b757300
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Independent Group To Make Bid For TWA

Thu Feb 08, 2001 9:22 am

Independent group to make bid for TWA


SCOTTSDALE, Ariz., Feb 7 (Reuters) - An independent group of investors said on Wednesday it plans to bid nearly $1 billion for the bankrupt Trans World Airlines , which is in the process of being acquired by American Airlines.

The newly formed group, called Jet Acquisitions Group Inc., said it wants to preserve TWA as an independent airline.

The group said it will propose the elimination of current debt, retention of virtually all current employees, modernization of current facilities and a substantial future expansion of the carrier.

"Our bid is more than twice the size of the nearest offer for TWA that was previously made by American Airlines," said group spokesman Stanford E. Lerch, a principal in the law firm Lerch & DePrima.

American Airlines, the world's No. 2 carrier and a unit of AMR Corp. , has proposed buying financially ailing TWA for $500 million plus the assumption of $3 billion in aircraft leases. TWA filed for Chapter 11 bankruptcy on Jan. 10.

19:03 02-07-01

Copyright 2001 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. All active hyperlinks have been inserted by AOL.
"There is no victory at bargain basement prices."
 
Guest

RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 9:44 am

Sounds like another Aerobanc/Global offer. Why does our beloved TW attract such bottomdwellers???
 
TWA717_200
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RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 9:49 am

Could this be the Aerobanc group? I noticed this is an actual Reuters article and not just a rumor.
 
B747-437B
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RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 10:55 am

I can confirm that this is the same bid that Aerobanc, Inc was involved with.
"The A340-300 may boast a long range, but the A340 is underpowered" -- Robert Milton, CEO - Air Canada
 
Guest

RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 11:01 am

"...was involved..."

Does this imply that the Aerobanc offer fell through or that they have withdrawn from it?

rgds
russ
 
B747-437B
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RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 11:09 am

Jet Acquisitions Group, Inc is a new group that represents a consortium of affiliated interests that include Aerobanc, Inc.

Russ - drop me an email if you can. "mendis105@mail.com". I'm gonna be up in your part of the world on the weekend and might actually be swinging into Ithaca.
"The A340-300 may boast a long range, but the A340 is underpowered" -- Robert Milton, CEO - Air Canada
 
SegmentKing
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RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 11:24 am

I wonder if this is the group that retained David Levine.... west coast base (which California is noted) and it doesn't appear to be related to Icahn...

nate
~ ~ ~ ~ pRoFeSsIoNaL hUrRiCaNe DoDgEr ~ ~ ~ ~
 
TWA902fly
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RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 11:55 am

I hope this happens, because TWA is a classic name, and a dounder of aviation in the USA>

-TWA902fly
Chicago Illinois
life wasn't worth the balance, or the crumpled paper it was written on
 
DCA-ROCguy
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RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 3:45 pm

Who else is involved in this group? Would they make TWA viable? It seems to me that with the excellent management TWA has, good product, solid hub structure, young fleet, that all TW needs is to get that damn Karabu vampire off its neck. This trip through bankruptcy is going to do it too, whether AA or this investor group gets TW. Karabu is about to die, sorry Carl. The next step is, DOJ and Congress need to resist the manure that Big Air execs are shoveling at them about how the industry needs to consolidate.

Even if AA gets TW, it still would have only 2 percent more of the USA market than UA has now. Even then there's no excuse to consolidate. US Airways needs to work on its problems more, and UA-US needs to be thrown into the Potomac.

Jim Goodwin told the Senate today that the industry has failed for 60 years to produce the returns investors deserves. What manifest horse puckey. The past five years have been very profitable. Goodwin has made very clear that consolidation is entirely about boosting already-fat profit margins and screwing consumers with higher fares, less seat capacity, especially in medium-size and small markets. He's lucky that none of the Senators on the committee threw Holy Water at him.

Jim
Need a new airline paint scheme? Better call Saul! (Bass that is)
 
Guest

RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 3:54 pm

We now know why Vitale has been absent for so long. According to the Arizona Republic he is a spokesperson for Jet Acquisitions Group.

I expect he knew quite a bit more then he said in his last few posts...

Hmmm..
 
nwa747-400
Posts: 1325
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RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 4:24 pm

Thank goodness!!!!

Now maybe all these mergers won't happen after all!!!

If they can stop AA/TW then UA/US wont go thru either.

Haven't times changed that the DOJ hated NW/CO deal a year or so ago and now it is actually considering allowing these mega merger.

Although, I watched the senate hearings today and the senators did not seem so enthused as they have been.

I guess time will tell...
 
N628AU
Posts: 354
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RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 5:13 pm

Yes...this is the group that David Levine was doing work for. Holly Hegeman reported this in today's (2/7) planebusiness.com daily banter. According to a statement, this group has no affiliation with Uncle Carl.
 
TWFirst
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RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 10:20 pm

RUSS!!!! SEE!!! It IS true!!! All of our wildest dreams have come true!!!!



 Nuts



I think I'm going to have the big O now.
An unexamined life isn't worth living.
 
TWFirst
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RE: The Story On ABCNews.com

Thu Feb 08, 2001 10:35 pm

Secret Bid
Mystery Group Offers $1 Billion for TWA
The Associated Press


Feb. 8 — A group of unidentified aviation experts and investors said it would bid nearly $1 billion to acquire Trans World Airlines, doubling the amount American Airlines said it would pay to take over the troubled carrier.



Jet Acquisitions Group Inc. of Scottsdale, Ariz., wants to preserve TWA as an independent airline, retain most of its employees and eventually expand the airline.
“With Congressional hearings now underway to scrutinize the consolidation of the airline industry and its effects on competition and consumer prices we believe our effort to thwart the trend toward consolidation is particularly timely,” spokesman Stanford E. Lerch said in a statement.

Shrouded in Mystery

Michelle Tuchman, a spokeswoman for the company, would not provide details about the group, other than to say that it included “former airline executives and general investors.” Carl Icahn, the billionaire financier who formerly ran TWA, was not involved, she said.

Including the assumption of $3.5 billion in lease obligations and $1.7 billion that would be spent on expanding TWA’s fleet, Tuchman said the total value of Jet Acquisitions’ offer would be $6.2 billion.

American’s bid for TWA included the acquisition of parts of US Airways from United Airlines and a large stake in a new startup carrier for $1.8 billion in cash and $3.5 billion in lease obligations.

Can TWA Survive Alone?

David Stempler, president of the Air Travelers Association, said he doubts TWA could survive as an independent entity—noting that similar-sized airlines such as Pan Am Airlines have gone out of business.

“The best for TWA in terms of its employees, the city of St. Louis, and for airline passengers, is probably to have it folded or merged into a larger airline to continue its operation,” Stempler said.

American, based in Fort Worth, Texas, has said it would pay $500 million for most of TWA’s assets, including up to 190 planes and the St. Louis hub. It also would pay $82 million for a 49 percent stake in DC Air, a minority-owned startup of United Airlines and US Airways that would serve 44 markets out of Washington’s Reagan National Airport.

American’s proposal is awaiting approval of federal regulators.

TWA Will Consider 'Better Legitimate Offer'

“The way it’s set up, anyone is free to bid,” American spokesman John Hotard said in response to Jet Acquisitions’ bid. “They’re free to bid whatever they want.”

A federal judge has extended the deadline for bids for TWA until Feb. 28.

“TWA will consider any higher and better legitimate offer,” TWA spokeswoman Julia Bishop-Cross said.

Edward Manhart, a spokesman for the International Association of Machinists, which represents TWA’s machinists and flight attendants, said the union expected more offers, but didn’t expect one so soon.

“I’ve been telling the membership that until all of the offers are on the table, to save a lot of feelings, we should wait until we see what all the offers are,” Manhart said in St. Louis.

TWA, based in St. Louis, has continued operations while bankruptcy proceedings occur.


Copyright 2001 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
An unexamined life isn't worth living.
 
B747-437B
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RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 10:56 pm

Scottsdale group plans competing bid for TWA


A Scottsdale group of investors has nearly doubled American Airlines' $3.5 billion offer for TWA, officials said Wednesday.


Jet Acquisitions Group Inc., made up of a collection of unidentified investors, will offer $6.2 billion, including $1 billion in cash, for the nation's No. 8 airline, said Michelle Tuchman, a spokeswoman for the group. The group would continue to operate Trans World Airlines as an independent company, she added.

The offer is almost double the $500 million in cash and $3 billion in assumed debt that American Airlines parent AMR is offering as part of the St. Louis-based carrier's Chapter 11 case. TWA filed for bankruptcy protection in January to expedite its sale to AMR in the face of mounting debts and dwindling cash reserves.

"Our group is adamant that TWA should be preserved as an independent and financially viable airline which will provide more choice for airline travelers," Stanford Lerch, a Scottsdale lawyer representing the investors, said in a release.

Another official with the group, Albert Vitale, told The Arizona Republic that there are seven investors, some of them from Arizona. He declined to name any of them. Jet Acquisition's news release said the group has experience in the America West bankruptcy case, among others.

Vitale was optimistic that the eleventh-hour deal, which he said is still being put together, can be pulled off.

"I think the chances are that we're going to walk away with it," said Vitale, an aviation analyst who was formerly with an aircraft leasing company.

Tuchman refused to identify investors in the group, citing confidentiality requirements in the bankruptcy bidding procedures. Final bids must be submitted by Feb. 27, and the auction is set for March 5, according to court papers.

"But I can say that Carl Icahn is not involved in the bid," Tuchman said.
"The A340-300 may boast a long range, but the A340 is underpowered" -- Robert Milton, CEO - Air Canada
 
Guest

RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 11:38 pm

Strange how many people/groups want TWA
when we in such financial problems.
 
DCA-ROCguy
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RE: Independent Group To Make Bid For TWA

Thu Feb 08, 2001 11:51 pm

As long as Count Icahn-ula isn't involved, and Karabu can be staked through the heart, the Jet Acquisitions group bid needs to be considered. A non-merger buyout of TWA could be the silver bullet to justify DOJ canning all of the consolidation proposals on the table. Which would be very beneficial to consumers, and disappointing to greedy airline execs.

Killing Karabu is vital to STL and 20,000 TWA employees. But it does not merit consolidating the damfool industry and possibly leading to the destruction of low-fare carriers and more fare gouging at medium and small size markets.

Jim
Need a new airline paint scheme? Better call Saul! (Bass that is)
 
sccutler
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Something To Ponder...

Fri Feb 09, 2001 12:16 am

There have been posts in the various threads dealing with this topic, and the topic of airline mergers in general, the essence of which are that airlines must merge and become ever larger to survive. And I think a dispassionate analysis of that theory must conclude that it is plain wrong.

TWA is now a potentially competetive and efficient market participant, saddled with (1) artificially-low yields as a result of the Karabu fiasco; (2) inadequate cash reserves because of being stripped by pror ownership; (3) excessive cost of capital (including leases) for the same reasons.

CO, through shrewd management and good product, built back from the brink to being the effective and efficient competitor it is today; WN has done what it has done, all the while enduring smart-assed comments about how they aren't a "real airline," etc.- but they grew from three planes serving three cities to being the compelling market force that they are today.

If a viable and well-funded group can relieve TWA's capital crisis and operate a revitalized (reVITALE-ized?) TWA, there is no reason why they cannot capitalize on existing strengths (and they are there), and grow strong.

Keep an open mind about this stuff, OK folks?
...three miles from BRONS, clear for the ILS one five approach...
 
flashmeister
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RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 12:21 am

This is a great thing! I wonder if Carty would want to pay double what he is for TWA...

DCA-ROCguy is correct that if this group gets TWA, it has a good chance of killing UA-US as well.

Make no mistake, though - this won't kill consolidation in general, it will just delay it. UA is going to acquire someone whether we like it or not - if not US, than America West. DL wants to expand too, and I still think they're best off with Alaska.

Consolidation is here and it will happen. The only question is who will align with who?
 
DCA-ROCguy
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RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 1:02 am

I'm not as convinced that consolidation is a foregone conclusion. Big Air's ten years of gouging people, esp in medium and small markets, since the late 1980's consolidation, has caused a first in US history (that I know of, at least). Big Air has managed to infuriate the public and Congress enough for airline service and fares to become a potent national political issue. There are an awful lot of Rep. Louise Slaughters out there, from medium markets like ROC that have been gouged and gouged the past ten years. And many of them are Republicans.

Flashmeister's correct that Big Air *wants* to merge; no profit margin ever seems to satisfy them. Jim Goodwin's dumb comment to the Senate yesterday that the airline industry hasn't been profitable for 60 years (wrong) and thus needs to consolidate to deliver suitable returns (read higher fares) isn't going to endear him or his peers to Congress, DOJ, or anyone else except Wall Street.

If AA-TW goes down and UA-US with it, Big Air will probably seek another consolidation round; the only question is now while labor agreements are up, or next year, after labor agreements are settled. It's probably a question of how much labor unrest management and labor are willing to inflict on the traveling public at once, and how best to minimize the damage to the bottom line.

HP doesn't seem to me an attractive takeover target. PHX has an entrenched WN hub, and that's going to depress "yields" (margins) for anyone who buys HP. At least in the next year or two, no Big Air carrier is going to be politically stupid enough to try to predatory price WN out of PHX to raise yields there--not in Senator McCain's back yard. At least not in the current industry structure.

I'd look for AS to be taken over though post haste; it's just a matter of who makes them the most attractive per-share offer. UA probably would want them, but there would be antitrust issues about West Coast service, and if UA loses the US fight they probably won't push that right away. Probably DL or AA.

Jim

Need a new airline paint scheme? Better call Saul! (Bass that is)
 
SegmentKing
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RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 1:10 am

Geeze Albert... and I thought you were only joking about going after TWA when messing w/ the Midwest Wings Airlines project :P

good luck w/ it :P

Nate
~ ~ ~ ~ pRoFeSsIoNaL hUrRiCaNe DoDgEr ~ ~ ~ ~
 
Alpha 1
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B747-437B`

Fri Feb 09, 2001 1:27 am

Name-dropper.  Smile
 
Guest

RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 1:37 am

IMHO, Somehow, somewhere, someplace
Icahn is there. Dont know where, but he is there someplace. Does anyone agree or disagree?

Bob
 
Guest

RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 1:40 am

How does Southwest World Airlines sound?
 
FlyPNS1
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Re: DCA-ROC

Fri Feb 09, 2001 3:48 am

Actually, the airline industry over its entire history is one of the most UNprofitable industries in America. Consider this, during the recession of 1991 and the few years following, the losses at the major airlines were so large that they cancelled out all profits that had been made in the prior SIXTY years of the airline industry. Certainly the last few years have been very profitable for airlines, but one severe recession and all of those gains will be gone in an instant.

I'll admit Goodwin was wrong to say that consolidation is a necessity...more likely Goodwin needs to learn how to control costs better...something he and many other airlines have failed miserably at doing.

As for the most recent announcement, I am still a little skeptical. I would like to see TWA stick around as an independent carrier. However. I'm also aware that there always seems to be someone foolish enough and wealthy enough to blow hundreds of millions of dollars in the airline industry and then simply walk away when they realize its not the profit maker they had hoped for. I need to see more details on this plan for TWA before I could really make a good assessment of it.
 
travelin man
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Re: DCA-ROC

Fri Feb 09, 2001 4:08 am

Since when did capitalism become a BAD thing? I'm so sick of people complaining about "anti-competitive", "bad for customers" blah blah blah.

Here's economics 101:

Stronger companies will crowd out weaker companies. Companies can purchse each other. Strong companies become strong by offering good service, fares, etc etc. If a strong company becomes dominant, complacent, and starts charging excessive prices, new entrants arrive (see Southwest), become dominant, and make the overpricing, bad service carriers SMALL (see Pan Am, etc.).

In addition, substitutes may be introduced that weaken a dominant company's position, such as videoconferencing in lieu of business trips, or driving or taking the Amtrak Acella (sp?).

It's called CAPITALISM.

Live with it (or you can move to North Korea or Cuba, where they don't have to worry about things like capitalism).

That being said, may the best bid win TWA. (Capitalism at work).
 
FLYTWA
Posts: 3
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AMR Will Prevail

Fri Feb 09, 2001 5:26 am

I will believe this offer when an actual bid is made. I also would not doubt that AMR new all to well that their bid was a lowball offer. I imagine that AMR fully intends to take TWA at a much higher cost if necessary. This is a chance for AMR to surpass UAL and stay ahead. Contingent on the U/UAL being turned down by the justice department.
 
AA-SAN
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RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 5:35 am

I couldn't have said it better FLYTWA... Let's remember that AA has a lot at stake with their investment in TWA, and they're not going to just let it go like that. You'de better believe that AA is going to go down swinging, if they go down at all. And this isn't an auction for TWA. The courts aren't just going to reward all these assets to the highest bidder, a large factor is what is best for the company, its employees, etc., so let's just not jump to any conclusions. The next few weeks should be very interesting.
 
DCA-ROCguy
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Joined: Fri Apr 21, 2000 5:03 am

Re: DCA-ROC

Fri Feb 09, 2001 5:36 am

Travelin Man, you win the Neville Chamberlain Naivete Award for your view of economics and human nature. Pure Laissez-faire capitalism has never been practiced for any length of time in the United States. The first time it was tried, in the Robber Baron Era, President Teddy Roosevelt and successors implemented the antitrust laws that protect consumers from naive thinking like yours. Conditioned capitalism has been the game since TR's time, and will be in years to come.

As a matter of fact, your thinking sounds a lot like North Korea and Cuba--where the strong tyrannize the weak without accountability. In the real world, governments recognize that economic decisions are not made in a vacuum. They affect real consumers, real employees, and real communities. And since air travel is a public good--yes you heard me right, a public good--the autonomy of companies to profiteer is limited.

Taxpayers subsidize airlines like crazy with airport revenue bonds, so we have every right to demand reasonable fares. But it's hard work to run a company well and offer reasonable prices--it's easier to chase the high fare dollar and screw everybody else--especially medium and small size communities that don't produce shuttle or transcon margins on every route. That's called fallen human nature, and no one is immune to it.

"Stronger"--read bigger--companies find that it's not in their interest to compete in any meaningful way. The Big 6 carriers that emerged from the last round of airline consolidation formed a comfy oligopoly. They charge high fares and chase the high-margin dollar. Pity the poor market--eg medium and small size market--which only produces moderate profit margins. Our economies don't benefit from good air service, we get stuck paying $800 rt to go to DC or Chicago. Unless you're one of the 58 lucky cities out of 400 USA air markets that have Southwest.

Airline mergers are about one thing: concentrating market power to destroy competition. The Big 6 can't crush Southwest, AirTran et al without on-paper collusion. Which would run afoul of Teddy Roosevelt's antitrust law. But as a Big 3 they could, and they would do it in a minute. To get those fat margins that Jim Goodwin says airline investors "deserve." Apparently the fat margins of the past five years weren't good enough. The airlines got over the 1991 recession and those huge losses pretty quick, I might add.

DOJ and the bankruptcy court should throw the book look veeery carefully at the AA-TW proposal and the Jet Acquisition proposal. Neither would result in an imbalanced industry that would require DL-CO-NW combination or UA-US. DOJ should throw these greedy anticompetitive mergers into the Potomac, and throw Jim Goodwin, Steve Wolf, and Leo Mullin in along with them.

Jim
Need a new airline paint scheme? Better call Saul! (Bass that is)
 
Guest

RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 5:49 am

I hate consolidation. All the majors have to learn to do is lower costs. AirTran has less than half the CASM on 625 mile routes of United(According to presentation by J.L.).

I can't wait to hear the infoline at TWA, and hear how this bid won't protect jobs, like the AA bid. TWA wants, at all costs, for AA to buy them.

BTW: Anyone know Compton's golden parachute? I'm guessing $50-$60 million.
 
Pilot1113
Posts: 2276
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Who Is Albert Vitale?

Fri Feb 09, 2001 6:28 am

Who is Albert Vitale and what does he represent? Is he 'evil' like Ichan was?

- Neil Harrison
 
Guest

RE: Who Is Albert Vitale?

Fri Feb 09, 2001 6:43 am

Username: Pilot1113
Posted 02-08-01 22:28 and read 6 times.
Who is Albert Vitale and what does he represent? Is he 'evil' like Ichan was?

- Neil Harrison



ROTFLMAO!!!
 
B747-437B
Posts: 8777
Joined: Thu May 30, 2002 6:54 am

RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 6:54 am

Albert Vitale is a deadbeat from Florida who dreams of an airline utopia!  Smile

Seriously though, Albert is none other than our very own ACVitale whose profile figures at http://www.airliners.net/discussions/profile.main?username=ACVitale. Unlike some other so called analysts that this board produces, Albert actually has people who can vouch for his authenticity (I know that myself and SegmentKing can for sure).

Albert is not evil. Well, at least not VERY evil... Big grin
"The A340-300 may boast a long range, but the A340 is underpowered" -- Robert Milton, CEO - Air Canada
 
AA@DFW
Posts: 392
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RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 6:57 am

Ok,

So let's say that TWA reviews the deal and decides they would rather go with AA. Can they do that? Do they have the ultimate decision? Or is it the US court system that makes the final call?

AA@DFW
 
SegmentKing
Posts: 3224
Joined: Sun Aug 27, 2000 7:16 am

RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 8:36 am

Sean, I can't vouch if he's evil... I was only around him for 7 weeks :P

I can say this about Albert... his love and passion for the industry definitely is one of a kind. He and I had serious disagreements over our own planned regional operation, but never really fought about it... we just left it alone. He could have easily pulled the plug at any moment and said "I'm out" but never did. His attitudes and impressions are "I don't care what you think, this is what we're doing and here is how we're doing it"... that is the kind of leadership entities need every now and then... sometimes you can't dilly-daddle around, but have to produce RESULTS.

Granted I haven't had contact with him since the beginning of merger-mania, I wish him and Mer the best and hope to reconciliate our differences at some point...

Nate
~ ~ ~ ~ pRoFeSsIoNaL hUrRiCaNe DoDgEr ~ ~ ~ ~
 
TWA717_200
Posts: 1410
Joined: Tue Nov 23, 1999 3:51 am

RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 9:47 am

I'm just going to sit back and see what happens.
 
Fleet Service
Posts: 473
Joined: Wed Apr 12, 2000 11:58 am

RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 10:43 am

An offer is just that, an offer.
Time will tell,as it always does.

Btw Al,Good day to you sir. lol
Yes, I actually *do* work for an airline,how about you?
 
flashmeister
Posts: 2671
Joined: Fri Apr 28, 2000 4:32 am

RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 10:50 am

DCA-ROCguy, I still would like to see how you can seriously worry about the Big 3 crushing Southwest. No one knows how to compete with them in the current group of 6 - why would combining make them any smarter?

Bigger, yes - but the bigger they are, the harder they fall.

Southwest and jetBlue and Frontier will all be beneficiaries of consolidation because, as Travelin Man stated, they all get their chance to grow into the areas abandoned by the Big 3. And they will...

The sky is not falling here...
 
toxtethogrady
Posts: 1693
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Show Me The Money!

Fri Feb 09, 2001 12:49 pm

I find it curious this $1 billion deal is still awaiting the final details on financing. I think it is a press release in search of venture capital. What I find more significant is senators from both parties are now screaming "Halt!" Whether that's enough to stop UA-US is unclear, but it might affect the outcome of AA-TW and certainly CO-DL.
 
DCA-ROCguy
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RE: Independent Group To Make Bid For TWA

Fri Feb 09, 2001 2:39 pm

Flashmeister, there's nothing I'd like more than to agree with you that the low-fare carriers could survive a Big 3. And if God forbid the supermergers happen, I hope and pray to be proven wrong. You're right that the major low-fare carriers are all extremely well-managed. In the current scheme, they are holding their own and mostly prospering. But there are a number of reasons that I think that a consolidated mainline industry could, and would, destroy the low-fare carriers.

First of all, consolidation is about getting control of the marketplace. As Big 6 the mainline carriers have clearly not been able to gain the kind of market control that is most efficient: in the words of Don Corleone, competition is wasteful, monopoly (or here super-oligopoly) is efficient. By nature large low-fare carriers threaten a safe Big Air applecart, affecting yields at points all over the national system.

Big Air does not believe that Big 6 can deliver the kind of safe, steady returns that makes Wall Street most happy. They can't control oil prices or the larger economy. But the can control what kind of competition they come up against-*if they can concentrate their power well enough.* IN as few hands as possible--Big Three hands.

Big Air does not want to "abandon" Rochester, Des Moines, Greensboro, or Binghamton. They want these medium and small markets safely under their thumb--served by RJ's and props with high fares carrying the few pricey pax who can be counted on to reliably pay top dollar. Feeding the big markets and concentrating traffic and money there.

At the big markets they want their high transcon and shuttle margins safely insulated against icky low-fare competition as well. The pieces of the system, hubs and spokes, are all part of an organic system. Low-fare carriers by definition destabilize the whole. John Dasburg has gone so far as to say that Big Air has a moral obligation to its employees and shareholders to predatorily destroy low-fare competition.

Low-fare carriers now are, to my count, less than 10 percent of US pax today. But all of them have aggressive growth plans--David Neeleman just a couple of days ago said he seriously envisions JetBlue at 400 planes by decade's end. They do not plan to remain small. These plans necessarily will involve entering major markets, because that's where the bulk of the people are. And those plans, brewed in smaller markets, by nature upset the whole Big Air applecart. They upset those smooth-flowing, oligiopoly high returns that Jim Goodwin told the Senate about yesterday.

This year, I wouldn't look for any serious predatory behavior by Big Air. It would be politically stupid, though I have no doubt they could destroy JetBlue, for instance, in a few months if they really put their resources to it. They want their mergers, and for now they're going to be on their best behavior. So this year won't be a good measure of what they can do to low-fare carriers. US Airways, for instance, has conspicuously left JetBlue alone at Buffalo and Rochester.

Again, I'd love to be proven wrong. And there are exceptions--Southwest's West Coast shuttles, and AirTran's hub at Atlanta. But the above confluence of factors, and I admit to some extent intuition, suggests to me that Big Air could do far more harm to low-fare carriers than they're doing today--if they get big enough.

The sky fell years ago at lots of places, like Rochester, and I think it could fall further. For these reasons and others it seems to me that DOJ should stop consolidation cold in its tracks.

Jim




Need a new airline paint scheme? Better call Saul! (Bass that is)
 
Pilot1113
Posts: 2276
Joined: Thu Aug 05, 1999 1:42 pm

RE: Independent Group To Make Bid For TWA

Sat Feb 10, 2001 2:57 am

I guess I was wrong about Viatle. I guess since he's an airliners.net member, I'd better "walk egg shells" when he's around, if I want a job in the future!

It's great that we have a legit CEO on these boards. Think he'll leak anything to us?  Wink/being sarcastic

One can hope, can't he?

- Neil Harrison
 
SegmentKing
Posts: 3224
Joined: Sun Aug 27, 2000 7:16 am

Vitale

Sat Feb 10, 2001 3:06 am

I don't think he's CEO of JAG... he is CEO of Midwest Wings Airlines, a venture we both started....

I don't think he'll be leaking info.. we never talked about our operation here, except in small bits and pieces, but never divuldged total info about the operation, except what is public on the website. But the FCA part of MW is on hold due to the United/USAirways merger and the proposal between AMR and TWA.....

Nate
~ ~ ~ ~ pRoFeSsIoNaL hUrRiCaNe DoDgEr ~ ~ ~ ~
 
redraider
Posts: 515
Joined: Fri Oct 20, 2000 3:40 am

RE: Independent Group To Make Bid For TWA

Sat Feb 10, 2001 3:54 am

From Yahoo and AP...

Analysts Skeptical of TWA Bid
By WALTER BERRY
Associated Press Writer
PHOENIX (AP) -- A secretive Arizona investment group's plan to outbid American Airlines and buy Trans World Airlines Inc. is drawing chuckles from some industry analysts.

Many questioned Thursday whether Scottsdale-based Jet Acquisition Group Inc. will actually follow through with its bid to beat out AMR Corp [NYSE:AAR - news].'s American Airlines and take TWA out of bankruptcy.

Others wonder why the group is being so cagey about its investors and money source.

``Any group wishing to make a bid for a company usually discloses its principals and financial backing to give it credibility,'' said Julius Maldutis, an airline analyst with New York-based CIBC World Markets Corp. ``We have none of that with this group, and that's odd.''

In releasing a statement on Wednesday that it plans to offer $1 billion in cash for TWA, more than doubling American's bid, Jet Acquisitions said it wants to preserve TWA as an independent airline, retain most of its employees and eventually expand TWA, which last month filed for bankruptcy for the third time in a decade.

But spokesmen for the group refused to discuss specifics.

``They could be protecting some investor who in the past hasn't been that credible,'' said Mike Linenberg, an analyst with Merrill Lynch in New York. ``Nobody knows yet who's behind this offer. If it's a nobody, it probably won't fly.''

Rick Manter, a spokesman for Jet Acquisitions, said Thursday the group thought it unwise to release any more information until it made its bid sometime around a Feb. 28 bidding deadline set by a federal judge.

``It's unusual to introduce any more information than necessary until a bid is delivered. It jeopardizes your bidding status,'' Manter said. ``As far as we're concerned here, either you have the money or you don't. This group is prepared to put up $1 billion as a guarantee. I think the proof is in the pudding.''

Manter would only say that the group included an investor who controls more than $1 billion in assets, another who has invested in several airlines, and representatives with significant banking and aviation backgrounds.

One reported partner is Scottsdale attorney Stanford E. Lerch, who claims to have previously worked on the bankruptcy cases of America West Airlines and Continental Airlines.

His office would not elaborate, and calls to America West and Continental officials about the cases were not immediately returned Thursday.

Lerch's office also said he would not comment on anything related to Jet Acquisitions' bid, citing confidentiality rules during the bidding process.

The State Bar of Arizona said its records show Lerch was born in 1933, attended the University of Arizona law school in Tucson and became a lawyer in 1961. Bar officials could not immediately find any record of Lerch facing disciplinary action.

The Arizona Republic reported Friday that Jet Acquisitions' office referred questions to a public relations firm in Irvine, Calif., which said one investor was Donald R. Moody who was identified as an ``international financier'' in Portland, Ore. The newspaper said Moody couldn't be located for comment.

The newspaper also said the company's incorporation application in the Arizona Secretary of State's Office listed Lerch and his law partner, Anthony DePrima; Kenneth MacRae of Scottsdale, and Albert Vitale of West Palm Beach, Fla. Vitale said on Wednesday he was a consultant to the company with prior experience in aircraft leasing.

Representatives of American and TWA downplayed news of the offer.

``Anyone is free to bid,'' American spokesman John Hotard said.

``The point of the auction process is to allow higher and better offers to come forward,'' TWA spokeswoman Julia Bishop-Cross said.

Michael Boyd, president of the Boyd Group consulting firm in Evergreen, Colo., said that someone with $1 billion to buy St. Louis-based TWA would have already made an offer instead of putting out a press release announcing a planned bid.

Manter said the press release was issued to make it clear that there is another serious bidder.

Including the assumption of $3.5 billion in lease obligations and $1.7 billion that would be spent on expanding TWA's fleet, the total value of Jet Acquisitions' offer would be $6.2 billion.

American's complicated bid to buy TWA includes the acquisition of parts of US Airways Group Inc. [NYSE:U - news] from UAL Corp.'s (NYSE:UAL - news) United Airlines and a large stake in a new startup carrier for $1.8 billion in cash and $3.5 billion in lease obligations.

American, based in Fort Worth, Texas, has said it would pay $500 million for most of TWA's assets, including up to 190 planes and the St. Louis hub.

American also would pay $82 million for a 49 percent stake in DC Air, a minority-owned startup being created as a result of the United Airlines-US Airways combination that would serve 44 markets out of Washington's Reagan National Airport.

All of the airplane deals are also awaiting approval of federal regulators.

On the Net:

American Airlines: http://www.aa.com
TWA: http://www.twa.com/

My wife can't wrestle, but you should see her box.
 
Cody
Posts: 2172
Joined: Tue May 18, 1999 12:16 pm

RE: Independent Group To Make Bid For TWA

Sat Feb 10, 2001 2:54 pm

In 1980, everyone "chuckled" when Texas Air claimed they wanted Continental.
 
N628AU
Posts: 354
Joined: Wed Oct 18, 2000 4:20 am

RE: Independent Group To Make Bid For TWA

Sat Feb 10, 2001 4:01 pm

Kudos to DCA-ROC. Man, you really have nailed the essence of this on the head. A little basic knowledge in economics goes a long way, huh.
 
sccutler
Posts: 5556
Joined: Thu Jan 27, 2000 12:16 pm

Two Comments-

Sun Feb 11, 2001 1:55 am

First, DCA-ROCguy-

Your usual thorough analysis is well-crafted, but the one thing on which I disagree with you is this: A well-managed and financially-sound low-fare carrier (Southwest, in particular) will never be at risk from competition from the traditional carriers, no matter how large. For a traditional carrier (such as AA or UA) to seriously challenge WN, they would have to price their product at less than their cost- a lot less- and there's a lot of room for such cuts before they get close to being at or under WN's cost. That strategy may work against a new-entrant with a weak balance sheet, but the ironic effect of trying it against a strong and efficient carrier is that, in order to support the cash drain it would create, the larger carrier would have to raise fares in the markets that they control more, thus creating an opportunity for a low fare carrier to swoop in and grab some share in those markets. That, too, is basic economics.

And yes, they chuckled when Texas Air proposed to buy CO; but remember where Texas Air got the money to buy CO? From their run at TWA.
...three miles from BRONS, clear for the ILS one five approach...

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