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WSJ: Why IAG Is Mulling Stake In AMR  
User currently offlinespeedbird9 From United Kingdom, joined Jan 2008, 231 posts, RR: 0
Posted (2 years 2 weeks 2 days 21 hours ago) and read 5561 times:

apparently IAG and US Airways have signed a non-disclosure agreement with AMR.
US Airways have obviously done so in order to value AMR, in order to: make a bid, decide on whether to merge or make a merger bid.

IAG have done so in order to potentially protect their Oneworld partner if necessary.

http://blogs.wsj.com/deals/2012/09/04/why-iag-is-mulling-stake-in-amr/


Is the customer always right? Michael O'Leary: no the customer is nearly always wrong
35 replies: All unread, showing first 25:
 
User currently offlineHPRamper From United States of America, joined May 2005, 4058 posts, RR: 8
Reply 1, posted (2 years 2 weeks 2 days 19 hours ago) and read 5290 times:

Is IAG honestly worried about AA leaving Oneworld if US takes control? I mean, it's prudent to cover their butts, but isn't it already common knowledge that AA would stay in Oneworld - and that rival Star would be weakened?

User currently offlinestrfyr51 From United States of America, joined Apr 2012, 1223 posts, RR: 1
Reply 2, posted (2 years 2 weeks 2 days 19 hours ago) and read 5238 times:
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how is Star going to be weakened?? if it's because USAir might leave then you're LATE! That was common knowlege even on THIS board When the UA/CO merger was mentioned

User currently offlineStitch From United States of America, joined Jul 2005, 31003 posts, RR: 86
Reply 3, posted (2 years 2 weeks 2 days 19 hours ago) and read 5219 times:
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Quoting HPRamper (Reply 1):
Is IAG honestly worried about AA leaving Oneworld if US takes control?

Perhaps IAG is worried about how US would manage AA and how that might impact OneWorld?


User currently offlinecommavia From United States of America, joined Apr 2005, 11640 posts, RR: 61
Reply 4, posted (2 years 2 weeks 2 days 19 hours ago) and read 5204 times:

Quoting HPRamper (Reply 1):
Is IAG honestly worried about AA leaving Oneworld if US takes control? I mean, it's prudent to cover their butts, but isn't it already common knowledge that AA would stay in Oneworld - and that rival Star would be weakened?

I think all of these rumblings may just be an insurance policy, but I too, find it surprising that IAG would really be worried about AA bolting for Star. Not. Gonna. Happen. Regulators wouldn't like it. AA's many lucrative partners wouldn't like it. And perhaps most importantly - United really wouldn't like it.


User currently offlineHPRamper From United States of America, joined May 2005, 4058 posts, RR: 8
Reply 5, posted (2 years 2 weeks 2 days 19 hours ago) and read 5139 times:

Quoting strfyr51 (Reply 2):
how is Star going to be weakened?? if it's because USAir might leave then you're LATE! That was common knowlege even on THIS board When the UA/CO merger was mentioned

Huh? If you are saying it's a foregone conclusion, fine, but you can't just subtract an airline the size of US from Star and say it doesn't hurt. That's a lot of passengers and a much weaker network on the East Coast and in the Southeast. Star would no longer be THE dominant alliance domestically - it would be a much more even playing field.


User currently offlinecommavia From United States of America, joined Apr 2005, 11640 posts, RR: 61
Reply 6, posted (2 years 2 weeks 2 days 19 hours ago) and read 5086 times:

Quoting HPRamper (Reply 5):
Huh? If you are saying it's a foregone conclusion, fine, but you can't just subtract an airline the size of US from Star and say it doesn't hurt. That's a lot of passengers and a much weaker network on the East Coast and in the Southeast. Star would no longer be THE dominant alliance domestically - it would be a much more even playing field.

Absolutely.

If a merger takes place, it is definitely going to impact Star. Of course it won't be calamitous, but it will have an impact, particularly along the east coast, in the Atlantic Southeast, and especially in D.C., where plenty of high-yielding corporate and premium FFs split their flying between USAirways out of DCA for domestic and United out of IAD for transcon/longhaul/international.

If USAirways and AA merge, the combined entity in oneworld would split that D.C. market, and there would definitely be some amount of customers who would decide to stay with AA/oneworld, which would then have an even larger/stronger domestic operation at DCA plus connectivity to Europe and the Mid East via JFK/PHL/LHR, and to Asia over several connecting points as well.


User currently offlineavek00 From United States of America, joined Oct 2004, 4387 posts, RR: 19
Reply 7, posted (2 years 2 weeks 2 days 4 hours ago) and read 4502 times:

Odds are that at the time BA/IB and AA hammered out the Joint Business Agreement, the European side was probably able to extract far better terms due to AA's then-precarious position. While it's highly unlikely that US would insist upon scrapping the JBA, it's entirely possible that Parker would demand substantial revisions to the arrangement that would potentially compromise IAG's financial interests. Thus, IAG has taken steps to ensure it retains substantial clout in the disposition of AMR.


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User currently offlinemogandoCI From , joined Dec 1969, posts, RR:
Reply 8, posted (2 years 2 weeks 2 days 3 hours ago) and read 4398 times:

Quoting HPRamper (Reply 5):
That's a lot of passengers and a much weaker network on the East Coast and in the Southeast.

The only major hole that would create in Star's network is CLT. Plus USAir's generous award availab

Once US-AA merges, it would be a tough decision to figure out how to right-size DCA-PHL-JFK-LGA (plus a sizable operation at BOS) without throwing away valuable assets or too much overlap. Based on US's and AA's track record, at least 1 of those would be in jeopardy.


User currently offlineHPRamper From United States of America, joined May 2005, 4058 posts, RR: 8
Reply 9, posted (2 years 2 weeks 2 days 2 hours ago) and read 4275 times:

Quoting mogandoCI (Reply 8):
Once US-AA merges, it would be a tough decision to figure out how to right-size DCA-PHL-JFK-LGA (plus a sizable operation at BOS) without throwing away valuable assets or too much overlap. Based on US's and AA's track record, at least 1 of those would be in jeopardy.

Something tells me LGA would be cut down quite a bit. With the new airline very strong in BOS I think the shuttle would stay but anything else non-hub goes.


User currently offlinecommavia From United States of America, joined Apr 2005, 11640 posts, RR: 61
Reply 10, posted (2 years 2 weeks 2 days 2 hours ago) and read 4161 times:

Quoting avek00 (Reply 7):
While it's highly unlikely that US would insist upon scrapping the JBA, it's entirely possible that Parker would demand substantial revisions to the arrangement that would potentially compromise IAG's financial interests.

Doubtful. Parker is the one on the outside looking in, and he needs IAG's buy-in as much as the other way around.given the massive amount of economic value the JBA generates for AMR today.

Quoting mogandoCI (Reply 8):
Once US-AA merges, it would be a tough decision to figure out how to right-size DCA-PHL-JFK-LGA (plus a sizable operation at BOS) without throwing away valuable assets or too much overlap. Based on US's and AA's track record, at least 1 of those would be in jeopardy.

I doubt it. The combined airline's leading or quite strong position in all four of the major northeast business markets would be a unique position of strength, so not sure why there would be a need to "right-size" it at all, particularly since the combined airline's operations at all four airports would really all serve generally different purposes. I could see optimizing of schedules - particularly internationally - between JFK and PHL, but not much else.

Quoting HPRamper (Reply 9):
Something tells me LGA would be cut down quite a bit. With the new airline very strong in BOS I think the shuttle would stay but anything else non-hub goes.

Not sure why. The combined airline would be sitting on a huge pool of slots at LGA that could be used to develop a strong O&D schedule to major business markets around the U.S./world, building on the strong existing AA presence in New York plus the limited, but helpful, network and slot pool USAirways would bring.


User currently offlinemogandoCI From , joined Dec 1969, posts, RR:
Reply 11, posted (2 years 2 weeks 2 days 2 hours ago) and read 4119 times:

Quoting commavia (Reply 10):
I doubt it. The combined airline's leading or quite strong position in all four of the major northeast business markets would be a unique position of strength, so not sure why there would be a need to "right-size" it at all, particularly since the combined airline's operations at all four airports would really all serve generally different purposes. I could see optimizing of schedules - particularly internationally - between JFK and PHL, but not much else.

BOS is also a major business market too. Might as well create another hub there while they're at it.


User currently offlinecommavia From United States of America, joined Apr 2005, 11640 posts, RR: 61
Reply 12, posted (2 years 2 weeks 2 days 1 hour ago) and read 4084 times:

Quoting mogandoCI (Reply 11):
BOS is also a major business market too. Might as well create another hub there while they're at it.

Of course. That was one of the four major markets I was referring to - along with New York, Philadelphia and DC. Nonetheless, because of its location, BOS can never be a major airline hub.


User currently offlineHPRamper From United States of America, joined May 2005, 4058 posts, RR: 8
Reply 13, posted (2 years 2 weeks 1 day 23 hours ago) and read 3873 times:

Quoting commavia (Reply 12):
Of course. That was one of the four major markets I was referring to - along with New York, Philadelphia and DC. Nonetheless, because of its location, BOS can never be a major airline hub.

The post I was referencing mentioned cutting one of JFK, PHL, LGA and DCA - BOS not included. It probably depends on who ends up making the decisions, US' feelings on LGA are quite clear. If AA kept control, they would probably vote to hack away at PHL.


User currently offlinemogandoCI From , joined Dec 1969, posts, RR:
Reply 14, posted (2 years 2 weeks 1 day 22 hours ago) and read 3727 times:

Quoting commavia (Reply 12):
Of course. That was one of the four major markets I was referring to - along with New York, Philadelphia and DC. Nonetheless, because of its location, BOS can never be a major airline hub.

Someone at jetBlue clearly didn't get the memo.


User currently offlinecommavia From United States of America, joined Apr 2005, 11640 posts, RR: 61
Reply 15, posted (2 years 2 weeks 1 day 22 hours ago) and read 3676 times:

Quoting mogandoCI (Reply 14):
Someone at jetBlue clearly didn't get the memo.

Sure they did. BOS does not function as a hub for JetBlue. It's a big station with lots of flights, catering almost entirely to O&D. JetBlue does handle some connections over JFK, but it's not a hub.


User currently offlinemogandoCI From , joined Dec 1969, posts, RR:
Reply 16, posted (2 years 2 weeks 1 day 22 hours ago) and read 3561 times:

Quoting commavia (Reply 15):
Sure they did. BOS does not function as a hub for JetBlue. It's a big station with lots of flights, catering almost entirely to O&D. JetBlue does handle some connections over JFK, but it's not a hub.

Haven't you noticed nearly all the B6 expansion in the past few years were for BOS not JFK ? JFK is maxing out for everyone so B6 smartly turned to the next-best-thing for growth.

They're definitely making BOS into another hub (and they actually have international feed for it - just look at JL's literature promoting NRT-BOS)


User currently offlineluckyone From United States of America, joined Aug 2008, 2172 posts, RR: 0
Reply 17, posted (2 years 2 weeks 1 day 22 hours ago) and read 3347 times:

Quoting HPRamper (Reply 5):
That's a lot of passengers and a much weaker network on the East Coast and in the Southeast. Star would no longer be THE dominant alliance domestically - it would be a much more even playing field.

For all but some intra-Southeast traffic Dulles and IAH can work just as well as Charlotte. I'm sure United would be happy to try to accommodate traffic going to the Midwest or Northeast via Dulles and traffic heading Westbound via Houston. Granted, neither option is as attractive or offers the options as the big dog in the Southeast -- Delta at ATL, but then again, neither does CLT anyway.


User currently offlineTWA772LR From United States of America, joined Nov 2011, 2065 posts, RR: 1
Reply 18, posted (2 years 2 weeks 1 day 22 hours ago) and read 3251 times:

Quoting commavia (Reply 6):

I don't think Star losing DCA to oneworld would hurt it that much. Of course you have the frequent flier base and strong O&D, but IAD has just as good, if not better domestic connectivity, and not to mention its an international gateway for UA. Yes DCA is a better O&D airport, but IAD has more going for it, IMO. I do agree that they are losing a foothold in the southern US by losing CLT, but those that can be covered by IAH and IAD, and to a lesser extent, EWR and ORD.

On a side note, I applaud Parker for getting AA's labor on his side and helping to bring IAG into this.



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User currently offlineaeroblogger From India, joined Dec 2011, 1363 posts, RR: 0
Reply 19, posted (2 years 2 weeks 1 day 21 hours ago) and read 3147 times:

Quoting commavia (Reply 12):
Nonetheless, because of its location, BOS can never be a major airline hub.

Quite contrary, I think BOS has the potential to be a fantastic 757 TATL hub. The location is perfect for USA-Europe connections.



Airports 2012: IXE HYD DEL BLR BOM CCU KNU KTM BKK SIN ICN LAX BUR SFO PHX IAH ORD EWR PHL PVD BOS FRA MUC IST
User currently offlinecrAAzy From United States of America, joined Jan 2008, 787 posts, RR: 0
Reply 20, posted (2 years 2 weeks 1 day 21 hours ago) and read 3020 times:
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Quoting commavia (Reply 10):
Not sure why. The combined airline would be sitting on a huge pool of slots at LGA that could be used to develop a strong O&D schedule to major business markets around the U.S./world, building on the strong existing AA presence in New York plus the limited, but helpful, network and slot pool USAirways would bring.



Agreed. NYC is still on of AA's strengths and US knows this. In some ways I feel US did the slot swap because it knew an AA merger was eventually going to be on the table. It made sense to strengthen it's position at DCA where it probably had more valuable corporate contracts while reducing it's weakening presence at LGA knowing a combined AA/US would have to give up a significant amount of slots anyway. Now DL will still have more slots at LGA than a combined US/AA taking any regulatory issues in the NYC area out of the picture.

Additionally by DL and US swapping out the slots prior to any US/AA merger it likely significantly decreased the overall amount of slots that would have had to be divested limiting the LGA access to other carriers.

IMHO this was one of the smartest (although risky) moves by US's management. They knew darn well that while DL might have some temporary short term gains if an AA/US tie up eventually did come to fruition their combined slot portfolio in the NYC will not only be more than enough to compete with DL and UA but their strength of their network throughout the NE (PHL,NYC,BOS,DCA) would surpass both DL and UA. Add CLT and MIA and your a dominant #1 in 3-4 of the top 7 population centers on the east coast as well as being a strong #2 in another 2 markets.

Quoting HPRamper (Reply 13):
The post I was referencing mentioned cutting one of JFK, PHL, LGA and DCA - BOS not included. It probably depends on who ends up making the decisions, US' feelings on LGA are quite clear. If AA kept control, they would probably vote to hack away at PHL.



No one is going to hack away PHL or LGA.



I'll also add into the mix that with a combine AA/US in WAS there will likely be a larger OW presence at IAD including an increase on select transcon flights with the new A321s (LAX, SFO), 2-3 daily flights to major business hubs (ORD, MIA, DFW, ATL, BOS, CLT, PHL, etc) and a handful of select international flights (BA,IB,AB,LA,JL,CX,AA).


User currently offlineLAXdude1023 From India, joined Sep 2006, 7616 posts, RR: 24
Reply 21, posted (2 years 2 weeks 1 day 21 hours ago) and read 2984 times:

Quoting luckyone (Reply 17):
Granted, neither option is as attractive or offers the options as the big dog in the Southeast -- Delta at ATL, but then again, neither does CLT anyway.
CLT is almost as good as ATL on a domestic leve (in terms of destinations offered-obviously ATL offers more frequency)l. Its internationally that ATL blows CLT out of the water.

[Edited 2012-09-05 14:18:42]


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User currently offlineHPRamper From United States of America, joined May 2005, 4058 posts, RR: 8
Reply 22, posted (2 years 2 weeks 1 day 21 hours ago) and read 2840 times:

Quoting LAXdude1023 (Reply 21):
CLT is almost as good as ATL on a domestic level. Its internationally that ATL blows CLT out of the water.

CLT is great domestically. The funny thing is the idea that IAD/IAH can cover the Southeast effectively.

US leaving Star would sting. No excuse to be made about it. UA also loses codeshare feed with nobody to replace it.


User currently offlinemogandoCI From , joined Dec 1969, posts, RR:
Reply 23, posted (2 years 2 weeks 1 day 21 hours ago) and read 2660 times:

Quoting crAAzy (Reply 20):
IMHO this was one of the smartest (although risky) moves by US's management. They knew darn well that while DL might have some temporary short term gains if an AA/US tie up eventually did come to fruition their combined slot portfolio in the NYC will not only be more than enough to compete with DL and UA but their strength of their network throughout the NE (PHL,NYC,BOS,DCA) would surpass both DL and UA. Add CLT and MIA and your a dominant #1 in 3-4 of the top 7 population centers on the east coast as well as being a strong #2 in another 2 markets.

per 2011 PANYNJ report for NYC :

UA CO 27.3m
DL 20.4m
US AA 20.3m
B6 13.7m

The merger helps with domestic volume but doesn't shift international volume one bit. Of course these are older numbers that doesn't take into account recent DL-LGA expansion or recent UA woes.

Quoting crAAzy (Reply 20):
I'll also add into the mix that with a combine AA/US in WAS there will likely be a larger OW presence at IAD including an increase on select transcon flights with the new A321s (LAX, SFO), 2-3 daily flights to major business hubs (ORD, MIA, DFW, ATL, BOS, CLT, PHL, etc) and a handful of select international flights (BA,IB,AB,LA,JL,CX,AA).

As if 1 split-hub is not bad enough now you want 2 ? Out of that entire list of OW carriers, only BA currently offer any international service. To even get half of that list filled would be impressive.


User currently offlineFI642 From Monaco, joined Mar 2005, 1079 posts, RR: 2
Reply 24, posted (2 years 2 weeks 1 day 20 hours ago) and read 2562 times:

It just makes sense for them to purchase a stake in the new company. It ensures the new company will stay with One World, and strengthen the weakest of the Global Alliances.

Remember how the investment by KL in NW forged the early alliance. The potential is quite exciting.



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25 crAAzy : AA has plenty of opportunities for international expansion out of JFK currently and that's not including the additional US slots. A US/AA combination
26 commavia : ... nor does it need to. That's the key. Post-merged, AA would not need as big an international presence at JFK since it won't have New York as its p
27 avek00 : All potentially true, but the ways in which TATL flows of a combined AA/US are optimized is certainly a matter of great import for IAG, and IMO, that
28 commavia : No question, but I don't think there's really any downside here for BA. The combined airline would inevitably end up in oneworld, and deeply tied to
29 vv701 : No. They are not. But they are concerned as to what would happen if US does not take control of AMR. IAG have signed the non-disclosure agreement so
30 LHCVG : I'd think a combined carrier would move toward the "dual hub" DL model, with their sizable presence at both LGA and JFK. They'll still be smaller at
31 mogandoCI : Few cities succeed having international split from domestics. Tokyo does, but ICN is stealing quite a lot of traffic NYC does work to a certain degre
32 commavia : Doubtful. A "split hub" in New York would never work for AA. I have my doubts as to whether it will even work for Delta. But for AA, they will simply
33 LHCVG : It may not be competitive, but both DL and AA make it work for them, whatever we want to call it. I just use split hub because I can't think of a bet
34 LOWS : Seoul is also split between ICN and GMP.
35 mogandoCI : Seoul's case is different because Seoul is such a huge part of South Korea, and the primary route that still requires flying is Jeju. GMP is more lik
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