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billreid
Topic Author
Posts: 761
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NW Cannot Stop CO Merger

Tue Dec 12, 2006 11:10 am

NWA has nothing to say about a merger/sale of CO. Thats up to the creditors and the courts.
Anything brought in that benefits the creditors is approvable.
Management owns NIL!!!!!

Assuming a merger is announced does this improve further mergers and where will it leave smaller airports?

Will the EU be able to block this as anticompetitive?
Some people don't get it. Business is about making MONEY!
 
kstateinALB
Posts: 547
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RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 11:18 am

I'm trying to find some good points if this merger would happen in the future, but I can't seem to think of many. The fleets really don't compare, theres some route overlapping in the eastern US, and there isn't a western hub(unless you count IAH and MSP). Not like they wouldn't survive without one, but it would be better for the airline to have one.
However, the European and Asian routes from CO and NW would come together great.
 
Werkur767
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RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 11:24 am

I don't think they'll leave smallest airports, only will be with the connection airline.

But EU will be able to block this anticompetitive, you can imagine if Virgin Atlantic and British Airways merger.....

Nwa could be merger with AA, for the competition.

I think this is in talks, there's a lot to make about this, untill now...nothing is concrate, but if happens..cannot be like directly competiton without any restrictions.

In EU is just like Lufthansa flying domestic routes in Britain, cannot be....

Regards, Werner from GRU.
Werkurspotter
 
Falcon84
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RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 12:31 pm

Quoting BillReid (Thread starter):

NWA has nothing to say about a merger/sale of CO.

Incorrect. As part of the deal where CO bought back it's stock, NW was given the ability to block any trade that would end the lucrative (for both carriers) code-share deal that has been in place for some years now.

NW CAN block a deal. However, it would only make sense that NW would have it's price-and that price is thought to be CO's Micronesia operation, which in and of itself is very lucrative, and would fit in with NW's Pacific operations.
Work Right, Fly Hard
 
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jetjack74
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RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 2:30 pm

Quoting Falcon84 (Reply 3):
NW was given the ability to block any trade that would end the lucrative (for both carriers) code-share deal that has been in place for some years now.

Now, the golden shares that NW owns can be voided if CO buys another carrier or NWA is bought out.
Made from jets!
 
AA737-823
Posts: 5521
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RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 2:37 pm

Where have you been?
They're called the golden shares, and so far, you're the only person on the board that seems to deny their existence.

Anyhoo, are you suggesting a CO-NW tieup? Uh, hmmm....
Well, their fleets couldn't be more different. Continental flies 737s, 75/67s, and 777. NW doesn't operate ANY of those, save the 757s, which have different engines.

Too heavy in the eastern half of the US... DTW, MSP, MEM, IAH, EWR, and CLE... nothing west of the midwest. Except NW's Seattle ops, which aren't really HUB status, are they?

As far as the EU... shoot, if they can sue our government for NOT buying A330 fuel tankers that don't even exist, they can probably block a merger.
No, I'm not bitter... not one bit.  Smile
 
dxBrian
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RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 3:39 pm

I think that NWA acquiring Continental Micronesia would be a disaster for the Air Mike employees and the economy of Guam. Most of the Guam hub ops employees would be terminated as NWA maintains an Ops/Dispatch center in NRT. The most valuable part of Air Mike to NWA would be the NRT arrival/departure slots.

I don't think that NWA's A320s are certified for ETOPS, and even if they were, they don't have the range to operate some of the Air Mike routes, such as GUM-CNS-GUM and GUM-DPS-GUM. Their A330s could replace the 767-400ERs easily enough between GUM and HNL and NRT.
 
jetdeltamsy
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RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 3:47 pm

Quoting BillReid (Thread starter):
NWA has nothing to say about a merger/sale of CO. Thats up to the creditors and the courts.

Yes they do. They have the power, through a special share of stock issued by Continental only to Northwest, from Continental acquiring any other airline. On the otherhand, Continental could be taken over in a hostile bidding war by any airline with sufficient $$$.

At least that's my understanding of those Golden Shares.
Tired of airline bankruptcies....EA/PA/TW and finally DL.
 
n844aa
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RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 4:16 pm

If anyone wants to try to puzzle out exactly what the golden share does or does not do, you might want to start here:

http://www.continental.com/web/en-US...ental_certofcorb_2003_03_04_01.pdf

I read through it, but there's no way I could provide any sort of meaningful analysis. Still, interesting stuff, and maybe there's a corporate lawyer out there who could give us some insights.
New airplanes, new employees, low fares, all touchy-feely ... all of them are losers. -Gordon Bethune
 
ANother
Posts: 1833
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RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 4:46 pm

Quoting BillReid (Thread starter):
Will the EU be able to block this as anticompetitive?

If the EU believed it to be anticompetitive (in an European sense, effect on European Consumers) then yes they could ask for remedies or even stop it (through threat of fines for breaching European Competition law).

However the EU could decide that it is not anti, or even pro-competitive or decide to not investigate it.

I belive the later is what would apply, but you never know with Brussels.
 
Falcon84
Posts: 13775
Joined: Fri Sep 10, 2004 11:52 am

RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 9:52 pm

Quoting Jetjack74 (Reply 4):
Now, the golden shares that NW owns can be voided if CO buys another carrier or NWA is bought out.

That is correct. Which is why NW would prefer CO buy someone, instead of visa versa.
Work Right, Fly Hard
 
bobnwa
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Joined: Fri Dec 22, 2000 12:10 am

RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 10:01 pm

Quoting Falcon84 (Reply 10):
That is correct. Which is why NW would prefer CO buy someone, instead of visa versa.

The "Golden Share" owns of Continental stock gives NW the right to control "any change of ownership, share exchange,business combination,recappitalization, consolidation" involving CO. I believe this means that CO needs NW approval to either buy or sell.
 
simairlinenet
Posts: 820
Joined: Sat Oct 29, 2005 2:24 am

RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 11:04 pm

I've read the document over. Here's what I believe is an accurate summary as it pertains to today:

1. Continental can redeem the golden share for $100 if any of the following happens:
-Northwest offers or tries to sell the voting right to someone else
-Northwest buys 25+% of another major airline ($1 billion+ in annual revenues)
or is 25+% bought by another major airline

2. Northwest must approve/can block a similar ownership change of Continental (as described above)

3. Northwest must approve/can block the sale of "all or susbtantially all" of Continental's transatlantic and Latin America route networks
 
micstatic
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RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 11:15 pm

This is just a thought. Wouldn't NW's rights to reject a buyer be voided since they are in bankruptcy right now? Wouldn't the creditors assume this decision?
S340,DH8,AT7,CR2/7,E135/45/170/190,319,320,717,732,733,734,735,737,738,744,752,762,763,764,772,M80,M90
 
bobnwa
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Joined: Fri Dec 22, 2000 12:10 am

RE: NW Cannot Stop CO Merger

Tue Dec 12, 2006 11:54 pm

Quoting Micstatic (Reply 13):
This is just a thought. Wouldn't NW's rights to reject a buyer be voided since they are in bankruptcy right now? Wouldn't the creditors assume this decision?

No, that is not the way it works.
 
twal1011727
Posts: 449
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RE: NW Cannot Stop CO Merger

Wed Dec 13, 2006 8:40 am

Quoting BillReid (Thread starter):
Will the EU be able to block this as anticompetitive?

I am not at all informed on this but......

I can't see how the EU could stop a merger between two U.S. carriers....they may be able to say that they would have to shave flts, cut capacity etc. but thats all.

No doubt somebody will let me know...

KD
 
baw716
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RE: NW Cannot Stop CO Merger

Wed Dec 13, 2006 11:10 am

I'm confused about the original post. We have discussed this issue over and over; to the best of my knowledge, CO is not involved in any merger activity at the moment.

As to the "golden shares", NW has the ability to block a merger. Now, what is an interesting argument is who controls those shares? To say that the creditors control them is incorrect and to those that say they do, I'm sorry, but you don't understand the bankruptcy laws in the USA.

There is a trustee that the judge has appointed to oversee the assets of the carrier and all matters have to be approved by the trustee or the court. If management wishes to exercise its golden shares to block a CO merger, it would have to go before the court to get permission to do so, since the shares are part of the assets of the carrier which are now under the control of the court (to protect the airline from the creditors collecting on its debts while the airline reorganizes itself, and to protect the creditors from actions on the part of management which put those assets at risk).

As to the EU blocking a deal...the EU cannot prevent a deal. What they can do is put conditions on the operations of the airline in Europe...and even then, so far, the EU has had difficulty exercising the kind of control it wants over the airline industry.

Then again, I haven't heard about CO being involved in any merger discussions. Everybody has been rumored to be in discussions with everybody, so I don't take too much stock in anything right now unless something is announced. The only thing annouced is US/DL and that deal is very much in doubt.

baw716
David L. Lamb, fmr Area Mgr Alitalia SFO 1998-2002, fmr Regional Analyst SFO-UAL 1992-1998
 
silentbob
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Joined: Tue Aug 15, 2006 1:26 pm

RE: NW Cannot Stop CO Merger

Wed Dec 13, 2006 4:08 pm

Quoting Falcon84 (Reply 10):
Quoting Jetjack74 (Reply 4):
Now, the golden shares that NW owns can be voided if CO buys another carrier or NWA is bought out.

That is correct. Which is why NW would prefer CO buy someone, instead of visa versa.

I would suspect they would prefer to have someone pay them to accept a buyout of CO. At least that way they get something out of the deal.
 
ANother
Posts: 1833
Joined: Thu Nov 03, 2005 2:47 am

RE: NW Cannot Stop CO Merger

Wed Dec 13, 2006 4:20 pm

Quoting TWAL1011727 (Reply 15):

I can't see how the EU could stop a merger between two U.S. carriers....they may be able to say that they would have to shave flts, cut capacity etc. but thats all.

Under certain conditions (not any that we see at the moment) the Competition Directorate of the European Commission can prevent a merger of non-EU companies.

Quoting Baw716 (Reply 16):
As to the EU blocking a deal...the EU cannot prevent a deal. What they can do is put conditions on the operations of the airline in Europe...and even then, so far, the EU has had difficulty exercising the kind of control it wants over the airline industry.

Have you forgotten the Honeywell GE merger?

To the question could the EU block a merger, the answer is simple - Yes, they can. The more difficult is would they. IMHO I believe this unlikely, they are on record that consolidation would be a good thing.
 
baw716
Posts: 1463
Joined: Thu Nov 20, 2003 7:02 pm

RE: NW Cannot Stop CO Merger

Wed Dec 13, 2006 5:33 pm

I stand behind my statement. The EU cannot prevent a deal between two US companies. It can put limitations on where it can operate within Europe, although this becomes problematic, since this goes against almost everything they have stood for, especially, consolidation.

I think the bigger issue is will the US Government allow the merger without some divesting of routes and assets? If we get into "merger mania" here in the US, the DOT/DOJ are going to have a lot on their plate, since as they approve mergers in the airline industry they will be making policy at the same time.

It will be interesting, no doubt.

baw716
David L. Lamb, fmr Area Mgr Alitalia SFO 1998-2002, fmr Regional Analyst SFO-UAL 1992-1998
 
ANother
Posts: 1833
Joined: Thu Nov 03, 2005 2:47 am

RE: NW Cannot Stop CO Merger

Wed Dec 13, 2006 6:47 pm

Quoting BAW716 (Reply 19):
I stand behind my statement. The EU cannot prevent a deal between two US companies.

As a matter of the law, the European Commission, can prevent a deal between to non-EU companies - be they American, or anyone else - if said deal has an effect on the EU market. The Commission has the power to assess considerable fines (10% of revenue) for breach of law.

On the US side the DOT has authority over aviation matters. DOJ might offer comments or advice to DOT but DOT holds the pen.
 
nitrohelper
Posts: 413
Joined: Tue Mar 08, 2005 5:32 am

RE: NW Cannot Stop CO Merger

Wed Dec 13, 2006 11:06 pm

Quoting Micstatic (Reply 13):
since they are in bankruptcy

They are in Chapter 11, that is protection from bankruptcy. Chapter 7 is liquidation of assets, the action that most people think of as "being bankrupt".

This next statement gives a clear understanding of Chapter 11

Quoting Baw716 (Reply 16):
There is a trustee that the judge has appointed to oversee the assets of the carrier and all matters have to be approved by the trustee or the court. If management wishes to exercise its golden shares to block a CO merger, it would have to go before the court to get permission to do so, since the shares are part of the assets of the carrier which are now under the control of the court (to protect the airline from the creditors collecting on its debts while the airline reorganizes itself, and to protect the creditors from actions on the part of management which put those assets at risk).
 
Jano
Posts: 760
Joined: Sun Jan 18, 2004 1:48 am

RE: NW Cannot Stop CO Merger

Wed Dec 13, 2006 11:45 pm

Quoting ANother (Reply 20):
As a matter of the law, the European Commission, can prevent a deal between to non-EU companies - be they American, or anyone else - if said deal has an effect on the EU market.

Yup, that's correct.

One can think of the proposed GE - Honeywell merger
http://money.cnn.com/2001/07/03/europe/ge_eu/
The Widget Air Line :)
 
Edmonchuck
Posts: 41
Joined: Tue Aug 15, 2006 5:58 am

RE: NW Cannot Stop CO Merger

Wed Dec 13, 2006 11:58 pm

This merger mania is going to happen, no doubt. Sure, the EU will try to flex its muscle, but the economics of 2006 and the debt burden of the airline industry as a whole will force this hand. All involved know this, so at best you'll see posturing and deal making.

As for NW being able to block CO, well, technically they could. However, even "golden shares" have a price, either monetarily or otherwise. Posturing will only go so far - hello the good old "law of diminishing returns".

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