phlwookie

There sure would some serious sickness over at UA WHQ if F9 were to do that.

I still think that any near term consolidation of sick airlines will need to be done with the combination of Chapter 7 bankruptcy and a third party to stich together the remaining assets. I suppose even a three-way merger, something like HP + UA + US could work in this way. Note that I'm not hoping for such a scenario - it would more than likely be horrible for many employees - but it will take something dramatic to fix the mess that is the legacy airlines.

motnot

Well, I just can't see a full-blown merger, because why would HP want all of US' beaten-down employees? Especially when seniority issues would have the potential to displace a lot of HP workers?

That said, the ATSB and GECAS hold the keys to US. And like it or not, US is on its deathbed. So both the ATSB and GECAS have an interest in doing something. For GECAS, financing a sale of some assets to HP very well might make sense. The ATSB, meanwhile, likely would be repaid in significant part by any asset sale. Then a smaller US could still fight for its survival and the preservation of some jobs.

I don't see why that geography is a problem. Right now, HP essentially only has the West Coast covered, and that doesn't stop it from serving its passengers or having a pretty effective business model. If US had its act together, it could do the same thing on the East Coast.

HP isn't an good option for folks wanting to fly from DEN to ORD. But HP does just fine because its customer base is in PHX, LAS and California.

I don't think HP would need to be in Star. Again, they're not now.

deelmakur

I have been consistent on these threads on this subject. The guys running this place aren't very good at it, but they are not dumb. The uncharacteristic silence from Bronner, who has had his equity investment largely wiped out, the continuing operation by the company in the midst of customer losses, low yields, and a humongous cash burn, has suggested all along that they are trying to get something like this done. I continue to believe the SWA/ATA virtual merger was brilliant, and has caused many carriers to have to rethink how they will deal with Southwest turning up where they were never expected (like LGA). One thing is for sure. this one will be done as a financial and strategic engineering exercise, not driven by the merger of a couple name brands. If they pull it off, it could be a doosie, will probably involve more than two carriers, and will likely contain surprises. One thing the deelmakur knows is when things get done in the open, like due diligence in a hub by executives of another company, this is often designed to mislead other parties chasing the same deal. One variant of this was the famous RJ Reynolds deal, which KKR won in an all night negotiation. While it was going on, during a holiday period, knowing their competitors were tracking the company plane by tail number, they sent it in the open, to Aspen, lulling the competition into thinking nothing would happen until after that. With apologies to GE and their brethern in the equity lending business, these kinds of shops have been known to conduct paralell negotiations with competing parties, who never suspected the other guys were in the same kinds of talks. In the deal business, you never believe what an equity guy tells you at a point like this (by the way, that's a compliment). It could be interesting before this thing concludes.

hp_fa

FWIW, there hasn't been much talk of this on the front lines at HP.

If any transaction were to occur, it is my belief it would be for specified assets rather then a complete merger. Part of this is based on comments made by Doug Parker at the time HP was courting ATA that he would do nothing that would harm HP employees. Since HP tends to be towards the bottom of the pay scale, I believe he was speaking of employee seniority issues, which are a big deal in this industry where everything from schedules to vacations are bid upon based upon seniority.

HP is 23 years old and U has employees with much more service then HP is old. so a straight merger would indeed hurt HP employees. However, an asset purchase and some form of preference for hiring ex-US Airways folks would be possible.

BearX220

I agree with hp_fa. An outright merger would saddle HP with costs and worker issues it doesn't want and need not acquire. An asset sale would be the smarter move for HP.

TechBoy

Really? DL competes directly with CO and NW in many places but that didn't stop them from including them in Skyteam.

The whole point of codeshares and alliances is to capture business that might otherwise go outside of the alliance by expanding the overall network. That ususally produces benefits to all parties in the alliance.

sbtinme

Not if the sale/merger/whatever was involving a huge third party investor, as has been widely suggested will take place. The employee issue thing would certainly get sticky (always does), but the cost component under such a scenario could make such a merger very unique.....

TomBascom

The problem with an asset sale is that you don't know if you'll be the winning bidder. Witness the ATA situation -- HP thought they had it all sewn up and then...

IMHO if some sort of deal occurs the seniority problem will be dealt with and it won't be to anyone at US' liking.

Spiff

It's still better than liquidation...

sbtinme

See, I told you so in the OP!

longing4piedmont

^ ^ ^ Never, never doubt a PI guy

motnot

About the ATA situation, HP didn't even bid. They decided it wasn't worth the price that lessors wanted for the planes.

As for seniority in a US-HP merger, I agree that the US employees do not have "hand," but HP CEO Doug Parker is out to treat people right. I just don't see how everyone can be satisfied, though, so I expect any deal to fall well short of a merger. At best, two airlines under one holding company -- at least for a while so senior US employees can retire or take buyouts.

deelmakur

These two carriers together would be a "debt bomb". US is losing money at a tremendous rate, but even so, their revenue is 3 times that of HP. The government is in up to it's eyeballs, with guarantees that neither can pay back. In effect, it would take a government write off of the debt to properly recapitalize them in a way that they could repair their balance sheet. If the government did that, every other carrier would scream bloody murder. My guess is that it was the government pressuring HP that caused them to suddenly break off the ATA bid. There again, they really couldn't afford it. I will say it again...this one isn't over. The company is now in "play'', and the America West disclosure provides the "credibility" needed to smoke out other players. The story was leaked. The equity likely did it (probably somebody at GE). The tipoff is that both the WSJ and NYT had it. While they compete, they won't run a story solely based on what they read in the other's paper. If you want them to go with a story, you have to give them facts. The Journal knows that, and it's why they jumped it out with an online story the night before. This is no different than Adelphia and MCI, where the same sort of leakage has caused other bidders to emerge with higher offers.

ClueByFour

I've yet to hear any good reasoning as to why David Bonderman (a very smart cookie) is going to intentionally piss away his perfectly healthy %55 stake in HP (bearing in mind that he did not think enough of the US franchise to get into a bidding war with Bronner 2 years ago).

And make no mistake--a merger would fail from a route structure standpoint (and, as the makur o' deels points out, represents a veritable mountain of debt).

TomBascom

Actually Deelmakur pointed out a potential good reason or two. Sure, it's a "debt bomb" but perhaps it's going to be defused somehow.

Bonderman apparently had a reason to consider this path before. He's a pretty smart guy. Maybe he has an idea...

What we don't know is whether or not any such considerations are actually at work. We can only speculate.