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U.S. Airline Mergers  
User currently offlineIAHTowTeam From , joined Dec 1969, posts, RR:
Posted (9 years 6 months 3 weeks 5 days 5 hours ago) and read 4723 times:

In this current environment, mergers are inevitable. I would like to know everyone's thoughts on the airline's that currently exist....who would be most likely to merge and why? Also, do you think it is possible that a LCC might buy into a legacy carrier? At the end of all of this....let's see who was right.

[Edited 2005-04-10 05:09:36]

35 replies: All unread, showing first 25:
 
User currently offlineJetBlueAtJFK From United States of America, joined Jan 2005, 1687 posts, RR: 3
Reply 1, posted (9 years 6 months 3 weeks 5 days 5 hours ago) and read 4708 times:

Maybe in the future US Air will just codeshare more and more flights with UA and they will eventually be absorbed by UA.

Just my thoughts

 airplane  jetBlueAtJFK  airplane 



When You Know jetBlue, You Know Better
User currently offlineAvek00 From United States of America, joined Oct 2004, 4406 posts, RR: 19
Reply 2, posted (9 years 6 months 3 weeks 5 days 3 hours ago) and read 4610 times:

Quoting IAHTowTeam (Thread starter):
In this current environment, mergers are inevitable.

More like "in this current environment, full-scale mergers are impossible".



Live life to the fullest.
User currently offlineDeltaMIA From United States of America, joined Feb 2004, 1672 posts, RR: 17
Reply 3, posted (9 years 6 months 3 weeks 5 days 3 hours ago) and read 4605 times:

Quoting IAHTowTeam (Thread starter):
Also, do you think it is possible that a LCC might buy into a legacy carrier?

I don't see how a LCC can take on that amount of debt.



It's a big building with patients, but that's not important right now.
User currently offlineFA4UA From United States of America, joined Nov 2003, 812 posts, RR: 20
Reply 4, posted (9 years 6 months 3 weeks 5 days 2 hours ago) and read 4536 times:

Glenn Tilton, CEO of United was quoted last week for saying that he envisions the US with only three mega carriers and some LCC's.

Let the pairing begin... lord help us with the seniority integration issues! Will it be with CO??? US??? hmmmmmmm?

FA4UA



The debate continues... Starwood or Hyatt... which is better
User currently offlineINTENSS From United States of America, joined Aug 2004, 317 posts, RR: 1
Reply 5, posted (9 years 6 months 3 weeks 4 days 23 hours ago) and read 4475 times:

One would hope today's airlines have learned a thing or two from the past and would just let struggling carriers die on their own. Airlines in crisis are like a disease, don't take any part of them into your system....it just spells doom.

-Rich


User currently offlinePlaneSmart From New Zealand, joined Dec 2004, 987 posts, RR: 0
Reply 6, posted (9 years 6 months 3 weeks 4 days 23 hours ago) and read 4458 times:

Mergers are inevitable, with financiers and major creditors being catalysts.

The favourite phrase currently among major airline / aircraft financiers is 'right-sizing' the industry.

The preferred option is probably to allow the 2 weakest and least costly to fail, with the pain (costs), shared by all industry participants, which will include re-capitalisation & additional funding for the survivors.

For this to happen, changes to anti-trust, and further changes to Chapter 11 & 7 are required.


User currently offlineSPREE34 From United States of America, joined Jun 2004, 2248 posts, RR: 9
Reply 7, posted (9 years 6 months 3 weeks 4 days 16 hours ago) and read 4333 times:

I don't see any mergers coming. Employee groups are nearing their limit for taking cuts in compensation, and benefits. Losing seniority would be the final straw for many. The resulting discontent would handicap the new combined carrier's ability to care for customers.
Government interference, which has partly led to where we are, would further complicate most of the merger options out there.
The dead wood needs to go so the strong, and new growth can flourish. I know that's a simple view, and maybe the simple solution is the way to go.



I don't understand everything I don't know about this.
User currently offlineAa777flyer From , joined Dec 1969, posts, RR:
Reply 8, posted (9 years 6 months 3 weeks 4 days 14 hours ago) and read 4241 times:

I really dont see any mergers right now, for several reasons. First of all none of the legacy carriers have any $$ to buy anyone else, and it goes somewhat against LCC's business model to go buying a UA/AA/DL or someone like that.
All of the legacy carriers are waaay to leveraged to pull off the financing to buy one another. Then you have seniority issues, fleet compatability, integration costs, etc......right now it would be a disaster. Also, I think there will be some antitrust issues with any of the reamaining legacy carriers merging. What I could see happening is as the legacys continue to struggle, they could sell off some of their assets, routes etc to raise cash to stay alive.

What needs to happen is either some of the legacy carriers need to go away, OR a zero growth (this defiantely wont happen) of any airlines for about 3 years or so allowing demand to catch up with capacity, as there is waaay to much capacity out there right now.


User currently offlineUAalltheway From , joined Dec 1969, posts, RR:
Reply 9, posted (9 years 6 months 3 weeks 4 days 14 hours ago) and read 4208 times:

Seeing as how all these airlines are competing against eachother (which is the reason so many are in bankruptcy), I really don't think you'll see too many mergers at the moment. However, I think DL and CO would make a great merger. Perhaps one of the best airlines. Well.. that is if DL would maintain some of it's aircraft a little better. :p

User currently offlineGarri767 From , joined Dec 1969, posts, RR:
Reply 10, posted (9 years 6 months 3 weeks 4 days 13 hours ago) and read 4159 times:

maybe hawiaain and aloha?

User currently offlineElagabal From United Kingdom, joined Mar 2005, 201 posts, RR: 0
Reply 11, posted (9 years 6 months 3 weeks 4 days 13 hours ago) and read 4130 times:

Quoting Aa777flyer (Reply 8):
What needs to happen is either some of the legacy carriers need to go away, OR a zero growth (this defiantely wont happen) of any airlines for about 3 years or so allowing demand to catch up with capacity, as there is waaay to much capacity out there right now.

I don't know, I think that these are the two likeliest options, and that it's entirely possible for there to be zero growth for a few years. The airlines have been losing gobs of money year in, year out for a while now, and nobody'd've thought that possible previously...

My magic 8-ball sez it'll be NW plus either DL or CO, best CO from a business point of view. (I really like DL and their JFK / ATL routes are good, but they're just bleeding red ink and swimming in it.) NW is relatively healthy, and CO has good position in areas that would complement NW's route map. AA and UA are too big already.

US might pull itself together and merge with someone, although the likelihood of its maintaining an identity is slimmer. Plus, who needs its routes? It might shrink to being based at CLT almost exclusively, whereupon somebody else might pick it up as a super regional carrier.


User currently offlineIAHTowTeam From , joined Dec 1969, posts, RR:
Reply 12, posted (9 years 6 months 3 weeks 4 days 12 hours ago) and read 4066 times:

Quoting UAalltheway (Reply 9):
Seeing as how all these airlines are competing against eachother (which is the reason so many are in bankruptcy), I really don't think you'll see too many mergers at the moment. However, I think DL and CO would make a great merger. Perhaps one of the best airlines. Well.. that is if DL would maintain some of it's aircraft a little better

I was at the CO CEO exchange a couple of mos. ago and Larry was telling us that he and Gordon Bethune walked away from the DL merger in either '99 or '00 because DL wanted to put all the CO employees at the bottom of the heep in seniority, true story! It is too bad that DL would not compromise on that issue because things could be alot different for all of us, had that merger taken place. For ex. we wouldn't be losing $200mil a month because of trying to match their "reduced" fare structure. Bethune also approach Tilton (UA) CEO to explore a merger with them....they turned their nose up at it. Bet now he wished he had done it. Also, America West(HP) has been talking about a possible merger and is considering USAir. I don't see how they are even in a position to make a move like that but crazier things have happened I guess.


User currently offlineTango-Bravo From United States of America, joined Jun 2001, 3806 posts, RR: 29
Reply 13, posted (9 years 6 months 3 weeks 4 days 12 hours ago) and read 4042 times:

Quoting SPREE34 (Reply 7):
The dead wood needs to go so the strong, and new growth can flourish. I know that's a simple view, and maybe the simple solution is the way to go.

It should be self-evident that pairing dead wood with dead wood will accomplish nothing but a larger mass of (even "deader") dead wood. It should be almost equally self-evident that "live" wood will not benefit in any positive way by absorbing dead wood. The legacies (and perhaps even some of the LCCs) may think and act in denial of these axioms, but they will not escape the end results if they can muster up enough suckers to fund any mergers they may contrive -- or if the financially fit are foolish enough to squander their good money into chasing bad money.

What I see happening is for the financially fit to grow organically (perhaps with selective codeshares as well) without the "benefit" of mergers to fill the vacuum left by dead wood that can no longer continue to prolong their existence through the hocus-pocus shenanigans and shell games of bankruptcy and restructuring that accomplishes nothing more than than to rearrange the proverbial chairs on the deck of the Titanic.

In the regulated era, airline mergers stood a fair to good chance of success; within the decade that followed the enactment of deregulation, there was a slim prospect for successful mergers; after that the possibility of successful mergers has been (and proven to be) vitually nil.


User currently offlineIAHTowTeam From , joined Dec 1969, posts, RR:
Reply 14, posted (9 years 6 months 3 weeks 4 days 9 hours ago) and read 3938 times:

Can carriers that are in BK merge or be merged with???

User currently offlineFA4UA From United States of America, joined Nov 2003, 812 posts, RR: 20
Reply 15, posted (9 years 6 months 3 weeks 4 days 8 hours ago) and read 3663 times:

Quoting Elagabal (Reply 11):
AA and UA are too big already.

In the airline industry there is no such thing as too big. Frequent fliers often site their reason for choosing a specific carrier is because they fly everywhere they need to go. Frequent fliers want one carrier to take them everywhere.

my humble opinion:
AA+UA: hello memories of Aeroflot

CO+DL: let's fly to Europe and let's fly to Europe some more. Antitrust concerns all over the North East.

CO+NW: match made in heaven except for all those darn Airbus

CO+UA: match made in heaven except for all those darn Airbus and different engines. I'd love to have that route map! We'd go nearly everywhere!

HP+US: two "pubescent" sized carriers both going through a lot right now. Plus, where's the cash for this?

DL+NW: anti-trust concern in smaller southern cities and the airbus integration
would be ackward with retraining, etc. How about that route map though! Purty!

US+UA: (flashback to 2000) antitrust concerns in DC, and we wouldn't want all the pieces from US, just their Euro, Carribean flying, and East Coast prescence that we're lacking.

AA+AS: makes logical sense, no real overlaps but is AS weak enough to be acquired or is AA strong enough to be the buyer?

just my 2 cents...
FA4UA



The debate continues... Starwood or Hyatt... which is better
User currently offlineIAHTowTeam From , joined Dec 1969, posts, RR:
Reply 16, posted (9 years 6 months 3 weeks 4 days 6 hours ago) and read 3052 times:

Yeah....I think a merger between UA and CO would be pretty awesome. UA would get EWR back, CO would get Denver back and CO would also get LAX, which is needed for expansion in the west. They also have access to London Heathrow and prime asia markets CO doesn't fly to, including Sydney. That would def. be a match made in heaven....the only draw back would be that the fleet types would no longer be simplified...they have a few Airbus'. My second choice would be DL and my third would be NW for CO. I wouldn't be surprised if Kellner approached Tilton if they do succeed on exiting bankruptcy, which, if oil stays where it is at, won't happen any time soon. Makes me think...if UA is able to stay alive this long, I wonder what would happen to AA if they were in the same situation?

User currently offlineElagabal From United Kingdom, joined Mar 2005, 201 posts, RR: 0
Reply 17, posted (9 years 6 months 3 weeks 4 days 6 hours ago) and read 2916 times:

Quoting FA4UA (Reply 15):
Quoting Elagabal (Reply 11):
AA and UA are too big already.

In the airline industry there is no such thing as too big. Frequent fliers often site their reason for choosing a specific carrier is because they fly everywhere they need to go. Frequent fliers want one carrier to take them everywhere.

my humble opinion:
AA+UA: hello memories of Aeroflot

No offense, but didn't you just contradict yourself?  eyebrow 

Maybe I should clarify. "Too big" means overstaffed, too much market share (monopoly, a la Aeroflot), an unfocused or unintegrated business model, that kind of thing. It doesn't mean too many destinations. Plus, you can have destinations you don't operate yourself: try codesharing.

Quoting IAHTowTeam (Reply 14):
Can carriers that are in BK merge or be merged with???

Sure. I have a funny feeling that "merger" is a polite way of saying "buyout," or even "downsizing." It's so much nicer to say "they merged," than to say "each fired half their staff and dumped half their planes, and then repainted everything."

Ditto, "we decided to join forces with so-and-so and pool our strength," instead of "we were going to liquidate in 3 weeks anyway, so if so-and-so take the rap for downsizing everybody here, it's an inside job and looks a lot tidier than an auction." Look what happened when AA "merged" with TWA... boggled 

Quoting Tango-Bravo (Reply 13):
It should be self-evident that pairing dead wood with dead wood will accomplish nothing but a larger mass of (even "deader") dead wood. It should be almost equally self-evident that "live" wood will not benefit in any positive way by absorbing dead wood. The legacies (and perhaps even some of the LCCs) may think and act in denial of these axioms, but they will not escape the end results if they can muster up enough suckers to fund any mergers they may contrive -- or if the financially fit are foolish enough to squander their good money into chasing bad money.

What I see happening is for the financially fit to grow organically (perhaps with selective codeshares as well) without the "benefit" of mergers to fill the vacuum left by dead wood

See above. Ever heard of cherrypicking? How about WN and those gates they just bought in Chicago - picture that on a grand scale, and that's effectively what could happen in a merger.

******************

There are many possibilities, some prettier and more politically possible than others. My gut instinct is that the system is in such bad shape now, NO solution is going to make even 50% of the people involved happy, certainly not at first; and so a fig leaf will be needed. The concept of "merging" covers a lot of territory, and I have a feeling someone clever will find a fig leaf in it.


User currently offlineElagabal From United Kingdom, joined Mar 2005, 201 posts, RR: 0
Reply 18, posted (9 years 6 months 3 weeks 4 days 6 hours ago) and read 2864 times:

Quoting IAHTowTeam (Reply 14):
Can carriers that are in BK merge or be merged with???

PS - Just to specify with a direct answer there, if a company's in chapter 11, sure it can merge if the merger partner or an associate ponies up the cash it needs, or agrees to accept its debts. Plus, it could (in the realm of the possible) buy a smaller firm with what cash it had on hand, if the judge and the creditors agreed that this was a wise use for it. It's very unlikely this would happen, but not inconceivable.

Protection from creditors, administration / receivership, and liquidation are three different things, although all referred to commonly as bankruptcy. The first (chapter 11, in the States) actually can give the company a lot of freedom; the third (chapter 7) means curtains.


User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 19, posted (9 years 6 months 3 weeks 4 days 6 hours ago) and read 2817 times:

I disagree with FA4UA on wanting US' Euro routes. Big deal?! We (UA) already fly to FRA, CDG, London, MUC, et. al. The only thing I see that we'd get is Madrid and Rome (which UA already had) and Ireland. Who cares about MAN (partner Bmi covers this for UA) and UA has no need to fly to Gatwick since it already has LHR.

From an anti-trust perspective, UA+CO works out best. UA should steer clear of US, period...just take the revenue sharing and leave it at that. No need for UA to look at DL. UA+NW? Hmmmm....


User currently offlinePlaneSmart From New Zealand, joined Dec 2004, 987 posts, RR: 0
Reply 20, posted (9 years 6 months 3 weeks 4 days 6 hours ago) and read 2788 times:

If an airline goes into BK, then a white knight can purchase the name, aircraft, leases, and other assets it wants, and leave other assets including staff and associated liabilities, with the administrator.

More likely is a completely new airline, created from the demise of 2-3 existing carriers. On day one it selects specific assets, leases, property and people that it requires, with all new contracts, and NO inherited liabilities like retirement funding, seniority scales, etc.

Clearly anti-trust laws need to be amended (or exemptions given) for this scenario to occur, because ideally the airlines involved need to enter BK simultaneously.


User currently offlineExFATboy From United States of America, joined Jul 2003, 2974 posts, RR: 9
Reply 21, posted (9 years 6 months 3 weeks 4 days 5 hours ago) and read 2620 times:

I don't see any mergers between the "legacy" carriers - most legacy tieups would be described best using the quip that someone (it was one of the brokerage analysts, I'm just not sure which one) made about the US/UA proposal - "like tying two rocks together to see if they'd float." There's also the labour issues to deal with.

From a route and anti-trust perspective, CO+NW would probably be the best choice. NW might have to reduce or eliminate the KLM tie-up to Europe, but other than that I'm not seeing DOJ get too worked up about this one. Problem here is CO's balance sheet - a lot of debt there. Not as bad as DL, but still not good. And fleet incompatability is a major stumbling block.

Any potential merger involving DL also involves way, WAY too much debt.

From an antitrust perspective, almost anyone other than UA could acquire US without too much trouble. (Why anyone healthy enough to be able to would want to is another issue.)

What I suspect will happen, is that there will be no mergers, except for a remote chance of CO/NW, and perhaps someone acquiring Alaska. The most likely scenario, dismal as it sounds, is that at least one "legacy" carrier and possibly more (and I'm not going to speculate on who it might be) will die the "death of a thousand paper cuts" - a slow, lingering failure punctuated by asset sales to desperately raise cash and keep the planes flying, followed by liquidation with anyone who can afford it cherry-picking whatever desirable assets remain. Realistically, that's probably the most financially prudent way for anyone looking to make acquisitions to do so - anyone considering merging two financially-weak carriers has got to have the Air Canada-Canadian fiasco in the back of their head. And red-state/blue-state theorizings aside, there's no political driver in the US to push for something like that.

God, that's a depressing scenario, both for the effect on the staff and for the effect on fares during the long, slow goodbye, but it is more likely than mergers, IMO.


User currently offlineIAHTowTeam From , joined Dec 1969, posts, RR:
Reply 22, posted (9 years 6 months 3 weeks 4 days 5 hours ago) and read 2577 times:

I wonder if 2 airlines merged...would it help in the long run or not, I mean...would they still be burning through cash like there's no tommorow? Raises a question though....NW is getting rid of mostly all of their DC9's...could they be making way for a possible merger with CO or DL? Makes you wonder....how could they afford to get rid of so many airplanes and how will they fill the routes in so they don't lose the market share???? Thoughts anyone???

User currently offlineTango-Bravo From United States of America, joined Jun 2001, 3806 posts, RR: 29
Reply 23, posted (9 years 6 months 3 weeks 4 days 4 hours ago) and read 2534 times:

Quoting FA4UA (Reply 15):
In the airline industry there is no such thing as too big. Frequent fliers often site their reason for choosing a specific carrier is because they fly everywhere they need to go. Frequent fliers want one carrier to take them everywhere.

Hasn't exactly proven to be a winning business plan... Whether or not frequent flyers prefer such an option is an issue which has no correlation with whether or not it is a viable or sustainable -- much less profitable -- stategy for airline.

Even Southwest, for all of its renowned efficiencies, is very close to the edge of becoming so large as to become unwieldy -- a condition that makes profits much more difficult to achieve. By the simple laws of physics or mathematics (or Murphy's Law or whatever) there is an absolute correlation between larger and more unwieldy. It is also known as the law of reaching the point of diminishing returns -- which can easily become what I refer to as the law of diminishing returns to the extreme -- IMHO this law has overtaken AA, UA and DL and, to a lesser albeit significant degree, the other legacies.


User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 24, posted (9 years 6 months 3 weeks 4 days 4 hours ago) and read 2505 times:

Quoting Tango-Bravo (Reply 23):
Even Southwest, for all of its renowned efficiencies, is very close to the edge of becoming so large as to become unwieldy -- a condition that makes profits much more difficult to achieve. By the simple laws of physics or mathematics (or Murphy's Law or whatever) there is an absolute correlation between larger and more unwieldy. It is also known as the law of reaching the point of diminishing returns -- which can easily become what I refer to as the law of diminishing returns to the extreme -- IMHO this law has overtaken AA, UA and DL and, to a lesser albeit significant degree, the other legacies

Interesting theory. I would argue it has everything to do with the airlines ability (or lack thereof) to profitably manage operations in each new city/route they add after their over-expansion.


25 Aa777flyer : I REALLY doubt this would happen. AA has already screwed up two west coast mergers. AirCal and Reno Air. AS would never sell out to AA. AA has proven
26 Armada : Not really. B6 still has a lot of growing to do, especially in the SE.
27 Post contains links HPforLife : Well guys, it may be sooner then we think. Check out what came out today: http://www.azcentral.com/arizonarepu...usiness/articles/0409amwest09.html
28 Post contains images UAMAYBACH1239 : Dream Team Mergers AA-NW UA-US DL-CO AA lacks Pacific presence, NW strongest presence. UA strong western presence US strong Eastcost Ops. DL Very smal
29 Swatpamike : Hello all True, In a surging economy and with low fuel costs. IMHO Just let them die than take what you want. Cheers swatpamike
30 Ejmmsu : IMHO, AA-NW would be a terrible merger. DTW-MSP-ORD All these hubs are right next to each other. Talk about overlapping routes. One or two of these hu
31 N801NW : I recall reading that AA at least considered buying NW in 2000. Any truth to that?
32 RAMPRAT980 : That has been going around for quite a while. CO, in my opinion is in the best position for a merge/take-over. Lets go CO.
33 Fleet Service : @N801NW: Yes, shortly after UA and US announced their intentions of merging in May of 2000,AA and NWA had discussions about a possible merger as well.
34 Cahiwa : We have to think bigger for the very long haul. I have felt for years that DL/NW/CO should get it hitched, close the hubs that don't work, cleanup the
35 Srbmod : The time for mergers seems to come up every so often in the last 5 years. When US/UA was announced, it seemed like merger mania was about to happen. T
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