Will CO Stick with SkyTeam or Join Star?
Jan 29, 2007, 10:10 am
#1
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Will CO Stick with SkyTeam or Join Star?
While there's lots of speculation abound with US/DL, especially in light of US's increased bid to acquire DL today, someone at US said something interesting today: that if the sale is completed, US would drop the Star Alliance and become a SkyTeam provider.
Merger speculation aside, would CO be able to and/or want to join another alliance quickly? While a US/DL marriage could lead to a UA/CO one, what happens with these alliances ...and what material benefit does CO have to be in one over the other?
And with e-ticketing and seemless, electronic interline arrangements, do airline alliances really mean as much as they used to?
Merger speculation aside, would CO be able to and/or want to join another alliance quickly? While a US/DL marriage could lead to a UA/CO one, what happens with these alliances ...and what material benefit does CO have to be in one over the other?
And with e-ticketing and seemless, electronic interline arrangements, do airline alliances really mean as much as they used to?
Jan 29, 2007, 1:25 pm
#2
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CO is chained with NW on account of its alliance agreement - so long as NW is a member of SkyTeam, so too shall CO be a member.
Jan 29, 2007, 1:34 pm
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Heathrowguy, does the codesharing agreement extent to just codesharing or does it carry over into which global alliance CO must go with? (I have no clue myself...just I always thought the NW/CO deal was w/r/t codesharing and not necessarily alliance membership.)
Jan 29, 2007, 4:41 pm
#4
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That said, I would think that if the US/DL goes through (and the resulting carrier is a member of SkyTeam, as most anticipate) a combined UA/CO would almost certainly be a member of Star.
I continue to think that the post-consolidation legacy carriers emerge as:
US+DL = an airline named DL in SkyTeam
UA+CO = an airline named UA in Star
AA+NW = an airline named AA in OneWorld
At this point, two big questions from CO's perspective are:
1. Does the US/DL go though (in which case other mergers - including UA/CO - become imperative)
2. How do the lawyers finagle NW's CO poison pill (or, alternatively, how much will it cost UA/CO to buy off NW's interest?)
Jan 29, 2007, 5:22 pm
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...ouch that was bad 
) of control happens at NW.I do not know how NW's BK, or emergence thereof, will affect the share and trigger CO buyback options.
However, that said, CO can acquire companies on their own however they cannot be bought and they cannot be reorganized under a holding company IIRC.
Actually wait there... I *think* CO may be able to be reorganized into a holding company with out regard to NW's golden share if the holding company maintains the golden share.
One would wonder what the DOJ would say w/r/t CO&NW's codesharing agreement should CO wish to acquire UA.
Jan 29, 2007, 5:47 pm
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Little help here from the lawyers... does this part of the contract mean when NW emerges from BK that CO will have the right to buy back their golden share as a change of control will have occurred at NW?
(Source)
...thoughts?
(Source)
The Share shall not be redeemable by the Corporation [CO] except that it may be redeemed, at the option of the Corporation [again CO], for an amount equal to the Liquidation Preference [$100 I think] upon or following the occurrence of any one of following (each, a “Redemption Event”)...
...a NW Change of Control, unless the Corporation shall have previously notified Northwest in writing that a NW Change of Control will not be deemed to occur by virtue of the relevant event;
“NW Change of Control” means:
...a NW Change of Control, unless the Corporation shall have previously notified Northwest in writing that a NW Change of Control will not be deemed to occur by virtue of the relevant event;
“NW Change of Control” means:
(i) a merger, reorganization, share exchange, consolidation, tender or exchange offer, private purchase, business combination, recapitalization or similar transaction as a result of which
[snip]
(iii) the sale, transfer or other disposition of all or substantially all of the Airline Assets of Northwest Airlines Corporation (or its successor) and its Subsidiaries on a consolidated basis directly or indirectly to a Major Carrier, any Affiliate of a Major Carrier or any combination thereof, whether in a single transaction or a series of related transactions;
[snip]
[snip]
(iii) the sale, transfer or other disposition of all or substantially all of the Airline Assets of Northwest Airlines Corporation (or its successor) and its Subsidiaries on a consolidated basis directly or indirectly to a Major Carrier, any Affiliate of a Major Carrier or any combination thereof, whether in a single transaction or a series of related transactions;
[snip]
...thoughts?
Last edited by J.Edward; Jan 29, 2007 at 5:57 pm
Jan 29, 2007, 6:06 pm
#7
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That langauge seems to suggest that a NW/AA hookup would have to happen BEFORE UA/CO do a deal.
Regardless, CO's got to get out of NW's poison pill. It's simply untenable for CO to have its future dictated by NW. If US/DL merge, the poison pill would seem to put NW in a strong position to drive the next move.
Maybe a giant, Yalta-like deal could be cut between UA/CO/NW/AA involving the poison pill, aircraft, routes, slots, and/or cash??? I think I hear investment bankers and corporate lawyers panting in the background...
Regardless, CO's got to get out of NW's poison pill. It's simply untenable for CO to have its future dictated by NW. If US/DL merge, the poison pill would seem to put NW in a strong position to drive the next move.
Maybe a giant, Yalta-like deal could be cut between UA/CO/NW/AA involving the poison pill, aircraft, routes, slots, and/or cash??? I think I hear investment bankers and corporate lawyers panting in the background...
Jan 29, 2007, 6:14 pm
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But then again, if CO's doing the buying than I don't really think NW can do anything... unless CO moves to organize themselves into a holding corp (a la AMR and American).
Neat stuff either way
Originally Posted by senatorgirth
Maybe a giant, Yalta-like deal could be cut between UA/CO/NW/AA involving the poison pill, aircraft, routes, slots, and/or cash??? I think I hear investment bankers and corporate lawyers panting in the background...
Jan 29, 2007, 6:18 pm
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NW and CO were originally part of the fourth alliance "WINGS", so I assume no alliance to SkyTeam is required. I assume that WINGS is now defunct.
Jan 29, 2007, 6:38 pm
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That said, I would think that if the US/DL goes through (and the resulting carrier is a member of SkyTeam, as most anticipate) a combined UA/CO would almost certainly be a member of Star.
I continue to think that the post-consolidation legacy carriers emerge as:
US+DL = an airline named DL in SkyTeam
UA+CO = an airline named UA in Star
AA+NW = an airline named AA in OneWorld
I continue to think that the post-consolidation legacy carriers emerge as:
US+DL = an airline named DL in SkyTeam
UA+CO = an airline named UA in Star
AA+NW = an airline named AA in OneWorld
Wouldnt it logically follow that if we have 1/2 as many airlines we would also lose at least one alliance? Doesnt seem to make much sense to have all the alliances if you have gutted them of their major US players
Jan 29, 2007, 8:44 pm
#11
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Jan 30, 2007, 1:22 am
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Wasn't, isn't, Air Mike part of this deal with NW. I keep hearing crap through out the last many years that NW has always wanted Air Mike and it's one of the few unencumbered assets that CO has that could be used as collateral for bank financing or sold outright to raise cash for any merger but that NW would have the right to buy it first or have to approve the sale or some junk like that.
I dunno, all I wanna know is what happens to my miles and Pclub Lifetime if CO undergoes a merger
Do I think it will happen, yup, I think there will be the mergers coming and I just don't want to get screwed in what happens. Considering where I live, I am betting I'm gonna get screwed. 
With CO's push into asia being under Air Mike and not CO I'm hoping that won't happen; however with United they have asia areas so they wouldn't need Air Mike. 
I dunno, all I wanna know is what happens to my miles and Pclub Lifetime if CO undergoes a merger
Do I think it will happen, yup, I think there will be the mergers coming and I just don't want to get screwed in what happens. Considering where I live, I am betting I'm gonna get screwed. With CO's push into asia being under Air Mike and not CO I'm hoping that won't happen; however with United they have asia areas so they wouldn't need Air Mike.
Jan 30, 2007, 2:02 am
#13
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Even this Department of Justice wouldn't tolerate such a thing. Congress? Forget about it, they wouldn't tolerate such a thing either.
Jan 30, 2007, 10:35 am
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I would hate it if CO was Star Alliance - Singapore and SAS would be OK, but I need Air France more than I need LOT, TAP or Spanair.
Jan 30, 2007, 2:24 pm
#15
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From what I understand, it does - CO is compelled to join any alliance NW is a member of (unless of course, the parties agree otherwise).