AAMRQ: TPG, US Airways (LCC) and Delta (DAL) consider bids for AMR Corp-- WSJ ($0.36)
Jan 14, 2012, 7:45 am
#181
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It's not usually viewed in terms of relative market share. Who takes over whom is typically viewed on a financial basis, specifically which company contributes more equity to the merger. To keep it relatively simple, right now US has a market equity value of $968 million; AA's market equity value is $135 million. If the two companies were to just simply merge on a 1:1 basis, the former US (stockholders) would end up owning nearly 88% of the combined entity. (Of course the #'s will change post-bankruptcy, but this is just illustrative.)
Of course it can be more complicated, I think from a financial standpoint UA purchased CO (slightly more than 50% of the equity) but a CO exec got the CEO job (and supposedly most other key management positions were split relatively equally).
Of course it can be more complicated, I think from a financial standpoint UA purchased CO (slightly more than 50% of the equity) but a CO exec got the CEO job (and supposedly most other key management positions were split relatively equally).
Jan 14, 2012, 8:24 am
#182
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It's not usually viewed in terms of relative market share. Who takes over whom is typically viewed on a financial basis, specifically which company contributes more equity to the merger. To keep it relatively simple, right now US has a market equity value of $968 million; AA's market equity value is $135 million. If the two companies were to just simply merge on a 1:1 basis, the former US (stockholders) would end up owning nearly 88% of the combined entity. (Of course the #'s will change post-bankruptcy, but this is just illustrative.)
Of course it can be more complicated, I think from a financial standpoint UA purchased CO (slightly more than 50% of the equity) but a CO exec got the CEO job (and supposedly most other key management positions were split relatively equally).
Of course it can be more complicated, I think from a financial standpoint UA purchased CO (slightly more than 50% of the equity) but a CO exec got the CEO job (and supposedly most other key management positions were split relatively equally).
Last edited by Traveloguy; Jan 14, 2012 at 12:29 pm Reason: Typo
Jan 14, 2012, 9:38 am
#183
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US is still screwed up from the merger with HP. They've still got borked union representation & adding AA's unions to the mix will only make it worse.
As badly as DL treats the customers & as badly as their online booking engine/award calendar work in terms of customer-facing issues (changing pricing during booking/bait-and-switch & excessive award pricing/calendar failure, which many of us believe are intentional), the operations integration (boarding passes, customer info, FF accounting, agent systems) went remarkably well - far better than US did in their merger. In fact, UA/CO is light years ahead of US's systems.
I am strongly in the camp of believing that DL is trying to bid up the price for their own purposes. They've done it before....
As badly as DL treats the customers & as badly as their online booking engine/award calendar work in terms of customer-facing issues (changing pricing during booking/bait-and-switch & excessive award pricing/calendar failure, which many of us believe are intentional), the operations integration (boarding passes, customer info, FF accounting, agent systems) went remarkably well - far better than US did in their merger. In fact, UA/CO is light years ahead of US's systems.
I am strongly in the camp of believing that DL is trying to bid up the price for their own purposes. They've done it before....
It's leadership that will make or break a merger and Parker isn't the right guy to integrate two airlines.
Jan 14, 2012, 10:02 am
#184
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DL is no dummy. By this announcement DL is potentially forcing USAir into a higher bid. It might also allow DL to have more access to AA internal information. Finally, if the election brings in a more friendly DOJ in 2013 (when AA will have finished its restructuring activities) DL would already be in a position to easily bid for AA.
But make no mistake, USAir is going to bid for AA once AA completes its restructuring activities. And there will be no shortage of lenders and investment bankers flying to Tempe to kiss the rear of Doug Parker in order to help with financing the deal.
But make no mistake, USAir is going to bid for AA once AA completes its restructuring activities. And there will be no shortage of lenders and investment bankers flying to Tempe to kiss the rear of Doug Parker in order to help with financing the deal.
Jan 14, 2012, 10:45 am
#185
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Being a good business transaction for DL and the result being an airline FFers would want to fly are two different things.
Although DL is a Flying Blue partner, I avoid that airline like the plague. YMMV of course
Although DL is a Flying Blue partner, I avoid that airline like the plague. YMMV of course
Jan 14, 2012, 11:16 am
#186
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I don't begrudge him the alcoholism - after all, Herb's drinking was legendary. But not arranging for a driver ahead of time? That demonstrates a substantial deficit in judgment.
Jan 14, 2012, 11:47 am
#187
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As a refugee from the DL takeover of NW, I can tell you that one of the worst things for members of an ff program is for their airline and its program to be assimilated by the DL Borg.
And mergers generally have meant a major downgrade of ff programs in recent years - AF/KL, DL/NW, and now UA/CO. All have sucked big time for ff members.
And mergers generally have meant a major downgrade of ff programs in recent years - AF/KL, DL/NW, and now UA/CO. All have sucked big time for ff members.
Jan 14, 2012, 12:28 pm
#188
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Well stated. I really think the dark horse in this one is IAG to be honest. Hook them up with TPG/US since IAG has the most to lose IMO. But yes what DL is doing is smart business. I actually think if people study it more it makes more sense then when someone first hears about it.
I'm actually surprised by some of the posts here.
DL is acting in a manner consistent with any half decently run competitor. DL is simply putting itself in a position where it can be potentially allowed to look at AAs books and help ensure that whoever does takeover AA pays more than they would otherwise have done. If they did in fact end up buying AA (not likely IMHO due to competition concerns), that would effectively be a secondary prize rather than the core rationale behind the current move.
TPJ being involved is of no surprise here. In fact their absence would more likely indicate AAs chances of coming out of Chapter 11 as being slim. TPJs role is to provide cash and keep management focused on the game to improve the balance sheet. I doubt they will want to pi$$ of customers so don't expect too many nasty changes should they become involved. Do however expect them to focus management on reducing duplication, sorting out agreements, selling non-core assets, and fast tracking integration again all to improve the balance sheet (and thus make a profit out of putting their cash in the pot).
Personally I would not be surprised to see IAG getting involved in some manner, and perhaps even another OW carrier. I don't however see that as being the main event due to the exisiting US ownership rules still being in force. The days of a true global airline are not yet here, especially when both NA and EU governments are playing more towards protectionist leanings.
DL is acting in a manner consistent with any half decently run competitor. DL is simply putting itself in a position where it can be potentially allowed to look at AAs books and help ensure that whoever does takeover AA pays more than they would otherwise have done. If they did in fact end up buying AA (not likely IMHO due to competition concerns), that would effectively be a secondary prize rather than the core rationale behind the current move.
TPJ being involved is of no surprise here. In fact their absence would more likely indicate AAs chances of coming out of Chapter 11 as being slim. TPJs role is to provide cash and keep management focused on the game to improve the balance sheet. I doubt they will want to pi$$ of customers so don't expect too many nasty changes should they become involved. Do however expect them to focus management on reducing duplication, sorting out agreements, selling non-core assets, and fast tracking integration again all to improve the balance sheet (and thus make a profit out of putting their cash in the pot).
Personally I would not be surprised to see IAG getting involved in some manner, and perhaps even another OW carrier. I don't however see that as being the main event due to the exisiting US ownership rules still being in force. The days of a true global airline are not yet here, especially when both NA and EU governments are playing more towards protectionist leanings.
Jan 14, 2012, 12:33 pm
#189
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Just a few thoughts from me.
1. I don't think that it would be a whole-sale merger BUT just an asset buy e.g. DL gets NYC, DFW and MIA US gets ORD, LAX etc. UA/DL/US split the LHR slots.
2. Yes TPG is good but the question is it too late to save AMR. Remember they also are having some revenue premium issues.
3. Agreed.
1. I don't think that it would be a whole-sale merger BUT just an asset buy e.g. DL gets NYC, DFW and MIA US gets ORD, LAX etc. UA/DL/US split the LHR slots.
2. Yes TPG is good but the question is it too late to save AMR. Remember they also are having some revenue premium issues.
3. Agreed.
I used to practice BK law at one of the largest law firms on planet earth. Similar to what I shared re: the original AA BK, here are my thoughts:
1. No way does DL get AA. The anti-trust division of the DOJ will not allow this to happen. Please see what just happened with AT&T and T-Mobile for an example. The President just appointed (a semi-recess appt. :-)) a new consumer watchdog. This guys could spend 110% of his time just monitoring "new DL/AA pricing on routes like DFW-SLC and DFW-ATL". No way, Jose.
2. I know a lot about TPG but cannot tell you why. Their deal to turn Continental around is one of the EPIC private equity success stories -- certainly in air transportation. These guys are very smart and know what they are doing. Pray they get the asset over anyone else.
3. But, you should also pray that they don't think about folding AA into US Airways -- TPG's slightly less successful deal. That deal has been a hard one for them. The assets were aging, the labor deals were not that great and their routes were not as lucrative (much of Co-Airs value was in the excellent Air Micronesia routes to the South Pacific).
My handicap system:
1. AA comes out of BK as a standalone company: 70%
2. AA comes out of BK and is acquired by TPG: 20%
3. AA comes out of BK and is acquired by TPG/US Airways: 10%
4. AA comes out of BK and is acquired by DL: 0%
SB
1. No way does DL get AA. The anti-trust division of the DOJ will not allow this to happen. Please see what just happened with AT&T and T-Mobile for an example. The President just appointed (a semi-recess appt. :-)) a new consumer watchdog. This guys could spend 110% of his time just monitoring "new DL/AA pricing on routes like DFW-SLC and DFW-ATL". No way, Jose.
2. I know a lot about TPG but cannot tell you why. Their deal to turn Continental around is one of the EPIC private equity success stories -- certainly in air transportation. These guys are very smart and know what they are doing. Pray they get the asset over anyone else.
3. But, you should also pray that they don't think about folding AA into US Airways -- TPG's slightly less successful deal. That deal has been a hard one for them. The assets were aging, the labor deals were not that great and their routes were not as lucrative (much of Co-Airs value was in the excellent Air Micronesia routes to the South Pacific).
My handicap system:
1. AA comes out of BK as a standalone company: 70%
2. AA comes out of BK and is acquired by TPG: 20%
3. AA comes out of BK and is acquired by TPG/US Airways: 10%
4. AA comes out of BK and is acquired by DL: 0%
SB
Jan 14, 2012, 12:43 pm
#190
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Just a few thoughts from me.
1. I don't think that it would be a whole-sale merger BUT just an asset buy e.g. DL gets NYC, DFW and MIA US gets ORD, LAX etc. UA/DL/US split the LHR slots.
2. Yes TPG is good but the question is it too late to save AMR. Remember they also are having some revenue premium issues.
3. Agreed.
1. I don't think that it would be a whole-sale merger BUT just an asset buy e.g. DL gets NYC, DFW and MIA US gets ORD, LAX etc. UA/DL/US split the LHR slots.
2. Yes TPG is good but the question is it too late to save AMR. Remember they also are having some revenue premium issues.
3. Agreed.
At JFK, DL's share of slots is not anywhere near half, but I doubt it would be allowed to acquire AA's entire JFK slot portfolio.
Generally, antitrust authorities permit market domination to just happen (like DL at ATL or AA at DFW) but the authorities very rarely permit market domination to be purchased or acquired in a merger/acquisition, etc. Accordingly, the government would likely require a divestiture of at least a portion of the DFW hub. Same thing at MIA. If DL were to keep AA's LAX operations, it might even have to split up the LAX operation with others.
ORD is the only large AA market where DL would probably face no opposition from the government, as its presense there is very small and even combined with AA, it would control only about half of ORD, with UA controlling the rest. But you've got US getting that.
Jan 14, 2012, 2:29 pm
#191
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Just a few thoughts from me.
1. I don't think that it would be a whole-sale merger BUT just an asset buy e.g. DL gets NYC, DFW and MIA US gets ORD, LAX etc. UA/DL/US split the LHR slots.
2. Yes TPG is good but the question is it too late to save AMR. Remember they also are having some revenue premium issues.
1. I don't think that it would be a whole-sale merger BUT just an asset buy e.g. DL gets NYC, DFW and MIA US gets ORD, LAX etc. UA/DL/US split the LHR slots.
2. Yes TPG is good but the question is it too late to save AMR. Remember they also are having some revenue premium issues.
2. AMR doesn't need to be saved as of right now. Again...if the bk process fails, then all this might be in the cards. But as of now, assuming the unions understand what's at stake for them, TPG might never even get to purchase or finance anything.
Please provide some numbers with respect to the premium issues you describe. I am unaware that AA has become a yield laggard.
Jan 14, 2012, 2:56 pm
#192
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Delta won't be permitted to acquire any more LGA slots based on the government's reasoning in the recent slot swap between US and DL. DL had to divest 16 slot pairs at LGA and controls about half the slots there. Not a chance they get to add any more, let alone AA's 21% share.
At JFK, DL's share of slots is not anywhere near half, but I doubt it would be allowed to acquire AA's entire JFK slot portfolio.
Generally, antitrust authorities permit market domination to just happen (like DL at ATL or AA at DFW) but the authorities very rarely permit market domination to be purchased or acquired in a merger/acquisition, etc. Accordingly, the government would likely require a divestiture of at least a portion of the DFW hub. Same thing at MIA. If DL were to keep AA's LAX operations, it might even have to split up the LAX operation with others.
ORD is the only large AA market where DL would probably face no opposition from the government, as its presense there is very small and even combined with AA, it would control only about half of ORD, with UA controlling the rest. But you've got US getting that.
At JFK, DL's share of slots is not anywhere near half, but I doubt it would be allowed to acquire AA's entire JFK slot portfolio.
Generally, antitrust authorities permit market domination to just happen (like DL at ATL or AA at DFW) but the authorities very rarely permit market domination to be purchased or acquired in a merger/acquisition, etc. Accordingly, the government would likely require a divestiture of at least a portion of the DFW hub. Same thing at MIA. If DL were to keep AA's LAX operations, it might even have to split up the LAX operation with others.
ORD is the only large AA market where DL would probably face no opposition from the government, as its presense there is very small and even combined with AA, it would control only about half of ORD, with UA controlling the rest. But you've got US getting that.
1. There is not going to be an asset sale/purchase as long as AA makes good headway in Chapter 11. Period. If the process falls apart and cash runs out, then anything is possible, but I can't imagine that the unions would intentionally stall the Ch11 process only to be sold off in pieces and join the competitors rosters at the bottom of the seniority and pay list.
2. AMR doesn't need to be saved as of right now. Again...if the bk process fails, then all this might be in the cards. But as of now, assuming the unions understand what's at stake for them, TPG might never even get to purchase or finance anything.
Please provide some numbers with respect to the premium issues you describe. I am unaware that AA has become a yield laggard.
2. AMR doesn't need to be saved as of right now. Again...if the bk process fails, then all this might be in the cards. But as of now, assuming the unions understand what's at stake for them, TPG might never even get to purchase or finance anything.
Please provide some numbers with respect to the premium issues you describe. I am unaware that AA has become a yield laggard.
2. I think you are right but I think AA is a mess in a way. I will admit once they can get the pensions off their backs that will help but still the airline has a long-way to go.
I am going to be honest I hope AA can turn themselves around and become a powerful carrier but I am also a realist and the US Airline industry has a large abundance of capacity some of which will need to go someday.
Here is what I used. While I do acknowledge they still have/had the highest RASM it is lagging because between 2009-2010 the percent of AA's RASM increase is smaller then there fellow legacy carriers.
AA 10.4%
CO 13.1%
DL 15.52%
UA 20.15%-Unsure if this included CO's numbers.
US 12.62%
As you can see AA's RASM increase is starting to lag a bit.
http://web.mit.edu/airlinedata/www/2...28PRASM%29.htm
Last edited by CubsFanJohn; Jan 14, 2012 at 3:17 pm Reason: Forgot the source used
Jan 14, 2012, 4:07 pm
#193
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Delta won't be permitted to acquire any more LGA slots based on the government's reasoning in the recent slot swap between US and DL. DL had to divest 16 slot pairs at LGA and controls about half the slots there. Not a chance they get to add any more, let alone AA's 21% share.
At JFK, DL's share of slots is not anywhere near half, but I doubt it would be allowed to acquire AA's entire JFK slot portfolio.
Generally, antitrust authorities permit market domination to just happen (like DL at ATL or AA at DFW) but the authorities very rarely permit market domination to be purchased or acquired in a merger/acquisition, etc. Accordingly, the government would likely require a divestiture of at least a portion of the DFW hub. Same thing at MIA. If DL were to keep AA's LAX operations, it might even have to split up the LAX operation with others.
ORD is the only large AA market where DL would probably face no opposition from the government, as its presense there is very small and even combined with AA, it would control only about half of ORD, with UA controlling the rest. But you've got US getting that.
At JFK, DL's share of slots is not anywhere near half, but I doubt it would be allowed to acquire AA's entire JFK slot portfolio.
Generally, antitrust authorities permit market domination to just happen (like DL at ATL or AA at DFW) but the authorities very rarely permit market domination to be purchased or acquired in a merger/acquisition, etc. Accordingly, the government would likely require a divestiture of at least a portion of the DFW hub. Same thing at MIA. If DL were to keep AA's LAX operations, it might even have to split up the LAX operation with others.
ORD is the only large AA market where DL would probably face no opposition from the government, as its presense there is very small and even combined with AA, it would control only about half of ORD, with UA controlling the rest. But you've got US getting that.
http://www.anna.aero/2012/01/11/delt...-market-share/
I don't see anyone breaking up United's monopoly at Newark. So why can't Delta have slightly more flights than JetBlue. JetBlue constantly expands as well and there is real competition at JFK between JetBlue and Delta and other carriers who wish to grow their marketshare.
Jan 14, 2012, 4:18 pm
#194
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This chart has been posted elsewhere in this Forum, but I think it might be illustrative and assist in the discussion?
Jan 14, 2012, 9:14 pm
#195
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I have no useful information, but an AmericaWestUSAir takeover of AA would be pretty much be guaranteed to push my business to someone else. America's Worst Airline earned a place on my "never fly again" list, and USAir was no favorite of mine before the merger.