sparkzone

oopps repost. please delete

FWAAA

Senior managment from AS? While I admire their success, both financial and operational (AS is an impressive small airline), I'm wondering if the execs from AS would understand how to run a much larger airline like AA. If AA had purchased AS sometime in the past, there would be a chorus of "AA management has no idea how to run an Alaska-centric and west-coast airline like AS." And they would probably be correct.

In many respects, Doug Parker has been in over his head in the combined US-HP. I don't see him possessing the skills necessary to run a combined AA-US any more than the AS execs.

george 3

Private equity usually means more LEVERAGE, streamlining of service (i.e. less flyer perks) and a possible round trip to Chapter XI.

Microwave

My point is that it's a delicate situation bringing in foreigners to do anything with a US-based airline. What you call it is less important than how it takes shape, and it's a very touchy subject with US regulators.

eponymous_coward

I don't think AS has any desire to be part of AA, as a junior merger partner or senior merger partner. They've done quite nicely in their niche so far, and I don't think they're done yet.

I also don't think they're particularly worried if AA/DL actually hook up, given that they are a crucial codeshare partner for BOTH of them.

billycwhatup

No surprise, but...

kpowed

Oh god... I hope DL doesn't merge with AA. That would leave the US without a cornerstone OW partner, devalue AAdvantage miles, and devalue my soon-to-be-had AA SWUs. There is no way the DOJ will approve DL-AA merger in its current form, so I'm not terribly worried. I'd much rather see AA-US or AA-AS and an expanded Asian network. I really hope that whatever the outcome, that EXP status will not be watered down in the combined entity.

greybeardy

If AS management did go after AA I don't think their plan would be to run a combined AS-AA. What's constraining AS expansion right now is lack of aircraft, so I think what would happen is that AS would acquire as many of AA's B738s as cheaply as possible, pick up some slots and sell the rest of AA piecemeal.

Ambraciot

Their current niche is being a partner with both AA and DL and playing the two off each other to get decent deals. If AA and DL merge, AS will have no negotiating power and will need to take whatever terms AA/DL offer.

The larger company will be able to squeeze every penny of operational profit out of them on every deal, knowing that AS could not continue operating without a deal with AA/DL. If AS refused an outrageous demand, they would be cut off with no viable alternate partner, while AA/DL would pick up their routes and customers.

bernardd

I've never really been clear how private equity could work for AA. Calling them "equity" funds always seems strange for something whose normal M.O. is to leverage the recipient to the eyeballs and beyond. In AA's case they already had all the debt they could possibly handle and more, and could really have benefited from a good chunk of equity to give themselves interest free breathing space to solve their business issues. Of course that also supposed the management was competent to solve those issues, but PE funds are not typically flush with operational capability so there's not going to be a lot of help from that direction.

FWAAA

This was "news" a long time ago. Today, it's sorta "old news."

bernardd

That surely is the point. It doesn't necessarily matter what the AA managers, IAG or TPG would like; it depends on what the judge and the creditors can be persuaded is the best option.

MiamiAirport Formerly NY George

Ah, you know how private equity does it. Typically in the previous decade private equity would load a bunch of nonsense goodwill and intangibles on the balance sheet to vastly inflate the asset value of the enterprise. Then they would find lenders willing to lend 1.5X or more on the total asset value, including the fictitious intangibles.

In the large deals the lenders would then resale the debt to investors with the debt of course blessed with an investment grade rating from the rating agencies.

Now the question is can private equity pull off such a deal in today's credit environment. Private equity has seen a huge fall off in deals and in many cases they have been required to make equity investments on their own as to have some "skin" in the game.

GUWonder

This kind of situation is sometimes done to pressure another party/run up an other party's cost of acquisition.

If DL is really interested in swallowing AA, DL really must have gotten even more arrogant with the USG basically giving DL and US most of what they wanted with LGA and DCA.

If DL were to end up being allowed to swallow AA, I would hope it would come with a bunch of tough conditions (for multiple airlines at that), including cracking down on the TATL and TPAC JV arrangement allowances granted.

pinniped

I can't see the DOJ approving it. That would leave the U.S. - if not the entire world - with only two real alliance choices. That's a much weaker consumer position than having three choices no matter what routes get divested.

I say "world" because I believe the combined entity would go Skyteam and that would weaken Oneworld to the point where it may not survive.

I could see a US+AA merger happening. Or even DL+US. But not DL+AA.

That's not to say that DAL shouldn't try or at least plant the seed that they're interested.



(Re: mobile phones upthread. Didn't DOJ kill off the T-Mobile/AT&T thing, leaving the U.S. still with 4 national mobile providers?)