pbarnette

I'm not talking about forming a full-fledged alliance. I'm talking about just cobbling together a handful of partners. EK and VS have gone this route and don't seem to be clamoring to join an alliance.

I agree that they may not be able to find a European partner, but I am not certain that CO really wants (or even needs) a European partner. It would seem they would prefer to serve smaller cities themselves and leverage EWR to make them work.

graraps

I see what you mean. They've already been doing that for a while, and it seems to be working alright for them for places like the UK regions that get virtually no feed from anywhere.
Expanding this strategy any further may be problematic, however. Spain, for example, has a massive domestic market, which means that IB, UX (and their Skyteam partners), UALH (through JK), and even TP all get lots of feed from an awful lot of cities for their longhaul ops out of MAD/LIS (which, contrary to LHR and maybe CDG, are quite good airports to connect at), hence there won't be much O&D demand for an EWR flight from there (would you go for a thrice weekly nonstop over an one-stop at virtually any time?). Germany and Austria are not too dissimilar (CO don't even fly to Munich!)...and then you have the issue of Europe-based CO flyers who would not have any FF benefits within Europe...
In short, if they're content with their current size in Europe, they certainly have a decent niche and may well manage to hold on to most of it. But I do think they have to stay in the alliance if they want to be able to meaningfully expand.

bocastephen

"Not going to happen"? Sounds like a factual declaration How about we wait and see - because if it 'was not going to happen', then the two companies wouldn't be talking about it. US/UA have many of the same aircraft, the anti-trust issue will be directed at NW/DL first, and the result of that soon-to-be-called Congressional investigation might be the cancellation of all airline mergers. Parker is the odd man out, and he would be removed in favor of Tilton - although no gem himself, he is better than Parker. Or perhaps, the board of the newly combined company would include a 'new- CEO' search to the deal. Gordon Bethune, anyone?

AA hardly makes a better partner than CO for AS. AA covers SoCal with Eagle - but so does CO, through the Eagle codeshare. AA and AS codeshare - so what - CO and AS share flights, award seats and FF benefits already.

I never proposed CO/AA, nor do I recall anyone on this forum proposing that would be a good idea.

I strongly disagree here, as your conclusion makes no sense. AS covers the west coast and mountain region, from Vancouver BC to Mexico and east to Montana. Their operation at SEA is huge, and would become a new CO hub. The Seattle region is home to many large companies - like Microsoft, Boeing, etc., and a large clutch of military facilities and their suppliers. The catchment might be somewhat smaller than the Bay Area, but the large Asian population and Seattle's large port and growing reputation as a gateway to Asia just screams 'growth opportunity'.

Really? The book value of CAL is just 2.13 billion? Please cite...
1. Seattle would make a huge air freight hub. Shippers do not move merchandise through Canada. What else does YVR have? AC, CX (a stopping point from JFK) and SQ? Is that really "10 times the international traffic"? Does SQ fly everyday? No they don't. Did you compare the YVR and SEA catchments side by side? Do you have specific analysis of their relation to each other beyond who 'flips the bird'?

If CO offered flights to NRT, HKG and SIN, I highly doubt people are going to drive from the SEA catchment, wait an hour to cross the border, drive to YVR and then fly AC. On the way back, they can wait another hour at the border to drive home - total roundtrip could be 8 hours of driving. Hardly anyone is going to do that.

They may *want* to fly CX or SQ for specific product or FFP reasons, but are more likely to fly AS(CO) from SEA to YVR and connect there.

Firstly, Skyteam hasn't cut anyone out - it's CO who made the declaration they are looking at how to proceed with NW and ST. Secondly, there is no requirement for CO to leave ST if they merge with AS - assuming they can get their hands on the operating authority from SEA to NRT (and to HKG and SIN as well). I wrote yesterday about pushing DL up against the wall to get aircraft as a concession, but CO has the option to remain in ST and work with Boeing to get aircraft to build-out the SEA operation, although part of the deal to remain in ST should result in NW handing over the route to NRT.

So, UA is not the only logical candidate. It is *one* logical candidate, but there are other options. CO management has always favored 'going it alone'. To jump into a major merger just because the industry climate is changing may not be their strategy - they may prefer to acquire a complimentary asset, like AS, which allows for organic growth, from which they can continue 'going it alone', but from a better competitive position.

bernardd

I believe the reference should have been to Market Cap. which is indeed around $2.1 billion.

Total stockholders equity in the last 10K filing was $1.55 billion, though that included an, IMO, somewhat dubious asset of $222 million worth of "Airport operating rights, net of amortization"

pbarnette

You are right. CO only has a market cap of $2.07B. As for book value, if you mean the net assets (=shareholders' equity), then it drops to $1.5B. Other key numbers at the end of 2007:

Net current assets: $112m
Net tangible assets: $844m

You can check out the numbers here.

JC1120

I bid $1B for Continental. Who's in with me besides Bocastephen (I'll let you run the AS merger )?

bocastephen

The Enterprise Value (the amount needed for a takeover) is around 4B - which is just a tad over what's sitting in my money market right now

Now if everyone in the forum chips in, maybe...

pbarnette

If I wanted to throw away my money, I would just burn it. It would be a lot easier than blowing it by investing in an airline.

spin88

(1) having not responded to my point about the unions, I will point out that all of the new US metal is 332 and 333. While US does have a few 752, their 733s are incompatable with UA, their 752s have different engine types, and i think even their 320/321/319s have different engine types. far less good of a fit than CO. As to Tilton taking over... read the UA board some. Everyone (i may be an exception) hates him, especially the unions. They want a merger to get rid of him, and Tilton wants to get out of the airline business. He is not going to run an airline, the unions will not let him, and the UA unions will not accept Parker. Yes, Gordon would likely be accepted, but no offence he is old and tired. That said, the Board is not going to do a deal, then look for a new manager. the markets will not sit for it.

(2) I don't know what you are talking about re AA, but you are wrong re So Cal, they have a large operation out of LAX, also fly a lot out of SAN and SJC. Not the Reach of UA, but in CA close. They partner with AS well (I know I used to fly them on an AS number when I was still with CO), CO/AS would not have a true west coast coverage. I'm not saying AS/CO is not a good fit, it just is not as good of a fit as AA/AS and it gets CO none of the heft it needs.

(3) I have to stand corrected on the YVR vs. SEA international traffic. quickly dashing off my reply I failed to research. per Wiki: YVR 78 international Destinations, 29 carriers. SEA: 13 international destinations, 10 airlines... These numbers just are for Non-US/CAN service. So while not 1:10 my point: that YVR with its looser visa rules and allowing transits, is correct, and you are simply wrong. IAH works because of Mexico-US traffic, but as a transit point (which is what you would need for an asian hub) SEA will never rival YVR.

(4) No way NW is giving up SEA-NRT. There will be some small divestiture, but it will be in overlapping areas. E.g. they will have to give up scarse gates at MSP, something like that.

(5) Others pointed out you are wrong about worth of the airline. My figure was precise when given and was that days market cap. Interesting that it is lower while DL/NW went up. Market appears to see what I am seeing, which is CO is in a bit of a pickle.

(6) Most pertanently though, the Skyteam thing is a real real problem. CO had reach with reciprocol upgrades on NW, they got harder to get as DL entered the mix, and I don't know how long they are required by contract, but you can bet your bottom dollar that the second NW does not have to give them, they will be gone. DL/NW with a much begger netword does not need to give others Frequent flyers reciprocol upgrades, and will no longer do so. At this point, CO is in real trouble. AS does not give this reach....even if CO could buy them, and they can't with cash at least (see 2.13 number in my post.)

Realistically CO has only one really good option (UA) and one bad option (AS), and one option (go it alone) that will end in going belly up.

No offense to COs management, but they either have a UA merger lined up, or they got out manouvered...

graraps

,
Skyteam is a lot more than reciprocol (sic) upgrades. CO have loads of codeshares with the European ST airlines, and the ST-wide benefits are independent of this DLNW thing. As a top level ST FF, no matter which airline you have status and which one you're flying, you can use premium check-in and security, have more access to "premium" seating like exit rows, use lounges on int'l itineraries, get a shot at priority baggage and, above all, earn and redeem miles across the alliance.
None of the above will change unless CO decide to leave ST.

entropy

not really.

graraps

Care to expand? Do you know of any alliance-wide elite benefits for CO pax on other members or for ST elites flying CO that will get cancelled out if CO remain in Skyteam while DL merge with NW?

graraps

duplicate post.

mikey1003

Cavuto on Fox News just said merger CO/UA will be announced next week

bocastephen

Now there is a reliable source

In any event, NW/DL+CO/UA in the same month will send Congress scrambling to hearings and in my estimation has a very high likelihood of delaying these deals past the point of achieving any benefit, or scuttling them altogether.

Congress is already preparing to pounce on NW/DL.