elitetraveler

I frankly don't have the answers. I understand the arguments for both an indy case and a merger. They both have upsides and risks.

I was surprised that Willie Walsh went on record as supporting the merger. Putting his U.S. partner at risk would be dangerous, so he must see an upside to merger. I doubt he would have unless he felt the merged company would be financially viable.

My assumption is that the US case is increased revenue and other cost savings will enable the entity to pay its people better.

To support AA as an indy one has to buy into Horton's scenario that the company will increase revenue significantly in a low growth market, in other words steal a lot of premium share. When JL and BA both support a combination with US it signals they see risk in the stand alone plan, which is particularly relevant as part of the stand alone revenue growth strategy is more JV revenue from partners such as BA and JL.

Supporters of both scenarios are buying into certain levels of risk.

http://online.wsj.com/article/SB1000...271095012.html

American's foreign airline partners aren't throwing a lot of support behind the company's stand-alone plan. "I have long expressed the view that an American-US Airways merger could be attractive," said Willie Walsh, CEO of International Consolidated Airlines Group SA, IAG.MC +0.77% parent of British Airways and Iberia. "If a deal is done, it will be great for the industry, great for consumers and get the U.S. industry back on its feet."

luv2ctheworld

Willie Walsh would like to say it's great for the U.S. industry and consumers, but in reality, it likely means consumers get the shaft.

Ever since DL took over NW, the way they've diluted their FFP has been atrocious. Looking at CO/UA, the same thing can be said of how the FFP is heading.

As I mentioned previously, I have no faith in Parker's ability to integrate AA with US; nor make it a better airline. Looking at his track record with US/HP, and my experiences are as a customer on US, I don't see it.

NiceLanding

What's been the result with BA taking over BMI? I remember some cheap fares on BMI in the past, but haven't flown enough standalone flights out of the UK lately to judge how much that merger may have changed market conditions. If it's worked out well for IAG, no wonder Walsh might support a seemingly similar merger with US.

Dr. HFH

I was unaware that that was the reason he chose to retire, essentially throwing in the towel. He doesn't strike me as the type to give up. Apparently you have more insight into his thought process than I.

PotNoodle

Not much has happened, many of BMI's routes have been dropped particularly the exotic former BMED routes like Khartoum, Tehran and so on. Many routes like Dublin, Bergen, Stavanger, Amman, Beirut, Freetown and Belfast for example have been kept (most with an increase in frequency). With the slots from the cancelled routes BA have started or will start new routes to Leeds, Rotterdam, Seoul, Chengdu, Alicante.

Domestic fares have increased by a bit, however with EZY at LGW/STN/LTN you can still get affordable fares. Also Virgin will start domestic routes in a few months which should lower domestic fares.


I don't blame BA for supporting the merger, the ideal transatlantic transfer hub in north America is in the northeast and AA have a small presence there. PHL work come in handy to east coast destinations from BA flights (I believe BA fly to PHL twice daily). BA would be able to offer flights to places like ALB that AA do not serve or to SYR that would require backtracking. It would also give AA a boost in TATL capacity and a reduction in reduce competition, of course AA have strengths in Latin America but BA get no revenue from that so BA would rather they have a more robust TATL network.

BA and JAL could get some of the revenue synergies from the merger through the Joint Ventures, but they would bare none of the cost increases that also come from the merger as costs are not shared in the joint venture.

flexibleflyer

I've watched this debate from the sidelines for more than 200 pages. But I just don't think that I get the vehemence in many of the posts. I'm not a stockholder but I might have more invested (in AA miles and status) than many stockholders do so my interest is simply that the airline survives (and that it puts out a good product). But it's not at all clear which management team would be more likely to do that. I realize that there have been changes recently, but the current AA management has not inspired confidence as they are essentially the group that has taken the airline into bankruptcy. The US group has faced very different challenges with their airline from those that a merged airline would encounter. I'm don't really understand why anyone is so confident that one or the other will clearly do a better job.

diver858

I have read several of his more recent interviews. What has stuck in my head was his apparent frustration with the inability to fully address, resolve labor issues, attributed to structural changes in the industry from deregulation, excessive inventory, extreme preice pressures.

http://aviationblog.dallasnews.com/2...situation.html

I retired in 1998 because new initiatives of any type – routes, aircraft, systems, or service approaches – were typically held hostage to individual contractual modifications desired by one group or another and because of increasingly vitriolic personal attacks by one or another of the unions on the property.

panjabi

The reality is that as per the latest figures released by the BLS, private sector union membership fell to 6.6% last year

So, for most CEOs, a choice between working in a union shop or a non union shop is almost a no-brainer.

This is not a pro/anti union post. I am just saying that if you are a prospective or existing CEO, you would rather work in the 94% of the companies that are non union and you do not have any additional "headaches" than work in the 6% that are union

BTW, the word "headache" is from the perspective of a CEO dealing with a union. I am just giving you a one sided perspective from the CEO. In no way should the above post be construed as pro/anti union. Needless to say, the perspective from a union side is different

Also, the fact that 6.6% of the private workforce is unionized does not mean 6.6% of all companies are unionized. I just used that as a shorthand. The reality is that most of the private sector union workers are concentrated in a handful of verticals like

1. Big Auto
2. Old Telecom
3. Airlines
4. Las Vegas Casinos
5. Old Transport

I feel I should add some more disclaimers and disqualifiers here to avoid the inevitable attack on this post as being pro/anti someone or having factual mistakes

elitetraveler

+ 1000

Neither management team has a track record that is particularly enviable.

Neither plan - merger or independent is without risks

diver858

Getting back to the relevant facts: Airline labor is typically represented by unions, management is paid big bucks to run the business, should be well aware of such challenges before taking on such responsibilities.

Bottom line: Prior AMR management teams - including Crandall's - were unable to bring about the changes required to keep AMR viable. Like others have learned the hard way, BK11 was the only option, it was up to Horton to bite the bullet, all indications are that he was successful.

Parker has had 2 BK11 filings, is 0-2 from a labor perspective, may require a third pass to resolve LCC's labor issues.

bubba198

I believe the assertion comes from an interview. He felt there was no more he could do. He had become frustrated with how the union / regulatory operating environment frustrated obvious management action. So he retired. That's a recollection, can't point you to a source.

Ooops... didn't see Diver858's more comprehensive response.

morrisunc

What were Doug Parker's 2 BK11?

I would hardly say airline executives make big bucks. Airlines don't really attract the best of American business. There are lots of better ways to make money with a lot less headache.

panjabi

That is the point I am making in post 3010 above. Without taking any sides in the union debate, my assertion is that if you are a competent or a talented CEO, you will avoid a union company

This is not a slam on unions. This is just a perspective from a CEO's point of view. It is easier for a CEO to work in a non union company

That is why AMR and other airlines have such trouble attracting top name CEOs. Doug Parker and Tom Horton may be the best available CEOs to AMR today. Does not mean they are the best possible CEOs.

No slam on anyone.

edwards183

Of course with the economy getting stronger that means oil prices will go up precipitously. Catch-22..

elitetraveler

I think this goes to the point that the airline industry does have trouble attracting the best and the brightest - not only the unions, but tremendous government regulations that make providing better service and innovative products sometimes close to impossible or cost-exhorbinant even if possible.