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AMR Buying Northwest

Thu Jul 13, 2000 5:32 am

is it ture AMR is merging with northwest
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Joined: Wed Apr 19, 2000 5:30 am

RE: AMR Buying Northwest

Thu Jul 13, 2000 5:41 am

NO, it is not true. American has made a bid for Northwest, that's all. Northwest wants $100 share, but it is reported it may settle for as little as $65. I think American offered somewhere in the $50 range.

However, there is strong speculation this is all posturing in response to the UAL-US proposed merger. If that merger does indeed go through, then American will be a lot more serious about NW. Right now though, they're just talking. It was reported in the Twin Cities papers today that NW is agreeable to being acquired, the only issue is money.

Again, I personally think this is all posturing.
An unexamined life isn't worth living.
Purdue Arrow
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RE: AMR Buying Northwest

Thu Jul 13, 2000 5:43 am

Reports out today in the Dallas Morning News indicate that American has offered $44 per share for Northwest, but that NW is asking $100. They also indicate that NW may be willing to lower their asking price to the $65 neighborhood, but do not indicate whether AMR is willing to go that high, but an analyst from Payne Webber is quoted as saying that he expects a deal to be between $55-$60. The current value of American's offer is $3.7 billion, while a $55 price would raise the value to $4.7 billion.
travelin man
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RE: AMR Buying Northwest

Thu Jul 13, 2000 6:04 am

I can see it now:
NW agrees to sell out to AA for $65/share. In the process, AA agrees to sell NW's CO shares to DL. Now DL can take over CO.

The Federal Government will go into conniption fits when faced with 3 airline mega-mergers. (This ain't Canada you know, our government actually LIKES competition). They will say "NO" to UA/US (and the others). This will give AA what it's wanted all along -- no approval of the United/US merger. (except it still would want those Asia rights...)

Basically, if the government allows UA/US, it will be forced to say yes to AA/NW and DL/CO, because realistically, why would they approve one and not the others?

RE: AMR Buying Northwest

Thu Jul 13, 2000 6:15 am

These are all calculated press leaks in my opinion. I think the $100/share is deceiving and could actually include the total package (debt obligations included). I think $44 was dropped so when the merger is announced at $55-$60 range, it will look better to investors.

I think the merger will go through. There are just as many arguments out there on the need for three mega carriers and in my opinion, three is better than two, which is better than one. Also, it seems to me that people think that there will only be three airlines TOTAL, not the case. This would be a perfect opportunity to grow the niche market, a la Southwest. I do think serious divestures are in order for these mergers to get approved though which could also create better opportunities for the smaller guys. Maybe AA will have to divest DAL operations to Legend .
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Thu Jul 13, 2000 6:52 am

I believe that if the government approves UA/US it does not necessarily mean AA/NW and DL/CO will be approved. Granted, anyone with AK or a small fry would be approved, but AA/NW and DL/CO are different mergers from UA/US.

UA/US is almost a perfect fit: there is hardly any overlap (~10%), the networks mesh well, the fleets match-- overall the merger will synergize the company. They do not share any common strong "hub regions". Whereas AA/NW has significant overlap with three midwest hubs all very close to each other (MSP, ORD, DTW). DL/CO-- sheesh, hubs or focus cities right next to each other: IAH next to DFW, CVG next to CLE, JFK next to EWR. Besides, AA/NW have obviously only come up with their merger proposal in reaction to the nearly year or so long contrived UA/US merger. Their plan is shaky to say the least. Also AA/NW mergers #2 and #4, DL/CO #4 and #5, UA/US #1 and #6. Which is the least large of the three in terms of market share? (Hint: UA/US with under 30% while both AA/NW and DL/CO venture in the high 30%).

The problems I feel that the government and regulators foresee with the UA/US merger are: a significant gap in market share with over 1.5 more than AA, and the dominance of the Washington market (which is why it's such a touchy political issue). Other than the Washington dominance, I see no reason why the merger will not pass (given that labor problems are resolved, of course).

RE: Approval

Thu Jul 13, 2000 8:29 am

I hardly think the merger will go through when you look that the J.D.'s trend. if Bush wins in Nov, a new AG could change it all...AA being based in DFW afterall.

RE: Imkeww

Thu Jul 13, 2000 9:09 am

I don't think the DOJ will approve one or two and not the others. There is little overlap with the AMR/NWAC merger, only 11 common routes, the hubs at MSP, ORD, and DTW won't be any different than PHI, PIT, and BWI in terms of geography. The DOJ doesn't consider fleet types in granting their approval and NW and AA do fit well with networks, NW strong in Asia, Pacific NW, AA in S. America, Southeast, and East, and Europe. Also the combined AA/NW would only have 31% of the market before divestures, bigger than UA/US, but not by much. I'm not sure of DL/CO but without a doubt something will have to be done with their networks.

Who knows what is down the road, but I don't think we will see a UA/US without an AA/NW or DL/CO approved by DOJ, other matters like labor could tell a different story.

Legalman, I do think Bush would lean more favorably towards these mergers than Gore.
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RE: AMR Buying Northwest

Thu Jul 13, 2000 10:22 am

The point of the midwest hubs of AA and NW being so close together was that the powers of the airlines there would be consolidated; there would be too much dominance by a single carrier there. Whereas with PIT, BWI, PHL... those are already dominated by a single carrier and won't be affected by United merging with US Airways.
travelin man
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RE: AMR Buying Northwest

Thu Jul 13, 2000 10:46 am

OK, how about PIT, PHI, BWI, and IAD (not even talking about the DCA routes)???? Talk about a regional consolidation!!! That argument holds no water. If the Justice Department is willing to grant United that much power over one region, the fact that AA would have 3 Midwestern hubs (much further spread out, by the way) should not really be a concern.

AA may be responding to UA, but that is no reason the Justice Department would refuse an AA/NW merger. Besides, I'd bet AA would not continue to operate all three of those hubs if they merged...
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RE: AMR Buying Northwest

Thu Jul 13, 2000 11:01 am

I really doubt that United/US Airways will be allowed. If it is not, AA/NW and DL/CO probably wouldn't be either.

RE: AMR Buying Northwest

Thu Jul 13, 2000 11:09 am

One thing I have not really heard much about, though I am certain it's there, is a vocal negative labor reaction to the proposed AA/NW link-up. It seems the unions are willing to let this happen, as long as they're not screwed, which may be a tall order. I would think that we would hear something that is well publicized if they had vehement objections.

What are your thoughts? Anybody at AA or NW have thoughts on this?
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RE: AMR Buying Northwest

Thu Jul 13, 2000 11:22 am

Well, I've been beaten to what I was mostly going to say although DTW-MSP-ORD are much more spaced out and in a much less dense area than PIT-PHL-IAD (remember, PHL is 2 hours driving from IAD, just 100 miles). UA/US actually have more overlap than the proposed AA/US of last year (over 10% compared to 4% for AA/US).

AA/NW is a reactionary merger. AA was beginning to build Asian presence, and that seems to be the only real reason that they would go after NW considering they just bought a west coast presence from Reno. The combined AA/NW would still be a rather unimportant player on the east coast, just as DL/CO would be rather uninfluencial on the west. US/UA would still be the only fully comprehensive network in the country, and further growth by the combined carrier would be halted domestically. (Read competition would be hurt.) If US and UA are not allowed to combine, expect UA to slowly and with great expense build their east coast network, and US will do the same in the west. That's how to build competition, and that's what the DOJ will opt for in my opinion. AA/NW will help them along in that decision.

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