

[funguy2]

TPG and Warburg Pincus (another investment firm) just announced they intend to acquire retailer Neiman Marcus for around $5bil, according to reports. Assuming its 50/50, thats $2.5bil from TPG.

Neiman Marcus gets three buyout bids

According to other articles I've seen (based on WSJ reports), the TPG/WP deal is the top bid.

I also read on Airliners.net that TPG is looking into a potential investment in VARIG (aka to South American Star Partner).

Texas Pacific Interested In Brazil's Varig Airline-Report

So, it makes me wonder how much cash TPG has and their interest level in an HP-US deal. I presume they have some interest, since they basically control HP, but they haven't been very public about it, vs. the other deals.

BTW, TPG also has a major stake in Burger King, along with other investment equity firms. From BK's website:

Burger King Holdings, Inc., the parent company, is private and independently owned by an equity sponsor group comprised of Texas Pacific Group, Bain Capital, and Goldman Sachs Capital Partners. In fiscal year ending June 30, 2004, Burger King Corporation had system-wide sales of $11.1 billion.

 

[USA320Pilot]

Busdrvr:

The source was from United Airlines.

Regards,

USA320Pilot

 

[skyflyr69]

" Pacific and Asian routes."

BINGO, with the AFA and UAL MTC soon to be walking out (chaos) Ual will have to sell the cream ala TWA . AC will be the int'l segment with HP/US/UAL domestic being the feeder.
this industry WILL transform before our eyes.

:blink:

 

[USA320Pilot]

Hharotz:

Thanks for the info.

I believe the Air Canada interest in US Airways - America West, along with the Star Alliance, is due the increasing likelihood United will see a material downsizing as its last attempt to survive, which could occur in the not-so-distant future.

Regards,

USA320Pilot

 

[hharotz]

Hharotz:

Thanks for the info.

I believe the Air Canada interest in US Airways - America West, along with the Star Alliance, is due the increasing likelihood United will see a material downsizing as its last attempt to survive, which could occur in the not-so-distant future.

Regards,

USA320Pilot

[post="266394"][/post]​

I agree 110%....I am really starting to wonder about the long-term prospects of UA. US/HP is a great insurance policy for STAR if UA goes under.