Superguy

US also works with VS and that provides some other options and competition. What you'd effectively have is *A, OW, ST, and VS. I'd also throw in as far as LH has absorbed other European carriers, you're not left with much in continental Europe besides LH in some form and AF/KL, though there are some LCCs around. I think IB and BA are kinda too far west to really be serve continental Europe well.

I don't know that precedent means so much. By following "precedent", it would eventually allow for a monopoly to form because other mergers were approved previously. The market needs to be looked at to see what would really happen if a competitive force is removed. At some point, the government's going to say enough is enough.

Sure, in the cell markets, AT&T and Cingular got together, and also Verizon and Alltel. By the precedent logic, AT&T/T-Mobile should have been allowed but it wasn't because there was concern that there wouldn't be much of a competitive environment left.

If there weren't antitrust immunized joint ventures between airlines, I'd be more inclined to go along with 3 alliances providing competition. There would still be competition amongst the carriers. Throw in a rogue carrier like VS to keep things honest too. With the JV's, it doesn't matter whether I fly UA, AC, or LH across the Atlantic - the money gets split evenly. There's no incentive for UA to compete with LH and AC. US still has a reason if they're in the same alliance. AA still has to compete too.

I don't see much incentive for OW, ST, and *A t o really compete. They can all charge roughly the same amount and people will fly which alliance they prefer. I think the market will stagnate and prices will eventually go up, and not just due to oil.

I'd love to be wrong about that, but I just don't see how 3 alliances in JVs can be good for competition and the consumer. Great for shareholders, sure.

gkbiiii

Wow who would have thought the AA unions want a merger with US?

http://www.airliners.net/aviation-fo....main/5443980/

starflyer

Certainly not the way for FAs to go if they're trying to gain support from the AA customers.

Superguy

[QUOTE=dtremit;18431750]There were a few things that made AT&T/T-Mobile unique, though, neither of which apply here. First is the "zero sum" nature of wireless -- as you state, the spectrum is limited, so if a few companies control all the spectrum, there's no ability for new entrants to join the market. Moreover, you need spectrum in pretty much the entire country to be a credible mobile phone operator. LCCs have demonstrated pretty readily that you can operate an airline without comprehensive service and still make a sustainable profit.

There's still a resource crunch though - slots at airports. Slots don't appear out of thing air - there are a lot things that go into them like air space congestion, runway capacity, how efficient ATC is, and of course the FAA. There are things that can be done help like ATC upgrades, adding runways, etc. Not much different than the FCC freeing up spectrum. Look at the mad scramble carriers were going for the 8 perimeter exemptions for DCA.

I don't know that would have happened. I think there would have been enough people who bailed to Sprint to keep it afloat. A lot of people were on T-Mo as it was the "value" carrier. Given the dislike of AT&T and Verizon, plus Sprint offering a lot better value than other two, I believe Sprint would have survived on that front. Sprint surviving due to bad management decisions is another story.

Domestically, sure. But that's not the only market - there's international, and there are lot of smaller places the legacies go that WN doesn't. WN also grew due to acquiring FL, which still takes a competitor out of the market. It takes a lot of time for a carrier to grow. Even with the newcomer VX, you still have largely a western airline with a few transcons.

WN got its rep for being cheap, which of course isn't the case anymore.

We also saw smaller startups try to give a go of it then get killed by legacies who offered cutthroat fares that drove them out of business. Independence Air vs. UA out of IAD anyone?

Overall, I could see a great argument for US leaving *A and joining OW and working closely with them. Still having some competition but both being on their own. I think that would largely preserve what's still out there rather than eliminating competition overall.

gkbiiii

Letter to US Employees from Doug Parker:

-------------------------
Dear Fellow Employees �

Today, we filed a statement (a form called an 8-K) with the Securities and Exchange Commission disclosing that we have signed agreements with the three unions that represent nearly 55,000 American Airlines employees. These unions are the Allied Pilots Association (APA), the Association of Professional Flight Attendants (APFA) and the Transport Workers Union (TWU), which represents all of American Airlines' mechanics and fleet service employees. Shortly after our disclosure, these three unions issued a public statement announcing their support of a US Airways-American Airlines merger and that they have agreed to terms that would govern collective bargaining agreements for their members at the merged airline. I want to explain to you why we have done this and what it means.

First of all, today's news does not mean we have agreed to merge with American Airlines. It only means we have reached agreements with these three unions on what their collective bargaining agreements would look like after a merger, and that they would like to work with us to make a merger a reality. To get to an actual merger, many more things must happen including gaining the support of AMR's creditors, its management team and its Board of Directors. But this is obviously an important first step along that path and we are hopeful we can all work together to make this happen.

All of you have heard me talk about the benefits consolidation has created for US Airways and our industry. You have also heard me say that US Airways does not need to merge with anyone, as evidenced by our team's outstanding results. That is still the case, but after studying American Airlines' current state and their future plans, we have concluded that a merger with American, while they are undergoing their bankruptcy restructuring, represents a unique opportunity that we should not ignore. These beliefs are shared by the three American labor unions and we are delighted to have their support. Like us, they recognize the potential of a merger to improve the current and future careers of both airlines' employees.

Combining American Airlines and US Airways would create a preeminent airline with the enhanced scale and breadth required to compete more effectively and profitably. Our intention would be to put our two complementary networks together, maintaining both airlines' existing hubs and aircraft, and create an airline that could compete successfully with United, Delta and other carriers within our industry. A merged airline would provide competitive, industry-standard compensation and benefits, as well as improved job security and advancement opportunities for all employees of the combined airline. Most importantly, in American's standalone strategy, over 13,000 employees at American will lose their jobs. Our merger contemplates saving at least 6,200 of these positions. For the US Airways team, the agreements we have reached with the unions representing employees at American would also provide enhancements to the compensation and benefits currently in place here.

Today is one step in what will be a much longer process. For now, it remains business as usual. We must continue to provide the outstanding service that customers have come to expect from US Airways.

In the meantime, if you have any questions, please stay connected via Wings (www.wings.usairways.com) and we will continue to provide updates on our progress. Thanks for all that you continue to do to take care of our customers. Together, whether a merger is our future or not, we will continue to run a great airline and have a bright future ahead of us.

Sincerely,

Doug

http://www.airliners.net/aviation-fo....main/5443980/

gkbiiii

Here are the details from APFA concerning how this will affect FAs. From www.apfa.org

-------------------------------

US Airways Q&A
This is APFA President Laura Glading with a Special Hotline Update for Friday morning, April 20, 2012.


The purpose of this address is to provide our members with the most critical facts. As you know, American Airlines management has made several excessive demands of our contract since filing for bankruptcy protection last November. Not only were their demands unreasonable, but their business plan was uninspired and not viable. My fellow union leaders and I had no choice but to evaluate alternatives.

Along with my counterparts at APA and TWU, I was approached by members of the US Airways’ management team who were interested in discussing a potential merger. Each of us – individually – came to the conclusion that a merger would be the best plan for our membership and the most successful option for the reorganization of our Company. In the days that followed APFA leadership, supported by our team of professionals, met with representatives from US Airways to hash out the details of how a merger would affect our flight attendants.

This agreement puts flight attendants in a far better position than any proposal American Airlines management has made. Equally important - is the business plan US Airways has put forward, which I strongly believe will bring American Airlines back to profitability and competitiveness. A combined US Airways and American Airlines will eliminate the competitive advantage of Delta and United and making us relatively competitive in both size and network.

After careful consideration, the APFA Board of Directors voted unanimously to sign an agreement in principle with US Airways, knowing that it was in the best interest of the membership.

Of course, this plan is not a perfect solution and we expect there to be bumps in the road, but I am confident that it is the best and most viable option available to us. More information can be found below and we will continue to update as material becomes available. Please check back frequently for the best and most accurate information.


Joint Union Press Release Regarding US Airways


Bridge Term Sheet Highlights

Early Out APFA's proposal accepted
No Furloughs
Wage Increases: 2.5% on effective date. 1.5% annually over next 5 years.
Retirement: Pension plan frozen. Replaced with a 401(k) contribution.
Current employees will receive automatic 401(k) contributions for 5 years, with no match requirement. Contribution levels as follows:
9.9% age 50 +
6.75% age 40 – 50
5.5% age 39 – below
At the conclusion of the 5 year period, all FAs would receive a 3% contribution with up to a 5.5% match.
Active Health Benefits: Better than AA’s proposed plan
Retiree Health Benefits: Implementation of Voluntary Employee Beneficiary Association (VEBA).
Bidding: Preferential Bidding System (PBS) with our input
Reserve:
Incorporate earlier Reserve assignment notification
Add AM/PM Ready Reserve shifts.
Allow Reserve pick-up on days off to be paid on top of guarantee.
Current reserve rotation will be maintained.
Sequence Pay Protection: APFA proposal
Schedule Maximum:
Minimum of seventy (70) credit hours and a maximum of ninety (90) credit hours per bid period.
Flex in the maximum line value by an annual amount of twenty (20) hours, but in no case more than five (5) hours during any given month.
Incentive Pay/Per Diem: Incentive pay eliminated. Per diem rates increased to:
Domestic: $2.00
International: $2.20
International Override:
$3.00 per hour for each international leg. Override for deadhead, trip and duty rigs and trips “not flown” consistent with CBA
Combined Domestic & International Operation
Current Duty Rigs Preserved
Expedited Negotiations for New Contract: Negotiations for a market based contract will take place immediately following a single-carrier certification. If an agreement cannot be reached within 60 days of the certification the matter will be submitted to final binding arbitration.
Maintain all other provisions in our current Contract including:
Vacation accrual and pay
Current PVDs
Sick hour use and current sick policy
Current Hotel language
ATC/ Code 59
Galley pay

What the Analysts are Saying

Throughout the bankruptcy, financial and aviation industry analysts have been advocating for consolidation. Most are in agreement that the only way for American Airlines to stay competitive is to merge with another carrier.
See the links below for articles from some of the country's leading minds and publications:


http://blogs.star-telegram.com/sky_t...ican_airlines/
http://beta.fool.com/tdalmoe/2012/04...gyholnk0000001
http://business.time.com/2012/02/06/...ne-in-america/
http://blogs.wsj.com/deals/2012/04/1...ican-airlines/
http://travel.usatoday.com/flights/p...+-+Top+Stories)
http://www.charlotteobserver.com/201...ys-merger.html
http://www.nycaviation.com/2012/03/a...o-be-believed/
http://www.bloomberg.com/news/2012-0...over-plan.html
http://travel.usatoday.com/flights/p...-says/653851/1
http://bottomline.msnbc.msn.com/_new...-of-bankruptcy
http://www.bloomberg.com/news/2012-0...venue-gap.html
http://blogs.barrons.com/stockstowat...merger-report/
http://www.forbes.com/sites/thestree...merger-effort/
http://www.thestreet.com/story/11383...en=forbeslinks
http://www.tulsaworld.com/business/a...1_CUTLIN603027
http://www.independent.co.uk/news/bu...a-6298050.html

APFA FAQs:
US Airways’ Bid for American Airlines

WHY A MERGER NOW?

Q. Why now?
A. To say that American Airlines is facing a challenging time is an understatement. Despite the sacrifices we have made over the years, management’s business plan and strategy for emerging from bankruptcy is not a workable solution for the survivability of our company or our careers. American Airlines’ plan includes gutting our contract, and leaves us no option other than to evaluate alternatives. After extensive discussions and study, we strongly believe that US Airways’ management team can help restore and grow American Airlines and sustain a future for our membership.

After much consultation with our attorneys, financial advisors and analysts, it is clear that a merger with another carrier is inevitable; the question is not if, but when, and with which carrier.
We strongly believe US Airways has presented us with an opportunity that is in the best interest of our flight attendants both individually and collectively.

Q. What is the short-term benefit?
A. Throughout the bankruptcy process, American Airlines has focused almost exclusively on its “cost” and “labor” problems. In an attempt to restructure and save the jobs of the dysfunctional management team, American Airlines has submitted a proposal to the bankruptcy court that would decimate our pay, weaken our work rules, cut our benefits, and cost thousands of flight attendants their jobs.
As APFA and other industry professionals have been saying for years, American’s problem is not with its costs, but with its revenues. And US Airways agrees. We’ve reached an interim agreement, referred to as a ‘bridge term sheet,’ with US Airways that would preserve - to a far greater extent - our jobs, pay, work rules and benefits than would American’s draconian, destructive plan.

Q. What are the long-term benefits?
A. The most recent industry mergers of Delta/Northwest and United/Continental have created two large airline competitors. They have strengthened their alliances and have taken market share away from American, leading to decreased revenue. This is the greatest factor contributing to the demise of the American Airlines we once knew.
The transaction with US Airways will make American among the nation’s largest carriers. US Airways’ plan strengthens our market position and creates critical opportunities for growth now rather than years down the road. Our airline’s future is far brighter with this transaction and the US Airways team.
Critical to us, under the bridge term sheet for flight attendants, US Airways has agreed that if it buys American, there will be an expedited negotiations process that will result in a joint contract that, as a whole, is market-based.

Q. When would our bridge term sheet take effect?
A. After American emerges from bankruptcy and US Airways takes control of American.

Q. Why couldn’t we just wait for American to buy US Airways after it gets out of Bankruptcy?
A. First, bankruptcy will be a lengthy process that takes many, many months. In the interim, if the bankruptcy court approves the Company’s proposal, we would suffer for many years with excessive and unnecessary job cuts, pay and benefit reductions, and diminished work rules. Second, American may not be in a position to make a transaction happen once it emerges from bankruptcy. Third, our competitors are not going to stand still and wait for American to play “catch-up.” And finally, an American acquisition of US Airways would leave the current management team in place – a management team that no longer deserves our confidence.

Q. I heardDelta was interested; wouldn’t they be a better choice than US Airways?
A. Delta has never reached out to APFA to discuss a potential purchase. Also, APFA and our professionals believe that the U.S. government would likely have significant anti-trust issues with a Delta-American transaction. To address those concerns, Delta would have to break up the company; take over certain assets and/or hubs while United and otherairlines could pick from what was left over. There is no certainty for flight attendants in this plan. Clearly, this is not a path that would be in our best interest.

Q. Will the name of the merged carrier be American or US Airways.
A. American
.
Q.Where will Corporate Headquarters be located?
A. US Airways plans onkeeping the headquarters for the merged carrier in Dallas-Fort Worth.

Q.What are the US Airways base cities?
A. Philadelphia, Washington DC, Phoenix, Charlotte.

Q.How will seniority integration be handled if US Airways buys American?
A.Under Federal law (McCaskill-Bond Amendment) APFA and AFA will try to reach agreement on seniority integration. If anagreement cannot be reached, under McCaskill-Bond the matter must be submitted to binding arbitration.

Q. What happens if US Airways’ offer to buy American Airlines is not approved?
A. We would continue to work through the bankruptcy process.

http://www.airliners.net/aviation-fo....main/5443980/

dtremit

Only a small handful of airports are slot controlled, though. I would expect divestment in those markets to be a condition for approval -- though the DL/US slot swap has probably made that much less of an issue for NYC. WAS is probably the biggest loser, though they'd be likely to pick up something compared with US' current footprint.

Except they don't have the spectrum to handle that kind of growth. They're kind of stuck either way. But this is veering off-topic.

You do have to consider both domestic and international, but I'm not sure you have to consider them together. Open Skies in Europe has opened up quite a lot of opportunity for European carriers to compete (and since US only really has European operations, I suspect that's all DOJ would consider).

DOJ has in the past fairly consistently looked at the effect of mergers on consumers in individual cities and individual routes -- I wouldn't expect them to deviate markedly from that. And US and AA have relatively little overlap in that respect. Probably less than UA/CO or DL/NW.

Independence Air's business plan was, sadly, nuts -- they were flying exclusively on inefficient planes everyone hated, and based themselves at the fortress of the network carrier who they'd recently pissed off. Probably not the best example -- though I miss those fares!

dtremit

This, right here, is a very interesting excerpt. McCaskill-Bond was signed into law in 2007 -- after the US/HP merger. Others have rightfully pointed out that since US would be the surviving carrier, the change-of-control clause in the US-East contract would not be triggered. However, the US and AA union groups would be required to resolve seniority issues in the merger.

Am I the only one wondering if this is in part a roundabout way for US management to force the hands of the East and West pilot unions?

dtremit

The complication here is that Boeing is one of the votes on AA's bankruptcy committee.

Of course, if they've got the unions, and PBGC (seems likely, since it sounds like they'd preserve AA's pensions), they only need one other vote. Hewlett-Packard is on that committee, too, and US threw out Sabre in favor of H-P's SHARES in the last merger. So they might be able to ignore Boeing -- or at least pit them against Airbus in the negotiations.

plon

More analysis from The Charlotte Observer

http://www.charlotteobserver.com/201...es-unions.html

etsmyers

so you are saying I will lose my 2+ years of 100% upgrades

nall

Any time there's a merger, you're generally left with more elites chasing fewer upgrades. I don't know why the specifics of which brand lives on, or where it's headquartered matters.

DCdeacon

It would have to be Oneworld. I don't think OW could survive as a global alliance if AA/US stayed in Star. There's no way that the North American airlines could be split up as : AA/US/UA/CO in Star, DL in SkyTeam, and no one in OW.

etsmyers

because as I understand, US and AA process their upgrades totally different

nall

All they've said is that the airline resulting from the merger would be named American Airlines, headquartered in DFW, and a member of OneWorld.

No statements have been made about how the resulting frequent flier program would look. They could very well call it AAdvantage but use the DM program rules.


Edit: I believe that, regardless of who your airline merges with and what the resultant frequent flier program looks like, your biggest problem is likely to be more competition for upgrades.