Topic Author
Posts: 2196
Joined: Wed Sep 08, 1999 12:01 pm

Air Canada - Canadian Merger

Wed Sep 08, 1999 12:16 pm

I would like to know other people's thoughts on the proposed merger. I am personally against it because those are really the two major airlines in Canada and a merger would make prices skyrocket and service drop. I don't think that it is going to happen because it is undervalued. AC is worth 5._ billion. They offered to buy both for 1.8 I think (plus assume Canadian's debt). I personally think that other investors or Star Alliance Airlines will make a counter offer in order for AC to stay in Star Alliance. If it does go through, it should be on Air Canada's terms, not Canadian's. For example, AC keeps their employees, way of business and stays with Star Alliance (I think it's better). Not switches over to Oneworld leaving Heavyweights Lufthansa and United without another feeder airliner.
Posts: 1496
Joined: Tue Jul 06, 1999 10:52 am

RE: Air Canada - Canadian Merger

Wed Sep 08, 1999 2:03 pm

I don't think it will go through, partly because AMR is using it to sell Sabre reservations services which AC doesn't really want.

I am against it because it doesn't give AC anything, and basically bails out CP. The amount of debt on the company, and horribly mismatched fleet could be a major problem as well. One of its biggest problems is also to do with alliances. Look at AC's route structure. Going into OneWorld throws away its strengths, such as good connections in Frankfurt, and also the geographic location of Denver is much better than Dallas.

As far as the money for shareholders, I'm surprised nobody else has noticed this in the media or elsewhere. Claiming that AC stock has been flat in the last 10 years isn't quite fair. Look at the values 18 months ago. They based their offer on the last 52 weeks, but for the last year there have been factors dragging down the stock value. Note that the past year has included a pilots strike, a near miss on a flight attendants strike, and negotiations with the mechanics. And I think there are enough investors speculating that there will be a counter-bid that AC unless Onex sweetens its offer to $11 or $12 from $8.25, investors just won't be interested.