BostonMark

Glenn Tilton says UA would consider withdrawing from *A:
http://www.chicagotribune.com/busine...,3472216.story

I suspect it would only happen in DL/UA tie up. What would this mean for US?

I think one of four things would happen in the following order:
1. LH would try to bring US, B6 and maybe F9 together to replace UA
2. CO will get booted out of Skyteam and would join *A with US remaining in *A
3. LH will help fund a NW/US merger
4. Nothing - US will go it alone for better or worse

This thread is NOT for flaming how terrible US is or how unrealistic this is - it's to rationally discuss things that COULD happen, however small the probability, if UA were to really withdraw from *A.

FrequentHopper

Air France is pushing DL to merge with NW, if the rumors are to be believed. However, there's an argument supporting a United acquisition as well (DAL's management team would almost certainly survive as the controlling party).

LH has an interest in preserving access to the US market -- I suspect their recent investment in JetBlue was a defensive move to preserve access to a "winner" in the US aviation market should UA merge (or go under).

A UAL merger with DL and withdrawal from Star Alliance would create some real opportunities for US, that's for sure. Other Star partners would be likely to rush in with capital for investments/loans to ensure continued strong presence in the US market, and a shift in codeshares and revenue sharing would bolster US's revenue in the short term.

SS255

US does not have an extensive enough route structure to be the sole American carrier in the *A, but I think if UA were to defect, we could stop worrying about US getting kicked out!

FrequentHopper

A DL-UA merger would likely have to divest of significant assets -- hubs and routes -- which US (being cash-rich) could probably pick up. For instance, DL would probably be interested in ditching a midwestern hub like CVG (which US could purchase).

There's also no reason why US cannot expand its service to meet Star's needs, either through an acquisition of its own or more service. If it was the sole partner in Star in the USA, a lot of service that would be marginally successful today (transcons from the BOS focus city, more midwest service, more international flying from focus cities) would be a profitable possibility for them.

BostonMark

I think that US could only truly expand through acquisition. I don't see that CVG gets them much of anything.

I really think LH would try to cobble together an airline with US, B6 and whoever they can get in. CO would also be a likely *A target, but with the addition of UA would CO have a reason to try and stay in Skyteam? I can see regulators worrying about the US markets - would they care one bit about international alliances and who belongs to what?

sbtinme

I think the chances of that happening are about the same as my being hit by a DC-6 in Vermont tomorrow afternoon.

(Hey, it could happen. I'm in BTV this week.)

BoeingBoy

Not with many quarters like the last.....

Sept 30 cash, cash equivalents, and short-term investments = $2.680 Billion
Dec 31 cash, cash equiv alents, and short-term investments = $2.174 Billion

Jim

budtkaboy2000

[QUOTE=BostonMark;9129940]I think that US could only truly expand through acquisition. QUOTE]

I strongly disagree and actually wish that they are not acquired or acquire anyone else. Let's see them slowly grow into something on their own.

BostonMark

I heard the DC-6 club of America was having their annual airshow in BTV this week.....

Renard

I don't think that UA will leave *Alliance (but then again what do I know.) What they say and what they'll do when push comes to shove...two different things. This is just Tilton being 'easy' and desperate to find a date to the ball.

US buy the CVG hub? Huh?
Wouldn't it be a little easier/cheaper to re-start PIT?

FrequentHopper

How much of that was consumed by operations, and how much of it was consumed by down payments for new planes?

US just dramatically expanded its widebody order and also changed its narrowbody order to bigger jets. That takes a big cash commitment.

McFlyPHL

A few things...

1) There's a place for baseless speculation, it's called airliners.net
2) UA can't very well come right out and say "we won't do this" or "we will do that" - simply doing so would imply that management is not considering options that may be in the best interests of its shareholders. Hence the careful wording by UA.
3) Foreign alliance partners are going to have their investments restricted by government regulations on equity shares.
4) Look at some of the restrictions on AA-BA in OneWorld. Regulators absolutely do care about tie ups and alliances.
5) The notion that US would get anything by acquiring the CVG hub that can't already get for free at PIT is laughable.
6) None of the overly rosy scenarios really hit the issue that most plagues US - the lack of a centrally located hub, which necessitates double connects if one travels from a smaller west city to a smaller east city.
7) The cash position may or may not be relevant (I haven't read the report as of yet and the 10K didn't pop up on EDGAR this morning), but I suspect that the drop in cash is not solely due to operations. If you want to "defend" against the abysmal market cap and relatively high "cash" balance, a shift from short term, liquid assets MAY make sense, but it's going to depend on the whole picture painted in the report.

BoeingBoy

For planes, they only show $128 million in purchase deposits for the year vs $48 million in 2006 when they were building "cash". They don't give the number for just the 4th quarter nor do they give a cash flow statement for the 4th quarter.

There should have been little to no cost for switching models in an existing order, like they did with the A320 series. That option was included in the contract.

Jim

DWilliamson5002

If UA and DL merge it would make since for DL to switch into the *A rather than having too many American carriers in sky team...

Having essentially 4 of the biggest US carriers in Sky Team would seem dumb...

GaryZ

That, and the fact US moved 353M into marketable securities and had 151M in prepaid expenses for 2007.

I think a better statement of their "cash" position is: "As of Dec. 31, 2007, the Company had $3.0 billion in total cash and investments, of which $2.5 billion was unrestricted."