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What Killed The UA / US Meger Attempt In 2000?  
User currently offlineEmSeeEye From United States of America, joined Jun 2006, 508 posts, RR: 0
Posted (7 years 8 months 1 week 5 days 8 hours ago) and read 3889 times:

I was on Wikipedia reading about UA and I came across this paragraph about the attempted merger / aquisition of US. Can someone shed some light on what caused the attempt to fail? Why were so many against the merger?

"In May 2000, United announced plans to acquire competitor US Airways in a complex deal valued at $11.6 billion. The offer drew immediate scorn from consumer groups and employees of both airlines. By the following year, regulatory sentiment was against the deal, and United withdrew the offer just before the Department of Justice barred the merger on antitrust grounds in July. The two airlines subsequently formed an amicable partnership that led to US Airways' entrance into the Star Alliance."

http://en.wikipedia.org/wiki/United_Airlines

I did a search and came across a boat load of a.net articles on the subject however aside from the negative employee sentiment none of them address my specific questions.

18 replies: All unread, jump to last
 
User currently offlinePanAm747 From United States of America, joined Feb 2004, 4242 posts, RR: 8
Reply 1, posted (7 years 8 months 1 week 5 days 8 hours ago) and read 3880 times:

Quote:
By the following year, regulatory sentiment was against the deal, and United withdrew the offer just before the Department of Justice barred the merger on antitrust grounds in July.

Any time two airlines want to merge, the government is going to look very closely at what percentage of the traffic the new carrier will be transporting. In the case of US and UA, it would have been a substantial chunk.

Also to remember, the summer of 2000 was the WORST period in United's history - there were nearly riots at airports from the mismanagement of the airline at that time. United had no way to meet their schedules, yet wouldn't cancel flights until the last minute, leaving thousands stranded.

If an airline is incompetently run, as UA was at that time, then there is NO way government regulators are going to okay the takeover of another airline.

That's it in a nutshell - when I get home today, I'll search my Airliners & Airways for further details.



Pan Am:The World's Most Experienced Airline - P(oor) S(ailor's) A(irline): San Diego's Hometown Airline-Catch Our Smile!
User currently offlineORD From United States of America, joined Jul 1999, 1389 posts, RR: 1
Reply 2, posted (7 years 8 months 1 week 5 days 8 hours ago) and read 3838 times:

United pulled the plug on the deal before it got rejected because they no longer wanted to merge, mainly because economic conditions had gotten so bad. As for the summer of hell in 2000, I don't believe that was mismanagement on United's part as much as the pilots. Their contract was up and they wanted top dollar. They leveraged this to delay and cancel flights during the summer, all in an effort to get United to give them the largest pilot contract ever. United's hands were tied because if they didn't give in to the pilots, they knew the pilots would block the proposed merger.

It's ironic that during United's bankruptcy, the government on several occasions failed to provide United with loan guarantees. What they were saying is United had to better adapt to the industry and market forces. Yet United's prior response to market forces, a merger with US, was not going to be allowed. So the government was very contradictory on what it was doing. Either pitch in and help United, or leave it be and let the market work things out. But the government did neither.


User currently offlineEmSeeEye From United States of America, joined Jun 2006, 508 posts, RR: 0
Reply 3, posted (7 years 8 months 1 week 5 days 8 hours ago) and read 3836 times:

Quoting PanAm747 (Reply 1):
Also to remember, the summer of 2000 was the WORST period in United's history - there were nearly riots at airports from the mismanagement of the airline at that time. United had no way to meet their schedules, yet wouldn't cancel flights until the last minute, leaving thousands stranded.

I remember vaguely. At my previous employer we mostly used DL but used other carriers occasionaly. Around 2000 - 2001 our travel dept stopped booking on UA and sent out a memo on avoiding UA. I guess I never put the pieces together...


User currently offlinePanAm747 From United States of America, joined Feb 2004, 4242 posts, RR: 8
Reply 4, posted (7 years 8 months 1 week 5 days 6 hours ago) and read 3732 times:

I will check in my Airliners & Airways magazines, but I remember the story of an IAD-FRA flight that the mechanics wouldn't sign off on because of the presence of the CEO at the time...the flight eventually ended up being cancelled.

In my opinion, United's attempted merger with US was a bad idea from the start - mergers are NEVER smoothe, and this one would have not only been painful, but would have left the airline with three east coast hubs - CLT, IAD, and PHL. It simply would have not worked, and with United in the precarious position it was in, it is probably for the best that it did not go through.



Pan Am:The World's Most Experienced Airline - P(oor) S(ailor's) A(irline): San Diego's Hometown Airline-Catch Our Smile!
User currently offlineFdex727 From , joined Dec 1969, posts, RR:
Reply 5, posted (7 years 8 months 1 week 5 days 6 hours ago) and read 3708 times:

Quoting PanAm747 (Reply 4):
I will check in my Airliners & Airways magazines, but I remember the story of an IAD-FRA flight that the mechanics wouldn't sign off on because of the presence of the CEO at the time...the flight eventually ended up being cancelled.

I worked with UA from 2000-2005, if I remember correctly it was former CEO Stephen Wolf. I was in training at IAD during this beginning of turmoil at UA and was unable to return to GSO several times due to cancellations misconnects. Once I returned back at my station I learned first hand the chaos of the ticket counter and begged to go back to the ramp.


User currently offlineSteeler83 From United States of America, joined Feb 2006, 9268 posts, RR: 21
Reply 6, posted (7 years 8 months 1 week 5 days 6 hours ago) and read 3698 times:

Quoting PanAm747 (Reply 4):
In my opinion, United's attempted merger with US was a bad idea from the start - mergers are NEVER smoothe, and this one would have not only been painful, but would have left the airline with three east coast hubs - CLT, IAD, and PHL.

Four, UA agreed to keep PIT as a hub and even move maintenance to PIT, and then there's the US base at DCA along with a UA hub at IAD. Can we say "canibalism?" Actually, with PIT, PHL, and IAD being rediculously close to one another, we could say, "canibalism" to that!

I still wonder what the hub at PIT would have looked like if US-UA would've gone through though. Someone on here did post that PIT would have picked up a couple of one-stop flights to Asia, probably via ORD. I guess this would've brought in a UA 747 on PIT-ORD-NRT or something of the type...



Do not bring stranger girt into your room. The stranger girt is dangerous, it will hurt your life.
User currently offlineUnitedFirst From United States of America, joined Jun 2001, 478 posts, RR: 2
Reply 7, posted (7 years 8 months 1 week 5 days 6 hours ago) and read 3658 times:

Quoting Steeler83 (Reply 6):
Someone on here did post that PIT would have picked up a couple of one-stop flights to Asia, probably via ORD. I guess this would've brought in a UA 747 on PIT-ORD-NRT or something of the type...

Doubtful...United's tag-on flights to Asia are usually 32S/757-operated to ORD/SFO, and then continue as a 744/777.


User currently offlineSteeler83 From United States of America, joined Feb 2006, 9268 posts, RR: 21
Reply 8, posted (7 years 8 months 1 week 5 days 5 hours ago) and read 3635 times:

Quoting UnitedFirst (Reply 7):
Doubtful...United's tag-on flights to Asia are usually 32S/757-operated to ORD/SFO, and then continue as a 744/777.

Well, then that's not really direct/one-stop service then, is it??? Sorry, I guess it's just me, but if you have to change equipment or change gates to continue on flying to your final destination, that is still making a "connection" as opposed to making a stop.

BA had one-stop service from PIT-LHR in the 1980s and early 1990s via BWI or PHL (granted this was because of the Bermuda2 restrictions)



Do not bring stranger girt into your room. The stranger girt is dangerous, it will hurt your life.
User currently offlineOceansWorld From , joined Dec 1969, posts, RR:
Reply 9, posted (7 years 8 months 1 week 5 days 5 hours ago) and read 3622 times:

Quoting Fdex727 (Reply 5):
I worked with UA from 2000-2005, if I remember correctly it was former CEO Stephen Wolf.

Not anymore. Wolf left UA in 1994, and by the time of the attempted UA-US merger, he had already left US too IIRC.

PanAm747 could perhaps confirm it, as in 2000 or 2001, there was a report in Airways named: Dumb and Dumber or something alike.


User currently offlineUSPIT10L From United States of America, joined Mar 2006, 3295 posts, RR: 7
Reply 10, posted (7 years 8 months 1 week 5 days 5 hours ago) and read 3597 times:

Quoting Steeler83 (Reply 6):
Four, UA agreed to keep PIT as a hub and even move maintenance to PIT, and then there's the US base at DCA along with a UA hub at IAD. Can we say "canibalism?" Actually, with PIT, PHL, and IAD being rediculously close to one another, we could say, "canibalism" to that!

Actually the DCA operation would have been turned into DC Air, a totally independent airline of United and US Airways. The F100s, MD80s and a new US Airways Express carrier, Potomac Air, were to be used for it. Potomac Air's operation certificate turned into MidAtlantic. Then after AA acquired TW, they wanted to also acquire 49% of DC Air and split the US Shuttle in two. THAT is what killed the deal. After AA acquired TW, there was a chance the deal would go through, until AA added the additional platforms I talked about. UA would've been bankrupt on 9/12/01. Mark my words.

[Edited 2007-04-11 22:30:41]


It's a Great Day for Hockey!
User currently offlineEmSeeEye From United States of America, joined Jun 2006, 508 posts, RR: 0
Reply 11, posted (7 years 8 months 1 week 5 days 4 hours ago) and read 3520 times:

Quoting USPIT10L (Reply 10):
Actually the DCA operation would have been turned into DC Air, a totally independent airline of United and US Airways.

Interesting... this is why I posted this thread.

Who would have controlled this DC Air?


User currently offlineORD From United States of America, joined Jul 1999, 1389 posts, RR: 1
Reply 12, posted (7 years 8 months 1 week 5 days 4 hours ago) and read 3490 times:

Quoting USPIT10L (Reply 10):
Then after AA acquired TW, they wanted to also acquire 49% of DC Air and split the US Shuttle in two. THAT is what killed the deal. After AA acquired TW, there was a chance the deal would go through, until AA added the additional platforms I talked about.

AA's involvement didn't kill the deal; it was meant to help it. Further, AA announced all three deals at the same time (acquire TWA, 49% of DC Air and half the US Shuttle) on January 10, 2001. The DC Air and Shuttle announcements did not come later. United actually brought American into the deal, figuring it would give them a better chance of getting the US Airways merger approved since it showed United would not be alone in dominating the industry...there would be another competitor just as large as United.

From the AA press release:

"American Airlines Announces Three Transactions That Dramatically Increase the Scope of Its Network;
American to Buy Substantially All the Assets of Trans World Airlines, Key Strategic Assets from United Airlines/US Airways and a 49 Percent Stake In DC Air"


User currently offlineAlphascan From United States of America, joined Nov 2003, 937 posts, RR: 13
Reply 13, posted (7 years 8 months 1 week 5 days 4 hours ago) and read 3474 times:

Here is a link to a Chicago Tribune Special Report which came out at the time UA entered Chapter 11. It is one of the better written and impeccably researched articles relating to commercial aviation I have ever read in a daily newspaper. It goes in depth on the UA/US merger and what happened from beginning to end.

http://www.chicagotribune.com/news/s...y?coll=chi-newsnationworldiraq-hed

Only problem, I couldn't get any of the parts to open past the title page. Part 3 is where I think you will find the sections on the merger. Anyway, if you can find a way to get to it, your answers lie within this Special Report.



"To he who only has a hammer in his toolbelt, every problem looks like a nail."
User currently offlineORD From United States of America, joined Jul 1999, 1389 posts, RR: 1
Reply 14, posted (7 years 8 months 1 week 5 days 4 hours ago) and read 3460 times:

Quoting EmSeeEye (Reply 11):
Who would have controlled this DC Air?

From another press release (before AA was to take a 49% stake):

"When Robert Johnson founded Black Entertainment Television (BET) 20 years ago, it was an historic first in the television industry. Today, through an investment of his personal funds, Johnson records another historic milestone with the planned creation of DC Air, a new regional airline serving 44 cities with 122 daily departures from coveted Ronald Reagan National Airport. Johnson will acquire the routes, departure/landing slots, equipment and other assets to create the airline as a result of today's announced merger of domestic airline giants US Airways and United Airlines. Once launched, DC Air would be the first major regional airline ever owned and operated by an African American."


User currently offlineIADCA From United States of America, joined Feb 2007, 1367 posts, RR: 8
Reply 15, posted (7 years 8 months 1 week 5 days 4 hours ago) and read 3456 times:

Quoting EmSeeEye (Reply 11):
Interesting... this is why I posted this thread.

Who would have controlled this DC Air?

One name I heard mentioned at the time was Robert Johnson, CEO of Black Entertainment Television (and who I believe is still on US's board). However, without any larger network to feed into, DC Air would have done about as well at DCA as Indy did at IAD...the business model just doesn't work, even out of Washington.


User currently offlineMoman From United States of America, joined Aug 2004, 1054 posts, RR: 4
Reply 16, posted (7 years 8 months 1 week 5 days 2 hours ago) and read 3379 times:

Quoting USPIT10L (Reply 10):
Then after AA acquired TW, they wanted to also acquire 49% of DC Air and split the US Shuttle in two. THAT is what killed the deal.

Incorrect.

Quoting ORD" class=quote target=_blank>ORD (Reply 12):
AA's involvement didn't kill the deal; it was meant to help it. Further, AA announced all three deals at the same time (acquire TWA, 49% of DC Air and half the US Shuttle) on January 10, 2001. The DC Air and Shuttle announcements did not come later. United actually brought American into the deal, figuring it would give them a better chance of getting the US Airways merger approved since it showed United would not be alone in dominating the industry...there would be another competitor just as large as United.

Correct. DC Air was a "sham" airline set up to alleviate regulatory pressure on the DC and northeast shuttle routes. It had 0% chance of survivability and the FTC/Justice Dept saw right through it and blocked the deal.

Quoting ORD" class=quote target=_blank>ORD (Reply 2):
It's ironic that during United's bankruptcy, the government on several occasions failed to provide United with loan guarantees. What they were saying is United had to better adapt to the industry and market forces. Yet United's prior response to market forces, a merger with US, was not going to be allowed. So the government was very contradictory on what it was doing. Either pitch in and help United, or leave it be and let the market work things out. But the government did neither.

How is that Ironic? If United had the funds to waste on pursing a merger that would never have been approved, why can't they run their business? Frankly, I think United operates today ONLY because it was forced to make drastic cuts and operational changes and succeed without the helping hand of the government. Private funds did much more for United than a restricted loan would have. In retrospect, the Gov't would have came out in good terms with United's stock allocation.

Quoting IADCA (Reply 15):

One name I heard mentioned at the time was Robert Johnson, CEO of Black Entertainment Television (and who I believe is still on US's board). However, without any larger network to feed into, DC Air would have done about as well at DCA as Indy did at IAD...the business model just doesn't work, even out of Washington.

Exactly. As I stated above, this was just a sham set up to alleviate regulatory pressure. AA and UA would have cannabalized the shuttle as soon as the deals were approved.


The merger between UA and US had no chance of ever being approved. Recall that in 2000 there were massive storms shutting down ORD almost daily in the summer and with a cranking economy, the air travel system was stretched to it's limits. Then United drops a bombshell, wanting to acquire a large competitor that is overlapping in over 50% of the markets (east coast, midwest). The ONLY way the UA/US routes were complementary was with United's vast international service. As a strategic move, AA then agreed to acquire TWA to counter the UA/US move, and TWA helped the situation by being in financial dire straits (or making it appear so - let's not rehash this again), and while that deal was quickly approved, UA/US was rejected even with a newly installed republican administration. I can't help but wonder if the expectations that Bush would push to approve the merger was factored into the equation.

As such, I'm thankful from an economic point of view that the merger died from the weight of it's own baggage.



AA Platinum Member - American Airlines Forever
User currently offlinePanAm747 From United States of America, joined Feb 2004, 4242 posts, RR: 8
Reply 17, posted (7 years 8 months 1 week 5 days 1 hour ago) and read 3286 times:

Airways magazine, December, 2000 - the article is titled, "United - F-A-L-L-I-N-G".

Here's a summary of the important parts:

  • In 1999, United finished 6th for on-time flight arrivals out of the ten major U.S. carriers. In 2000, it dropped to 8th place in the first quarter, and to last place in the second quarter. During July, only 41.7% of UA's flights arrived on time. By August, that number had plunged to 36%.

  • In the July 2000 Air Transport Consumer Report published by the D.O.T., of the worst timekeepers of 100 scheduled flights, 94 were operated by United. Flights UA1447, UA264, UA448, and UA1479 - a total of 109 flights - operated late 100% of the time. Every flight. Every day.

  • During this time, 356 flights arrived late 80% or more of the time. 328 of these - 92% - were United flights.

  • During this time, UA operated 31.5% of its flights "late 70% of the time or more". Second was Alaska at 4.1%. By comparison, American's rate was 0.5%.

  • During the summer of 2000, American's ontime rate at ORD was 61.9%. United's was 38.8%.

  • In 1994, United's employees made substantial wage concessions in return for the ouster of CEO Stephen Wolf, including a 55% equity stake in the company. Afterwards, other airlines raised employees salaries, while United's remained stagnant.

  • United's management had a vested interest in dragging its feet on a new contract. If it could stall and delay for a year, it would keep millions of dollars in the company's coffers. Pilots were not allowed to strike, but they could 'work to rule'. At the same time, while they were busy delaying pilots' negotiations, the money they were sitting on would be used to acquire USAirways.

  • United's pilots, in addition to be frightfully p***-ed off at stalling tactics, were now concerned as to how 5,000 US pilots would be integrated. United's pilots decided to not work any overtime.

  • United had fully scheduled its aircraft to depend on pilots to voluntarily work overtime - and they gambled on pilots' voluntarily working overtime, as management consciously decided to not hire enough pilots.

  • United knew weeks - months, in some cases - that in couldn't fill the flight schedule, yet it continued taking money for tickets for flights they knew they had no chance of fulfilling. Day after day, flights were canceled at the last minute.

  • It was United 914, IAD-CDG, that suffered the mechanics' revenge. Discovering that Stephen Wolf was onboard, they (and rumored also the pilots) refused to sign off - UA cancelled the 1755 flight after midnight.

  • The matter was FINALLY ended after the White House (President Clinton) and Secretary of Transportation Slater called for a summit to resolve the problem, and it took only a few days for the two sides to reach agreement. The pilots got exactly what they wanted - 10,000 delays and cancellations later.

    Now if it were your decision, would you allow United to take over USAirways at that time?



  • Pan Am:The World's Most Experienced Airline - P(oor) S(ailor's) A(irline): San Diego's Hometown Airline-Catch Our Smile!
    User currently offlineFdex727 From , joined Dec 1969, posts, RR:
    Reply 18, posted (7 years 8 months 1 week 4 days 23 hours ago) and read 3202 times:

    Quoting OceansWorld (Reply 9):
    Not anymore. Wolf left UA in 1994, and by the time of the attempted UA-US merger, he had already left US too IIRC.



    Quoting PanAm747 (Reply 17):
    It was United 914, IAD-CDG, that suffered the mechanics' revenge. Discovering that Stephen Wolf was onboard, they (and rumored also the pilots) refused to sign off - UA cancelled the 1755 flight after midnight.


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