ASTROJET707 From United States of America, joined Feb 2004, 299 posts, RR: 5 Posted (9 years 11 months 3 weeks 4 days 13 hours ago) and read 1903 times:
This is for all the economists and arm-chair-CEOs. Given the current economic climate the the US are consolidations/mergers inevitable? Will they wait until carriers have cash or the ability to finance? Are the criteria for a sensible merger different from say 10 or 20 years ago? Thanks.
Tango-Bravo From United States of America, joined Jun 2001, 3807 posts, RR: 28
Reply 1, posted (9 years 11 months 3 weeks 4 days 12 hours ago) and read 1801 times:
In the post-deregulation era it makes much more sense, IMO, for airlines lacking "the right stuff" to be allowed to go out of business and allow the marketplace to determine who (existing and/or new carriers), if anyone, will fill any vacuum left by the departure(s) of one or more airlines. While I won't go so far as to say that there is no such thing as a good merger, growth from within has, IMO, proven to be a vastly superior game plan in the airline industry -- for airlines, their employees and their customers.
PlaneSmart From New Zealand, joined Dec 2004, 1153 posts, RR: 0
Reply 2, posted (9 years 11 months 3 weeks 4 days 10 hours ago) and read 1751 times:
For struggling businesses, banks generally work co-operatively, even to the extent of forgiving debt. This approach is taken because whilst property, plant & machinery, etc have a value, realising it, other than as on a going concern basis, is very difficult. Better to help the business trade out, than letting them go under.
Because an airline's assets are mobile, and can be re-deployed more readily, there is generally less willingness by banks to forgive debt. Better to simply extricate their assets, sell or lease to new clients, and move on.
Now that is a generalisation.
Clouding the situation in the US is Chapter 11, which was intended as short-term protection against asset owners, giving businesses the chance to re-organise, under less duress, and taking into account interests other than just lenders/financiers.
US Chapter 11 rules are actually envied by many countries, some of which are working towards implementing similar provisions.
Frankly, the US has the greater need for Chapter 11. US banks are the least co-operative when it comes to working collaboratively to allow a client to keep trading, so they can either sort out their problems, or be liquidated in a managed fashion. Where syndicated funding is involved, they often threaten to take unilateral action, unless other members of the syndicate buy them out.
Chapter 11 in the US is good, but is being misused. The longer financial problems are permitted to fester, the more other players, some of whom are in quite reasonable shape, will be affected, and the harder the landing when failures occur.
Scotron11 From United Kingdom, joined Feb 2004, 1178 posts, RR: 3
Reply 3, posted (9 years 11 months 3 weeks 4 days 4 hours ago) and read 1648 times:
It is an interesting question, especially in the wake of 9/11. Here in the EU we seem to be moving in the direction of more consolidation. Given the current state of the US airline industry, would the regulatory bodies look more favorably on mergers like UAL/US?
Instead of the "Big 6", will there one day be the "Big 3" airlines, ala the automobile companies? I think for that to occur, one of two things have to happen: a huge merger or a huge collapse.