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Did AA Ever Look Into Merging With NWA?  
User currently offlinecraigpc01 From United States of America, joined Jun 2009, 31 posts, RR: 0
Posted (4 years 2 months 2 weeks 15 hours ago) and read 9779 times:

With all the chatter about AA needing to merge to regain the title, it got me wondering; It would seem the route network between AA and NWA would have been every bit as complimentary as with Delta, so it begs the question? Was AA simply too busy working their plans for international partners or did they look into it and decide against it?

18 replies: All unread, jump to last
 
User currently offlinecommavia From United States of America, joined Apr 2005, 11405 posts, RR: 62
Reply 1, posted (4 years 2 months 2 weeks 15 hours ago) and read 9734 times:

Quoting craigpc01 (Thread starter):
Did AA Ever Look Into Merging With NWA?

Yes.

In May and June of 2000, the two were in very intense merger negotiations that at the time were reportedly at very advanced stages.

If I remember correctly, talk fell apart over - what else? - price.

Quoting craigpc01 (Thread starter):
With all the chatter about AA needing to merge to regain the title, it got me wondering; It would seem the route network between AA and NWA would have been every bit as complimentary as with Delta, so it begs the question? Was AA simply too busy working their plans for international partners or did they look into it and decide against it?

Yes and no.

Northwest would have made sense to a certain extent, as it would have given AA a larger presence in Asia that it didn't have.

In a wide array of other network and cultural areas, though, Northwest would not have worked well.

There was a ton of overlap in their network - DTW and MSP both served very similar traffic flows as ORD, and MEM served basically identical traffic flows to DFW.

Culturally, NW was extremely unionized and at that time was having some very serious issues with some of their labor groups. AA had the same problem, with its own contentious labor issues. Putting that together would have been horrific.

So, for a myriad of reasons, it is probably for the better that AA didn't buy NW. NW would have brought some things to the AA network, but the redundancies and cultural disconnects would have far outweighed the benefits.


User currently offlineworldtraveler From , joined Dec 1969, posts, RR:
Reply 2, posted (4 years 2 months 2 weeks 14 hours ago) and read 9479 times:

well said, Commavia.

But it is also true that was shut out from buying PA's Pacific network by UA... so AA missed out two times on buying into the big US Pacific operators.

And it is impossible for AA to ever build its own network that can come close to challenging DL or UA on the Pacific...and the alliance situation is such that AA cannot replicate a comparably large Asian presence through alliances.

AA's decision, while it made sense, does have long term strategic implications.


User currently offlineAlias1024 From United States of America, joined Oct 2004, 2743 posts, RR: 2
Reply 3, posted (4 years 2 months 2 weeks 14 hours ago) and read 9481 times:

Quoting craigpc01 (Thread starter):
With all the chatter about AA needing to merge to regain the title

Regain the title?



It is a mistake to think you can solve any major problems with just potatoes.
User currently offlinecommavia From United States of America, joined Apr 2005, 11405 posts, RR: 62
Reply 4, posted (4 years 2 months 2 weeks 14 hours ago) and read 9398 times:

Quoting worldtraveler (Reply 2):
But it is also true that was shut out from buying PA's Pacific network by UA... so AA missed out two times on buying into the big US Pacific operators.

AA "missed out" on PA's network.

They didn't "miss out" on NW's - they rejected it by choice.

It wasn't worth the money. I think (in fact I know) that AA saw the writing on the wall ten years ago about which way the diplomacy and market was moving in Asia and recognized that buying NW's Asian network, for what largely amount to slots and route authorities above all else, would have been less desirable given the impending move toward market liberalization.

To be clear: I didn't say it had no value. AA would have taken it, I'm sure, at the right price. But what NW wanted was too much and, strategically, it wasn't worth it long-term.

Quoting worldtraveler (Reply 2):
And it is impossible for AA to ever build its own network that can come close to challenging DL or UA on the Pacific...and the alliance situation is such that AA cannot replicate a comparably large Asian presence through alliances.

First off, I'd never use the word "impossible" with regards to the airline business.

Second, I still contend - despite your characteristic certainty to the contrary - that AA need not replicate what NW (DL) and UA have in Asia.

For starters, the Asian network of DL is quite likely going to look dramatically different in 10 years from now than it does now. As I have long projected, and as history has thus far borne out, NRT will continue to be de-emphasized in favor of DL's mainline U.S. hubs. More and more flying will go over NRT, not through it, and I do not believe DL will be able to maintain as large a presence there as they do now - nor will they need to.

Secondly, AA doesn't need to have as many flights to as many cities in Asia to be competitive long-term. What they need is at least one well-timed, well-placed flight per day from one of their major U.S. hubs and/or gateways nonstop to the key markets of Asia, and they can move the remaining traffic via codeshares over NRT or HKG.

AA "needs" at least one flight per day to HKG, ICN, PEK and PVG, plus several flights to NRT. Anything beyond that - like KIX, NGO, or additional flights to the markets above - would be nice, but not strategically critical. Low-yielding connections to TPE and MNL (where pricing power is controlled by lower-cost local players) can be handled via codeshares, as can the longer-haul connections to deep Southeast Asia (BKK, KUL, SIN, CGK), where virtually all traffic is today and will likely for quite some time continue to be required to make a connection somewhere anyway.

So, in summary: there is what I believe AA "needs": their current schedule to NRT, plus a daily flight each to HKG, ICN, PEK and PVG. They're getting there.


User currently offlinemah4546 From Sweden, joined Jan 2001, 32596 posts, RR: 72
Reply 5, posted (4 years 2 months 2 weeks 14 hours ago) and read 9367 times:

Quoting commavia (Reply 4):

So, in summary: there is what I believe AA "needs": their current schedule to NRT, plus a daily flight each to HKG, ICN, PEK and PVG. They're getting there.

AA needs far more than that. To be competitive, AA doesn't need a lot of destinations, but AA needs to open up second dailies to PEK and PVG, best served from Los Angeles, but I would not rule out DFW or JFK.

AA also needs to enter Nagoya and Osaka, again, and it should re-enter Taipei.

One daily each isn't going to cut it.

AA is absolutely in a position to be competitive with DL/UA trans-Pacific, but not with just a handful of flights to five cities.



a.
User currently offlineSlcDeltaRUmd11 From United States of America, joined Jan 2004, 3338 posts, RR: 0
Reply 6, posted (4 years 2 months 2 weeks 13 hours ago) and read 8945 times:

They would have been a terrible fit for each other.

5 hubs in the middle of the country DFW,MSP, DTW, ORD, and MEM. ORD is also so close to DTW and MSP you cant have three hubs that large that close, ORD is the best anyway and AA already had it. Look at how well STL worked out for AA because of its proximity to ORD. It wouldn't have helped AA in the west anyway where they could use the best benefit from a merger. AA has the east and middle already well covered NWA would have really helped them.


User currently offlinePlanesNTrains From United States of America, joined Feb 2005, 5445 posts, RR: 29
Reply 7, posted (4 years 2 months 2 weeks 12 hours ago) and read 8841 times:

Quoting worldtraveler (Reply 2):
But it is also true that was shut out from buying PA's Pacific network by UA... so AA missed out two times on buying into the big US Pacific operators.

And it is impossible for AA to ever build its own network that can come close to challenging DL or UA on the Pacific...and the alliance situation is such that AA cannot replicate a comparably large Asian presence through alliances.

AA's decision, while it made sense, does have long term strategic implications.

I'm sorry, but what does this have to do with the question about AA+NW? Why did this have to turn into a history lesson about AA's Pacific inadequacies?

-Dave



Totes my goats!
User currently offlineCIDflyer From United States of America, joined Apr 2005, 2271 posts, RR: 3
Reply 8, posted (4 years 2 months 2 weeks 12 hours ago) and read 8656 times:

I remember news reports of AA & NWA in merger talks, however I think it was a reaction of the announced UA/US merger at the time. AA & NWA would have never worked, there was too much overlapping (ORD with MSP/DTW and DFW with MEM). You can bet if it would have gone through DTW, MSP and MEM would be long gone as hubs. In the end NWA really was a perfect fit for DL with minimum overlap.

User currently offlineflyby519 From United States of America, joined Jul 2007, 1124 posts, RR: 0
Reply 9, posted (4 years 2 months 2 weeks 11 hours ago) and read 8559 times:

Would it make any strategic/financial sense for AA to set up an operation based in NRT similar to NW/DAL and UA have? Or does the JAL partnership eliminate this idea?


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User currently offlineworldtraveler From , joined Dec 1969, posts, RR:
Reply 10, posted (4 years 2 months 2 weeks 10 hours ago) and read 8324 times:

Quoting commavia (Reply 4):
They didn't "miss out" on NW's - they rejected it by choice.

It wasn't worth the money. I think (in fact I know) that AA saw the writing on the wall ten years ago about which way the diplomacy and market was moving in Asia and recognized that buying NW's Asian network, for what largely amount to slots and route authorities above all else, would have been less desirable given the impending move toward market liberalization.

I agree it was a choice... but you downplay all of the value of the franchise that they inherited... and that is absolutely what enabled UA to build PA's network, AA to build TW's LHR operations etc.
Slots and route authorities are bought in bankruptcy when they aren't operating... franchises are bought when they are still operating... and that is the way EVERY major int'l route transfer that has been passed from one US carrier to another has occurred.

The reality is that those assets were operating and had value because they were transferred as OPERATING assets - and the evidence is clear that the buyer obtained far more value because they were operating.

Quoting commavia (Reply 4):
For starters, the Asian network of DL is quite likely going to look dramatically different in 10 years from now than it does now. As I have long projected, and as history has thus far borne out, NRT will continue to be de-emphasized in favor of DL's mainline U.S. hubs. More and more flying will go over NRT, not through it, and I do not believe DL will be able to maintain as large a presence there as they do now - nor will they need to.

again, you assume that DL is going to have to give up its Japan dominance in order to make the rest of its network work. DL WILL expand its Pacific network but it will also retain its position in Japan.

Let's check back in 5 or 10 years and see, ok?

Quoting commavia (Reply 4):
Secondly, AA doesn't need to have as many flights to as many cities in Asia to be competitive long-term. What they need is at least one well-timed, well-placed flight per day from one of their major U.S. hubs and/or gateways nonstop to the key markets of Asia, and they can move the remaining traffic via codeshares over NRT or HKG.
Quoting mah4546 (Reply 5):
One daily each isn't going to cut it.

I'm w/ Mark.

AA can't compete w/ DL and now UA/CO with even a couple flights to the prime destinations when DL and UA/CO will have massive Pacific networks (each of which is larger than many Asian airlines).

But AA can't build that overnight... and DL and UA aren't going to stop growing just because AA wants to grow... AA will always have a structural disadvantage in size that won't change unless it is able to buy an Asian carrier or the alliance picture dramatically changes....

and that disadvantage is directly related to AA's decision not to buy NW - as valid as it was at the time.

Quoting PlanesNTrains (Reply 7):
I'm sorry, but what does this have to do with the question about AA+NW?

because as Commavia says, it was a CHOICE AA made... and it has strategic implications today.
Decisions ALWAYS must be made w/ consideration for what others would do... NW might not have been attractive to AA but DL obviously decided NW was worth integrating into DL's network - and expanding it.


User currently offlineTUSAA From United States of America, joined Mar 2008, 230 posts, RR: 0
Reply 11, posted (4 years 2 months 2 weeks 10 hours ago) and read 8266 times:

Quoting commavia (Reply 4):
AA "missed out" on PA's network.

If im not mistaken, PA offered AA it's pacific routes before they were sold to UA. Part of the deal was that the buyer had to take the planes and the very senior pilots who flew them on the pacific routes, but Crandall passed on the offer knowing it would have been a uphill battle trying to get the APA to accept the deal. Imagine that......!


User currently offlinecommavia From United States of America, joined Apr 2005, 11405 posts, RR: 62
Reply 12, posted (4 years 2 months 2 weeks 10 hours ago) and read 8204 times:

Quoting worldtraveler (Reply 10):
but you downplay all of the value of the franchise that they inherited

That's because I don't believe there was a value to said franchise. The "franchise" you speak so highly of amounts to a bunch of tangible and intangible assets that customers don't know about and often don't see - leaseholders, facilities, equipment, employment contracts, route authorities, take-off and landing slots, etc. That's it.

The only other thing attached with the "franchise" is the brand of the airline whose operations are leaving the market, and that brand disappears pretty much instantly - so I attach 0 value to it.

Quoting worldtraveler (Reply 10):
AA to build TW's LHR operations

No "franchise" value of TWA's Heathrow operations there. Literally the minute the last TWA-branded flight took off from Heathrow, all the employees there quickly went about dismantling any last vestiges of TWA and by the time the next arrival came in several hours later - as AA - basically everything was branded AA, not TWA.

So what value did AA get from TWA, besides the people, equipment, facilities, slots and route authorities?

Answer: nothing.

Quoting worldtraveler (Reply 10):
AA can't compete w/ DL and now UA/CO with even a couple flights to the prime destinations when DL and UA/CO will have massive Pacific networks (each of which is larger than many Asian airlines).

AA doesn't need to compete with DL and/or UA by being as large everywhere. That's not necessary. That has been proven quite conclusively in that DL is and will most likely continue to be "structurally smaller" than AA in Latin America, and yet they seem to be doing alright in the markets they can sustain in that region.

All AA needs is a competitive schedule in the biggest, most important markets that count - and in Asia, that's not a very long list.

Mark's opinion is that you need several daily flights to PEK, PVG, etc. Okay - I could perhaps see that.

But that doesn't change my original point one bit: AA need not buy another airline to achieve that.

Let's break this down. If we're talking about AA "needing" - supposedly:

5x NRT
2x HKG
2x PVG
2x PEK
1x ICN
1x KIX
1x NGO

That is entirely achievable independent of any merger or acquisition.

Quoting worldtraveler (Reply 10):
But AA can't build that overnight

You know that old saying about Rome.

Quoting worldtraveler (Reply 10):
and DL and UA aren't going to stop growing just because AA wants to grow

Who said they would?

But using that logic, does that mean we can stop hearing you constantly go on and on about DL nipping at AA's heals and becoming a "competitive force" in Latin America, since - as we all know - "AA isn't going to stop growing just because DL wants to grow?"

Quoting worldtraveler (Reply 10):
AA will always have a structural disadvantage in size that won't change unless it is able to buy an Asian carrier or the alliance picture dramatically changes

Again, anything is possible.

Do I think AA will be the largest airline from the U.S. to Asia anytime soon (like my lifetime)? No. But that doesn't mean it's impossible, and it doesn't mean that I don't think they will grow in Asia.

Quoting worldtraveler (Reply 10):
and that disadvantage is directly related to AA's decision not to buy NW

No it's not. Again, in order to be competitive, all they need to do to grow is just grow a pair.

Buying NW would have bought them access into rapidly-liberalizing markets. But most of those markets AA can serve right now without paying anything.


User currently offlineDeltaMD90 From United States of America, joined Apr 2008, 7795 posts, RR: 52
Reply 13, posted (4 years 2 months 2 weeks 7 hours ago) and read 7767 times:

Don't forget DL's relationship with AF and NW's relationship with KL. AF and KL were merged, and DL+NW made a nice fit with them.


Ironically I have never flown a Delta MD-90 :)
User currently offlineEMB170 From United States of America, joined Nov 2007, 646 posts, RR: 0
Reply 14, posted (4 years 2 months 1 week 6 days 21 hours ago) and read 6601 times:

Quoting commavia (Reply 12):
Buying NW would have bought them access into rapidly-liberalizing markets. But most of those markets AA can serve right now without paying anything.

True.

We must also remember that traffic to Asia really dropped after talks broke off. First, 9/11 happened, and then the SARS outbreak...

Question: I know foreign entities are allowed to purchase only a small portion of US airlines...are US airlines allowed to buy foreign flag carriers? Not that they want to, but *could* AA buy an Asian airline if they so desired?



Can passenger jets fly as fast as my feet do? Let's find out...
User currently offlineisitsafenow From United States of America, joined Feb 2004, 4984 posts, RR: 24
Reply 15, posted (4 years 2 months 1 week 6 days 21 hours ago) and read 6483 times:

Quoting commavia (Reply 12):
But that doesn't change my original point one bit: AA need not buy another airline to achieve that.

Let's break this down. If we're talking about AA "needing" - supposedly:

5x NRT
2x HKG
2x PVG
2x PEK
1x ICN
1x KIX
1x NGO

That is entirely achievable independent of any merger or acquisition.

Taint gunna happen and heres why. The foreign governments must approve any build up by a USA carrier.
They are going to see it as competition with their home carriers other than othe USA carriers. They couldnt care less
about other USA carriers and AA's competition with.
Unless AA is on good terms with these govenments like NW was throughout the years(with an assist from our State Dept), AA will never be the dominating carrier between USA and countries listed above.
(THIS IS THE ONE PLACE WHERE I DO SAY .......NEVER)
safe



If two people agree on EVERYTHING, then one isn't necessary.
User currently offlinerangercarp From United States of America, joined Nov 2009, 143 posts, RR: 0
Reply 16, posted (4 years 2 months 1 week 6 days 21 hours ago) and read 6478 times:

Quoting worldtraveler (Reply 2):
it is also true that was shut out from buying PA's Pacific network by UA... so AA missed out two times on buying into the big US Pacific operators.

And it is impossible for AA to ever build its own network that can come close to challenging DL or UA on the Pacific...

Impossible is a VERY big word. Not that long ago people could have argued it would be IMPOSSIBLE for any airline to build up netweroks that could rival Pan Am or TWA.



iwgbtp!
User currently offlinecommavia From United States of America, joined Apr 2005, 11405 posts, RR: 62
Reply 17, posted (4 years 2 months 1 week 6 days 20 hours ago) and read 6423 times:

Quoting isitsafenow (Reply 15):
Taint gunna happen and heres why. The foreign governments must approve any build up by a USA carrier.
They are going to see it as competition with their home carriers other than othe USA carriers.

Huh?

These countries are basically all now Open Skies - either in name or in practice.

AA already has 5 flights per day to NRT, plus they will soon have a JV with JAL.

AA already flies once per day to PVG, with a daily flight to PEK soon to come (probably, hopefully, eventually).

HKG is wide open, as is ICN, and NGO, and KIX. All of those markets AA could fly to right now if they grew a pair.

There is no practical roadblock of an "approval" foreign governments have to give in order for AA to start flights to an Open Skies country - of which all of these now are except China. True, some markets have slot restrictions, but that is hardly an insurmountable problem by any means.

Quoting isitsafenow (Reply 15):
Unless AA is on good terms with these govenments like NW was throughout the years(with an assist from our State Dept), AA will never be the dominating carrier between USA and countries listed above.
(THIS IS THE ONE PLACE WHERE I DO SAY .......NEVER)

Again - no need to be "on good terms" with governments in order to get route authorities. It's not 1985 anymore. Open Skies means AA could fly wherever they want, whenever they want. They just have to get slots - which, true, can be a challenge (PEK, obviously, as an example) but that is by no means a permanent, systemic, or structural barrier to market entry for AA.

As another poster alluded to, in this case, "never" is a very big word.


User currently offlineUSPIT10L From United States of America, joined Mar 2006, 3295 posts, RR: 7
Reply 18, posted (4 years 2 months 1 week 6 days 16 hours ago) and read 5372 times:

Quoting TUSAA (Reply 11):
If im not mistaken, PA offered AA it's pacific routes before they were sold to UA. Part of the deal was that the buyer had to take the planes and the very senior pilots who flew them on the pacific routes, but Crandall passed on the offer knowing it would have been a uphill battle trying to get the APA to accept the deal. Imagine that......!

IINM, UA was the only airline PA offered to sell the Pacific division to. UA asked PA first in 1982, and was rebuffed. By the time 1985 rolled around, PA had no choice. They had no money to reinvest in their Pacific fleet or inflight product. It was believed at the time Crandall was too tough to deal with, so PanAm exclusively negotiated with UA.



It's a Great Day for Hockey!
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