Impact of UA merger on AA?
Sep 28, 2006, 5:21 pm
#46
Suspended
Join Date: May 2006
Programs: AA Plat, UA, CO, DL, Hhonors Gold
Posts: 402
Originally Posted by martin33
if it is merger betting, then yes it's foolish merger betting. an acquisition out of bankruptcy would likely not involve anything for "old" DL shareholders. payment (in cash and/or merged company stock and/or bonds) would go to the DL creditors.
Sep 28, 2006, 9:04 pm
#47
Join Date: Apr 2001
Location: PIT/DFW/MEL; AA Exec. Platinum & 4MM, QF WP
Posts: 7,689
Originally Posted by f9999
Airline stocks as a group have rebounded in a serious way recently. Most of it seems to be due to falling fuel prices. DALRQ has a way higher beta but that makes sense, it's in the pink sheets. Foolish betting perhaps, but wouldn't put faith in merger predictions based on it.
Sep 30, 2006, 5:35 am
#48
Join Date: Aug 2006
Programs: divident miles
Posts: 106
Originally Posted by sipples
The impact is going to be highly variable, depending on merger partner.
So let's start with that question: with whom would they merge? There aren't a lot of choices:
1. Northwest
Fleet compatibility problems, labor problems, hubs that essentially overlap (Minneapolis and Chicago?), also financially struggling.
2. Delta
Slightly better but still not great.
3. Continental
Why would Continental be interested? They're doing just fine.
4. AA
Uh, no.
5. Southwest
Come on.
6. Midwest Airlines
Would it matter?
7. Frontier
Anti-trust problems.
8. Alaska
Fleet problems, but not totally crazy.
9. The New U.S. Airways
Would it then become the New New U.S. Airways? They just merged, so maybe they could just do another one.
So let's start with that question: with whom would they merge? There aren't a lot of choices:
1. Northwest
Fleet compatibility problems, labor problems, hubs that essentially overlap (Minneapolis and Chicago?), also financially struggling.
2. Delta
Slightly better but still not great.
3. Continental
Why would Continental be interested? They're doing just fine.
4. AA
Uh, no.
5. Southwest
Come on.
6. Midwest Airlines
Would it matter?
7. Frontier
Anti-trust problems.
8. Alaska
Fleet problems, but not totally crazy.
9. The New U.S. Airways
Would it then become the New New U.S. Airways? They just merged, so maybe they could just do another one.
Sep 30, 2006, 2:16 pm
#49
Join Date: Sep 2002
Location: WA State
Posts: 386
Nothing in the airline industry seems to make sense anymore
Alaska doesn't seem logical as both have a strong West Coast presence. AS has no foreign routes with the exception of Mexico. Of course who knows, as after all AA did acquire Reno Air.
Alaska doesn't seem logical as both have a strong West Coast presence. AS has no foreign routes with the exception of Mexico. Of course who knows, as after all AA did acquire Reno Air.
Sep 30, 2006, 2:27 pm
#50
Join Date: Oct 2005
Posts: 118
United has tried to buy both the Old US Airways and the old America West before. They were stopped on account of Anti-trust reasons in the case of AWA and financing blowups in the case of US Airways. A merger of the new US Airways is something United would relish.
A still better option would be a merger with CO. The hubs and international flying would be complimentary, but I think it would be CO doing the acquiring. They have better management and far better labor relations. If this happens, it would become my preferred airline.
A still better option would be a merger with CO. The hubs and international flying would be complimentary, but I think it would be CO doing the acquiring. They have better management and far better labor relations. If this happens, it would become my preferred airline.
Sep 30, 2006, 7:51 pm
#51
Join Date: Mar 2004
Location: Singapore
Programs: AA Gold, IHG & Marriott Platinum, Hilton Gold
Posts: 1,024
Other Airlines
Given Northwest's veto over a Continental merger, AA's probable lack of interest (and anti-trust issues), and an otherwise lack of apparent merger/acquisition partners for United among the airlines currently mentioned, I thought I'd help United with some additional ideas. (United management: please send me a share of the fees you'll be sending to Goldman Sachs.)
1. Spirit Airlines. This up-and-coming airline flies lots of high fare business travelers to top business destinations like St. Thomas and Kingston, Jamaica. It may be too late to merge with Eastern Airlines, but some Eastern employees ended up at Spirit (and are succeeding), so Spirit could be the next best thing.
2. USA3000. This airline has a similar service philosophy to United in trying to upgrade coach travel from bus service. USA3000 serves Velveeta(TM) sandwiches, for example. USA3000 serves numerous international destinations in warm places, so they would also help provide lots of high fare business travelers to United's bottom line. The fleet merger should be quite easy (Airbus A320).
3. Pan Am. United bought Pan Am routes once before, so why not do it again? Pan Am serves the world's busiest slot-controlled airports: Bedford, Massachusetts; Portsmouth, New Hampshire; Tunica, Mississippi; Elmira, New York; and Trenton, New Jersey. Pan Am also serves two other airports nobody has ever heard of, ATL and BWI, and United would have to cut at least one (probably BWI since they're already at IAD). But that's minimal conflict. Pan Am flies the 727-200, an aircraft United would instantly be able to absorb into its fleet since United made the tragic mistake of retiring the type some years ago. The 727-200 is a fast, efficient, three engine aircraft with a low cost three person crew, so United would save a great deal of money if they could grab Pan Am's fleet.
4. Mesa Air Group. United already does business with Mesa, so why not just buy the whole thing? United would acquire federally subsidized routes to places like Ogdensburg, New York, and Manhattan. (That'd be the one in Kansas.) Nothing quite like living on the dole for a few more years. However, as their financial advisor I would recommend downgrading the Beech 1900 service to UAVs (Unmanned Aerial Vehicles) in order to improve profitability. United would also get Mesa's operations in Hawaii (operating as "Go!"). Go! is incredibly profitable, and there's no competition whatsoever on any of their routes.
5. Remember Avolar, United's aborted attempt to start an executive jet service? The idea is still sound, except United should just buy a current operator so that their unions won't have time to react. It's hard to imagine Berkshire Hathaway (that'd be Warran Buffet) willingly parting with NetJets, but United might want to consider working with Goldman Sachs in a hostile takeover of Berkshire, then sell off all those money losing bits to keep NetJets. That should be easy. There are other private jet companies, like Flexjet and Flight Options, that might be available. The danger with any of these companies is that they might dilute United's passenger mix by introducing too many leisure travelers who are not willing to pay premium fares. NetJets, for example, has a lower RASM than Delta Airlines.
Actually, in all seriousness, United might want to consider #5. It won't be NetJets, but perhaps United's employees would be more keen on the idea now. Mixing domestic private jet service with upgraded first class service in one, integrated travel product just might work.
1. Spirit Airlines. This up-and-coming airline flies lots of high fare business travelers to top business destinations like St. Thomas and Kingston, Jamaica. It may be too late to merge with Eastern Airlines, but some Eastern employees ended up at Spirit (and are succeeding), so Spirit could be the next best thing.
2. USA3000. This airline has a similar service philosophy to United in trying to upgrade coach travel from bus service. USA3000 serves Velveeta(TM) sandwiches, for example. USA3000 serves numerous international destinations in warm places, so they would also help provide lots of high fare business travelers to United's bottom line. The fleet merger should be quite easy (Airbus A320).
3. Pan Am. United bought Pan Am routes once before, so why not do it again? Pan Am serves the world's busiest slot-controlled airports: Bedford, Massachusetts; Portsmouth, New Hampshire; Tunica, Mississippi; Elmira, New York; and Trenton, New Jersey. Pan Am also serves two other airports nobody has ever heard of, ATL and BWI, and United would have to cut at least one (probably BWI since they're already at IAD). But that's minimal conflict. Pan Am flies the 727-200, an aircraft United would instantly be able to absorb into its fleet since United made the tragic mistake of retiring the type some years ago. The 727-200 is a fast, efficient, three engine aircraft with a low cost three person crew, so United would save a great deal of money if they could grab Pan Am's fleet.
4. Mesa Air Group. United already does business with Mesa, so why not just buy the whole thing? United would acquire federally subsidized routes to places like Ogdensburg, New York, and Manhattan. (That'd be the one in Kansas.) Nothing quite like living on the dole for a few more years. However, as their financial advisor I would recommend downgrading the Beech 1900 service to UAVs (Unmanned Aerial Vehicles) in order to improve profitability. United would also get Mesa's operations in Hawaii (operating as "Go!"). Go! is incredibly profitable, and there's no competition whatsoever on any of their routes.
5. Remember Avolar, United's aborted attempt to start an executive jet service? The idea is still sound, except United should just buy a current operator so that their unions won't have time to react. It's hard to imagine Berkshire Hathaway (that'd be Warran Buffet) willingly parting with NetJets, but United might want to consider working with Goldman Sachs in a hostile takeover of Berkshire, then sell off all those money losing bits to keep NetJets. That should be easy. There are other private jet companies, like Flexjet and Flight Options, that might be available. The danger with any of these companies is that they might dilute United's passenger mix by introducing too many leisure travelers who are not willing to pay premium fares. NetJets, for example, has a lower RASM than Delta Airlines.
Actually, in all seriousness, United might want to consider #5. It won't be NetJets, but perhaps United's employees would be more keen on the idea now. Mixing domestic private jet service with upgraded first class service in one, integrated travel product just might work.
Dec 12, 2006, 7:10 pm
#52
Original Poster
Join Date: Jun 2004
Location: SFO
Programs: AA PLT; UA Gold
Posts: 5,378
United and Continental Discussing Possible Merger
Looks like a UA/CO merger is coming closer to happening!
http://www.nytimes.com/2006/12/12/bu...12cnd-air.html
December 12, 2006
United and Continental Discussing Possible Merger
By ANDREW ROSS SORKIN and JEFF BAILEY
United Airlines is holding preliminary talks to merge with Continental Airlines in a huge deal that would further reshape the struggling airline industry, people involved in the negotiations said tonight.
The discussions, though far from complete, recently picked up pace following US Airways’ bid last month to buy Delta Air Lines for about $8 billion, these people said.
Analysts have long favored a combination of United’s Asian routes and heavy coverage of the Western United States with Continental’s Latin American and European routes and its large and highly profitable hub in Newark.
[...]
United’s chief executive, Glenn Tilton, and Continental’s chief executive, Larry Kellner, have met in person to discuss a combination, a person with knowledge of the talks said.
[...]
http://www.nytimes.com/2006/12/12/bu...12cnd-air.html
December 12, 2006
United and Continental Discussing Possible Merger
By ANDREW ROSS SORKIN and JEFF BAILEY
United Airlines is holding preliminary talks to merge with Continental Airlines in a huge deal that would further reshape the struggling airline industry, people involved in the negotiations said tonight.
The discussions, though far from complete, recently picked up pace following US Airways’ bid last month to buy Delta Air Lines for about $8 billion, these people said.
Analysts have long favored a combination of United’s Asian routes and heavy coverage of the Western United States with Continental’s Latin American and European routes and its large and highly profitable hub in Newark.
[...]
United’s chief executive, Glenn Tilton, and Continental’s chief executive, Larry Kellner, have met in person to discuss a combination, a person with knowledge of the talks said.
[...]
Dec 12, 2006, 7:39 pm
#53
FlyerTalk Evangelist
Join Date: Dec 2002
Location: Danville, CA, USA;
Programs: UA 1MM, WN CP, Marriott LT Plat, Hilton Gold, IC Plat
Posts: 15,721
A CO-UA or DL-UA merger would be great for AA. It will be a disaster merging the two work forces, planes, computers, etc. (think AA-TWA, AA-AirCal, DL-Western, DL-PanAm routes, CO-Eastern, US-PSA, etc.) and things will be a mess for a while, allowing AA to suck up the dissatisfied customers. Also many will defect when Nonepass replaces MP (n/a to a DL merger). Plus working out the Skyteam *A mess... Even if it eventually works out AA will benefit from reduced competition and higher fares as planes are pulled (remember STL? SJC?)
If I were an AA patron or employee I wouldn't be worried at all. If AA needs some lucrative routes they can always buy Alaska and then pick at the bones of NW for Asia service.
If I were an AA patron or employee I wouldn't be worried at all. If AA needs some lucrative routes they can always buy Alaska and then pick at the bones of NW for Asia service.
Dec 12, 2006, 9:30 pm
#54
Join Date: Oct 2003
Location: New York, NY
Programs: AAdavantage, Hyatt, Mileage Plan, Bonvoy
Posts: 91
Dec 12, 2006, 10:32 pm
#55
Original Poster
Join Date: Jun 2004
Location: SFO
Programs: AA PLT; UA Gold
Posts: 5,378
A CO-UA or DL-UA merger would be great for AA. It will be a disaster merging the two work forces, planes, computers, etc. (think AA-TWA, AA-AirCal, DL-Western, DL-PanAm routes, CO-Eastern, US-PSA, etc.) and things will be a mess for a while, allowing AA to suck up the dissatisfied customers.
Dec 13, 2006, 3:28 pm
#56
FlyerTalk Evangelist
Join Date: Dec 2002
Location: Danville, CA, USA;
Programs: UA 1MM, WN CP, Marriott LT Plat, Hilton Gold, IC Plat
Posts: 15,721
In some respect I think it is a way of obtaining profitable routes, as well as a way to deny competitors access to those routes and resources. But clearly the better course of action is to buy the routes, as United did from PanAm, rather than the whole enchilada.