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US Airways Vs. Delta  
User currently offlineBoeingBus From United States of America, joined May 2004, 1596 posts, RR: 17
Posted (9 years 3 months 3 days 4 hours ago) and read 5467 times:

Does anyone here think that Airbus is propping up US Airways so that it applies pressure on Delta, a huge Boeing customer, to fail?

I think this US/America West deal will hurt Delta the most. A strong US Air in the eastern states will impact Delta the most. I think Airbus did this intentionally for strategic reasons... A risky gamble but can be a huge ROI if US Air succeeds and Delta is displaced. Rumors popping up that Airbus will do the same for UA, so it's Delta that will be hurt most...

Is Airbus setting a new dangerous precedent here? Are we now going to start seeing airplane manufactures battle each other by investing airlines?


Airbus or Boeing - it's all good to me!
26 replies: All unread, showing first 25:
 
User currently offlineKahala777 From , joined Dec 1969, posts, RR:
Reply 1, posted (9 years 3 months 3 days 4 hours ago) and read 5452 times:

Quoting BoeingBus (Thread starter):
I think this US/America West deal will hurt Delta the most

Along with WN, UA, B6, CO, NW


Regards - Kahala777


User currently offlineTinPusher007 From United States of America, joined Feb 2005, 977 posts, RR: 1
Reply 2, posted (9 years 3 months 3 days 4 hours ago) and read 5430 times:

I think what you're suggesting is a long shot, but who knows. Airbus has seemed rather desparate lately...especially with the AI situation.


"Flying isn't inherently dangerous...but very unforgiving of carelessness, incapacity or neglect."
User currently offlineJetpixx From United States of America, joined Jul 2004, 850 posts, RR: 1
Reply 3, posted (9 years 3 months 3 days 3 hours ago) and read 5321 times:

That has a little bit of sense, however, NW is a big Airbus buyer and a partner of DL. So there, I do not think Airbus would want to do something to anger one of its bigger customers.

User currently offlinePope From , joined Dec 1969, posts, RR:
Reply 4, posted (9 years 3 months 3 days 1 hour ago) and read 5230 times:

Quoting BoeingBus (Thread starter):
A risky gamble but can be a huge ROI if US Air succeeds

What's the marginal ROI. Assuming everything goes perfectly, Airbus gets a customer buying an airplane at regular prices. Therefore it's ROI is exactly what it would have received by convincing US to buy the aircraft.

Airbus is receiving no risk premium for what you describe as a "risky gamble" (the understatement of the year).

Airbus management has definitely screwed its shareholders through this ridiculous move that has absolutely no economic justification.

Alex


User currently offlineZone1 From United States of America, joined Jan 2005, 1035 posts, RR: 7
Reply 5, posted (9 years 3 months 3 days 1 hour ago) and read 5193 times:

Quoting Jetpixx (Reply 3):
That has a little bit of sense, however, NW is a big Airbus buyer and a partner of DL. So there, I do not think Airbus would want to do something to anger one of its bigger customers.

I really don't know if NW would bargain with Airbus on behalf of DL just because they are alliance partners. It really doesn't seem that the US SkyTeam members have overwhelming love for each other, especially CO. I agree that DL will be hurt more than most of the majors by the US/America West deal, especially in the east. The merged airline might also cause DL's extremely loyal frequent flyers in the southeast to switch since they will be able to fly to most places DL serves. Further, the merged airline will cover the west coast much better than DL. That said, I feel that AirTran will be hurt more than DL. They have more to lose. They have less of a loyalty base than DL, and they won't have the country as covered as the merged airline. The only thing going for them, is that they will probably be able to sustain a price war better than America West/US.



/// U N I T E D
User currently offlineRoseFlyer From United States of America, joined Feb 2004, 9580 posts, RR: 52
Reply 6, posted (9 years 3 months 3 days 1 hour ago) and read 5178 times:

Quoting Zone1 (Reply 5):
I feel that AirTran will be hurt more than DL.

Airtran is a low cost carrier that earns loyalty by having the lowest fares. The only way they stand to lose is if the new US Airways will undercut their fares. I don't think that there are many high yielding passengers in ATL or elsewhere that are extremely loyal to FL that are likely to switch. DL will suffer as people might be more willing to fly US if it is in a more financially stable position where passengers don't have to worry about liquidation.



If you have never designed an airplane part before, let the real designers do the work!
User currently offlineMariner From New Zealand, joined Nov 2001, 25071 posts, RR: 85
Reply 7, posted (9 years 3 months 3 days 1 hour ago) and read 5169 times:
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Quoting BoeingBus (Thread starter):
I think this US/America West deal will hurt Delta the most.

That may be true.

Quoting BoeingBus (Thread starter):
Does anyone here think that Airbus is propping up US Airways so that it applies pressure on Delta, a huge Boeing customer, to fail?

GECAS, an American company, a subsidiary of GE, is the prime mover in this. They have much more money at stake in HP/US than Airbus.

So - is GE trying to applying pressure to Delta to fail?

mariner



aeternum nauta
User currently offlineKC135TopBoom From United States of America, joined Jan 2005, 12134 posts, RR: 51
Reply 8, posted (9 years 3 months 3 days ago) and read 5125 times:

The HP/US merger still needs stockholder and government approval. If the government even thinks that Airbus is helping HP/US so a Boeing customer, DL, will be hurt, then it won't happen.

On the stockholder side, I believe that only the HP stockholders get a vote. Everyone knows how the US stockholders will vote.

Quoting Mariner (Reply 7):
So - is GE trying to applying pressure to Delta to fail?

I doubt that, DL is not only a huge Boeing customer, but a huge GE customer, as well.


User currently offlinePanamair From United States of America, joined Oct 2001, 4893 posts, RR: 25
Reply 9, posted (9 years 3 months 2 days 16 hours ago) and read 4944 times:
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Quoting RoseFlyer (Reply 6):
DL will suffer as people might be more willing to fly US if it is in a more financially stable position where passengers don't have to worry about liquidation

Again, DL hasn't even filed for Chapter 11, let alone all this talk of Chapter 7! And, even if and when DL is in Chapter 11, many parties will be doing their best to prevent a Chapter 7. Look at dinky US, much smaller in size than DL and how much went into trying to save it (including casting off pensions and cancelling union contracts). You can bet that any BK judge would be hard pressed to push for liquidation of the 3rd largest U.S. carrier with the largest hub in the U.S., employing over 65,000 people.

Quoting BoeingBus (Thread starter):
I think this US/America West deal will hurt Delta the most

Not necessarily; HP/US' reduction in capacity will most likely impact the traditional East Coast markets more than HP's West Coast; after all, HP was the profitable one prior to the merger and the LCC competition is a tad less ferocious out in the West. Besides, Delta already faces B6, WN, and FL in the East - how much more brutal can it possibly get? Unlikely that Doug Parker is going to waste his cash infusion on trying to undercut B6 et al. in the East and try to drive DL out...


User currently offlineSHUPirate1 From United States of America, joined Sep 2003, 3670 posts, RR: 17
Reply 10, posted (9 years 3 months 2 days 13 hours ago) and read 4882 times:

Quoting Panamair (Reply 9):
Look at dinky US, much smaller in size than DL and how much went into trying to save it (including casting off pensions and cancelling union contracts).

There was not a single US Airways contract that ended up being unilaterally cancelled. Every single new contract that US Airways' employees are working under is a negotiated contract. Ironically, there are three America West workgroups working either without a contract, or under an expired contract.



Burma's constitutional referendum options: A. Yes, B. Go to Insein Prison!
User currently offlineMariner From New Zealand, joined Nov 2001, 25071 posts, RR: 85
Reply 11, posted (9 years 3 months 2 days 12 hours ago) and read 4849 times:
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Quoting Panamair (Reply 9):
Delta already faces B6, WN, and FL in the East - how much more brutal can it possibly get?

A lot.

The east coast is El Dorado for the winning airlines. But not all of them can win.

I don't see how FlyI can be anything but chopped liver and I would have said US Airways was for the high jump.

But I was wrong about US Airways, and suddenly it just got a whole lot more brutal. Southwest has already drawn a line in the sand with US/HP and the deal isn't even approved yet.

JetBlue isn't about to concede anything on the east coast to anyone, and I doubt that CEO Neeleman has happy memories of his last fight with Delta - the only time that he has lost. I can't think he will let that happen again.

Airtran is ready for a fight. Still licking his wounds after WN/ATA/MDW, CEO Leonard, of Airtran, is not about to lose again either.

And US Airways? It is all about CEO Parker of America West. He is a rising star and he knows that this is his great chance to write himself into the airline history books. He also knows that Wall Street is not yet convinced he can do it. So he has personal reasons not to fail, and he's going to have a lot of money behind him.

Which leaves Delta - drowning in debt, losing billions, led by a splendid but old time CEO who is refusing to do the one thing that would give Delta a fantastic advantage over the others - the chance to do what United has done, become an irrational competitor.

Believe me, it can get a whole lot more brutal.

cheers

mariner



aeternum nauta
User currently offlineF4N From , joined Dec 1969, posts, RR:
Reply 12, posted (9 years 3 months 2 days 10 hours ago) and read 4794 times:

Mariner:

I would expect that DL will undoubtedly seek bankruptcy protection if the US/HP thing even remotely looks like it will move forward. Delta's management knows that time is running out & viable options are dwindling.
While they are certainly reluctant to make that leap, I suspect they already know it's inevitable.

regards,

F4N


User currently offlineAvek00 From United States of America, joined Oct 2004, 4368 posts, RR: 19
Reply 13, posted (9 years 3 months 2 days 10 hours ago) and read 4789 times:

Quoting Mariner (Reply 11):
Which leaves Delta - drowning in debt, losing billions, led by a splendid but old time CEO who is refusing to do the one thing that would give Delta a fantastic advantage over the others - the chance to do what United has done, become an irrational competitor.

If you read DL's Annual Report, the company makes it evident that a DL bankruptcy = death - the airline would be unable to obtain financing to enter and remain in Chapter 11.



Live life to the fullest.
User currently offlineBoeingBus From United States of America, joined May 2004, 1596 posts, RR: 17
Reply 14, posted (9 years 3 months 2 days 10 hours ago) and read 4771 times:

US Air has an edge right now over Delta....and Delta right now remains the weakest link on the verge of bankruptcy and with this deal I don't think there is an alternative for them. Whether it's United, Delta, or other will ultimately fail in this ultra competitive high fuel cost environment.

If Delta fails, and so does a high profile Boeing customer. Airbus is financing US so they can keep their US customer and possibly do the same with United. Should Boeing just sit around and watch Delta fail?

Airbus is setting a dangerous precedent and honestly maybe I'm over reacting with this... but should be interesting times at least...



Airbus or Boeing - it's all good to me!
User currently offlineMariner From New Zealand, joined Nov 2001, 25071 posts, RR: 85
Reply 15, posted (9 years 3 months 2 days 10 hours ago) and read 4763 times:
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Quoting Avek00 (Reply 13):
If you read DL's Annual Report, the company makes it evident that a DL bankruptcy = death - the airline would be unable to obtain financing to enter and remain in Chapter 11.

I read the annual report, and perhpas you might have understood me better if I had said "has refused to do".

As of this moment, with $1.8 billion in cash in the bank, Delta could probably just squeak by a Chapter 11 filing.

I think United had about $2 billion (someone correct me) when they went in? Maybe slightly less.

US Airways was under $1 billion when they went in the second time.

The basic problem is that Mr. Grinstein does not want to file Chapter 11, and he believes it would be the kiss of death.

And, because he believes it so passionately, he may be right. It may become a self-fulflling prophesy.

cheers'

mariner



aeternum nauta
User currently offlineMariner From New Zealand, joined Nov 2001, 25071 posts, RR: 85
Reply 16, posted (9 years 3 months 2 days 10 hours ago) and read 4754 times:
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Quoting BoeingBus (Reply 14):
Airbus is setting a dangerous precedent and honestly maybe I'm over reacting with this.

You are not over-reacting about the situation, you are over-reacting about Airbus.

The $250 million from Airbus is the cream on the cake in this new financial mix. US/HP don't actually need it, but why walk away from it?

They would be well-funded without it. They will be somewhat better funded with it.

cheers

mariner



aeternum nauta
User currently offlineBoeingBus From United States of America, joined May 2004, 1596 posts, RR: 17
Reply 17, posted (9 years 3 months 2 days 9 hours ago) and read 4734 times:

Quoting Mariner (Reply 16):
US/HP don't actually need it, but why walk away from it?

Care to explain why Airbus is doing this? As it is currently, HP/US are a significant Airbus customers with a majority of Airbus jets.

So why is Airbus doing this? Just to sell the A350? if that is the case, than Airbus is doing a disservice to its own sales force. Can only sell jets if you become invested in the airlines? Again, something fishy and I tend to believe Airbus is meddling with the US airline industry as whole to ptotect its future in N. America.



Airbus or Boeing - it's all good to me!
User currently offlineAvek00 From United States of America, joined Oct 2004, 4368 posts, RR: 19
Reply 18, posted (9 years 3 months 2 days 9 hours ago) and read 4719 times:

Quoting Mariner (Reply 15):
As of this moment, with $1.8 billion in cash in the bank, Delta could probably just squeak by a Chapter 11 filing.

I think United had about $2 billion (someone correct me) when they went in? Maybe slightly less.

US Airways was under $1 billion when they went in the second time.

The basic problem is that Mr. Grinstein does not want to file Chapter 11, and he believes it would be the kiss of death.

1. Delta could not squeak by in Chapter 11 sans DIP financing given its current financial state. The airline will find itself with as little as $900M-$1B cash-on-hand at YE, and the credit card processors and lessors will demand that DL keep at least that much available to continue doing business with the airline - an impossible feat given that Q1 is the worst financial period for Delta.

2. United was able to secure over $1B in DIP financing for its Chapter 11 - since then, UA has drifted in Chapter 11, US has filed for bankruptcy twice, and major investors have lost nearly all stomach for throwing fresh money into airline reorganizations. Notice that the US/HP financiers (ACE excepted) are comprised of companies that stand to lose bigtime if US tanks - little "fresh money" from new investors involved.



Live life to the fullest.
User currently offlineLawnDart From United States of America, joined May 2005, 970 posts, RR: 3
Reply 19, posted (9 years 3 months 2 days 8 hours ago) and read 4671 times:

One reason Delta is trying to avoid bankruptcy, as stated by Grinstein, is that managerial control of the airline is hampered or lost. Approval from the court is required on most decisions, and the need to get debtor agreement takes time. DL does not have time, and I have yet to meet a manager that would willingly give up control.

Delta does have certain assets, namely ASA and Comair, that they could, and probably will, sell. Also, they owe a lot more money to a lot more creditors than either US or HP, General Electric among them. As a creditor, do you prop up one client to the detriment of a larger client? Or do you try to help both?

Is Airbus investing in the hope of keeping a customer, or in the hope of getting paid for aircraft already sold? Would Boeing do the same? They have in the past by investing in AirTran. Does Delta have grounds to approach Boeing and ask for similar assistance?

Creditors can expect to be payed less, in some cases much less, if a client goes into Chapter 11. Are they willing to reduce payment schedules ahead of such an event in the hope that monies received will be more than what they would get from the court? As a creditor, do you drop a payment schedule the first time someone asks? Or do you negotiate...negotiate...negotiate...hoping to squeeze the last red cent out of an ultimate agreement?

Delta is a much larger carrier than HP or US or a combination of both. What economic impact would their failure have on the local Atlanta economy? (And no, AirTran could not replace DL, at least not in the short term). Georgian politicians are already doing things to assist DL - attempting to reduce locally-imposed fuel taxes, for instance.

If HP/US can get funding from Air Wisconsin (who did so to assure their own survival), how much funding can DL expect from a much healthier SkyWest? If Air Canada (a carrier that was bankrupt itself not too long ago) is willing to invest in HP/US, would Air France/KLM, a much healthier airline, do the same for their largest North American partner?

Desperate times call for desperate measures.


User currently offlineOttoPylit From , joined Dec 1969, posts, RR:
Reply 20, posted (9 years 3 months 2 days 8 hours ago) and read 4618 times:

Apparently, industry experts see the merger as deterimental to the entire industry, but better off for the airlines serving the East coast, due to US Airways capacity reductions.

http://biz.yahoo.com/ap/050520/airline_merger.html?.v=8

With US Airways already announced a cut in flying, and a little more if the deal goes through, the only airlines that have anything to gain, if only temporarily, are East coast airlines.

Personally, I don't see how the deal will work or be approved. Both airlines have a good network to partner together, but they don't exactly have strong balance sheets, and we all know that two wrongs don't make a right. Even after a merger, there will still be a lot of debt and a lot of excess capacity in the air. I see this as more of a Hail Mary by US Airways, their last chance to make it work, but they still have to convince and put to rest the US/HP employees who are worried about things like seniority, pay, etc. But pairing up with HP in this could, in the end, also hurt HP if it doesn't work.

Quoting Mariner (Reply 11):
Which leaves Delta - drowning in debt, losing billions, led by a splendid but old time CEO who is refusing to do the one thing that would give Delta a fantastic advantage over the others - the chance to do what United has done, become an irrational competitor.

And because you have so much experience running an airline, then you tell the rest of us, what-exactly-does Delta need to do in order to become an irrational competitor, like the example you have provided-in BK, horrible labor relations, and still not able to come up with a viable strategy to exit BK. Actually, given than example, nevermind, I'll stick with the old-time CEO.


User currently offlineAvek00 From United States of America, joined Oct 2004, 4368 posts, RR: 19
Reply 21, posted (9 years 3 months 2 days 7 hours ago) and read 4589 times:

Quoting Mariner (Reply 16):
They would be well-funded without it. They will be somewhat better funded with it.

Nothing about this deal is "well-funded" - in addition to raiding the coffers of both existing airlines, the new airline will be saddled with another billion in debt that will go down the drain in the form of integration costs.



Live life to the fullest.
User currently offlineAlitalia744 From United States of America, joined Mar 2000, 4747 posts, RR: 45
Reply 22, posted (9 years 3 months 2 days 7 hours ago) and read 4535 times:

Quoting Mariner (Reply 7):
So - is GE trying to applying pressure to Delta to fail?

oddly enough, whether people know it or not, GE has more interest in Delta than just engines...

time will tell and you will see.



Some see lines, others see between the lines.
User currently offlineRamerinianAir From United States of America, joined Nov 2003, 1486 posts, RR: 0
Reply 23, posted (9 years 3 months 2 days 6 hours ago) and read 4278 times:

Even when DL folds, the only A/C that will be marketable in America still will be the 777s, 764s and the newer 738s. This represents only about 100 A/C. They clearly aren't in the market to replace their older jets and won't be for a while.
SR



W N = my Worst Nightmare!!!!!
User currently offlineMariner From New Zealand, joined Nov 2001, 25071 posts, RR: 85
Reply 24, posted (9 years 3 months 2 days 3 hours ago) and read 3849 times:
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Quoting Avek00 (Reply 21):
Nothing about this deal is "well-funded" - in addition to raiding the coffers of both existing

It does not raid the coffers of America West and US Airways has no coffers to raid.

Quoting Avek00 (Reply 18):
1. Delta could not squeak by in Chapter 11 sans DIP financing given its current financial state.

Of course, they would need DIP funding, that is a given. And obviously, given the high wire game they are playing, they believe they could get it.

If Delta's present creditors - to the tune of $20 billion - believe that CEO Grinstein was actually leaving the airline, that is, those creditors, with no options, they would probably pull the plug on him.

Please note that I say "probably". I do not acually know what anyone will do about anything.

That is one of the joys of life - people constantly do surprising, unexpected things.

Quoting Avek00 (Reply 18):
and major investors have lost nearly all stomach for throwing fresh money into airline reorganizations. Notice that the US/HP financiers (ACE excepted) are comprised of companies that stand to lose bigtime if US tanks - little "fresh money" from new investors involved.

I am not on intimate terms with financiers at this level, I do not know what they think about Delta's situation.

What I see, from the outside, is clearly very different from what you see.

mariner



aeternum nauta
25 Post contains images Mariner : I have no experience running an actual airline, that is why I post here. But if only people running airlines are allowed to post about running airlin
26 PlaneSmart : You talk like there is one creditor, A, controlling the strings. With HP/US there are more than 40 major, 400+ secondary and thousands of smaller pla
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