Horton: it's time now to consider merger options

Discussion in 'American Airlines | AAdvantage' started by HaveMilesWillTravel, Jul 10, 2012.  |  Print Topic

  1. HaveMilesWillTravel
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    Am I really the first to post this?

    http://www.washingtonpost.com/busin...rger-options/2012/07/10/gJQA64DlbW_story.html


    DALLAS — The head of American Airlines says his company has done so much to fix its problems that it can consider potential mergers, and invitations will be going out soon.

    Thomas Horton, the CEO of American and parent AMR Corp., said Tuesday that American has boosted revenue, reached cost-cutting deals with labor unions, and is well on its way to a successful restructuring after seven months under bankruptcy protection.

    ...


    American is the nation’s third-biggest airline, and US Airways ranks fifth in passenger traffic. Combined, they would be roughly the same size as United and bigger than Delta.

    US Airways said it was pleased by Horton’s comments.

    “All we have asked for is a fair and balanced opportunity to present our plan versus others, and we are hopeful this is the beginning of such a process,” said US Airways Group Inc. spokesman John McDonald.

    Horton didn’t say how many potential investors or merger partners he’ll talk to, and he didn’t name any.

    ...
     
  2. anabolism
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    anabolism Gold Member

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    Certainly lots of discussion over at FT and news updates at TB. Unclear of course if this is serious or not.
     
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  3. DestinationDavid
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    As has been noted in other merger threads, Horton would be silly if he didn't consider mergers in AA's current state, and he has in fact made other references to potential merger prior to this. We'll just have to see, as you note, how serious these comments are.
     
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  4. HaveMilesWillTravel
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  5. dildooba44

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  6. Seacarl
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    I don't see how merging with Alaska or Frontier or Virgin would solve anything for American. The hubs aren't complementary. Frontier's DEN hub has two large hubs there (UA & WN). SEA is low yielding. All of VX is low yielding and losing money. They don't add any international traffic (except AS Mexico). Because AA is so much bigger, its culture and cost structure would apply and surely destroy those carriers.

    I can see some possible rationale for B6, to grow the JFK hub and build on AA's Carribean and Latin strengths. But plenty of issues.

    Combining with US, while it won't be pretty, offers by far the most synergies and ability to improve economic performance by keeping higher yield hubs, and dropping lower yield, and increasing international reach, primarily in Europe. I could see an AA-US combination that keeps DFW, CLT, MIA and PHL as the main hubs, and backs away from PHX, ORD and JFK where there is too much competition.
     
  7. DestinationDavid
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    If AA is really considering a merger, they'd still make public overtures to all potential suitors to keep with their fiduciary responsibilities, regardless of how likely a merger with those unlikely candidates (AS, VX) might be.

    Regardless of whether AA merges or not, I don't see AA backing out of JFK or the NYC area in general in its future.
     
  8. HaveMilesWillTravel
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    Spirit should feel snubbed then, and maybe start an advertisement campaign about it.
     
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  9. DestinationDavid
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    Similar to the "new chapter" $11 sales they announced when AA entered bankruptcy protection and they launched DFW service? :D
     
  10. HaveMilesWillTravel
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    Yes, in that same spirit.
     
  11. Sedosi

    Sedosi Gold Member

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    Possibly a "we aren't being considered as an AA merger partner" $50 fee?
     
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  12. HaveMilesWillTravel
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    A no-merger surcharge... I like it! I bet a lot of NW or UA fans would have gladly ponied up some $$$. Maybe even AA fliers when the alternative is a US merger.
     
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  13. gleff
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    I actually see a US airways acquisition of AA as less likely rather than more likely.

    AA's unit revenue is up. Their cash is up. They're wrapping up labor agreements. Mechanics are getting a better deal than under US.

    If anything, AA is getting much more expensive to acquire than the thinking went some months ago.

    They have to look at merger options if only to get a blessing for going it alone. Some of the options they're going to look at will be options where they are the acquirer, rather than being acquired.

    Delta already had its merger, and the New York overlap is extreme. The #2 and #3 carriers merging will likely have anti-trust problems.

    I don't think mergers often reap the benefits that are anticipated. I don't think US acquiring AA would be good for US shareholders. It will drive up their costs. It will be a huge cost in its own right. Parker wanted to merge with United. He wanted to merge with Delta. He DID manage to merge wtih US when he was at HP. All of his talk about how strategic it is, he just wants to run a bigger and bigger airline and would love to run "American AIrlines."

    It was a stretch when AA first filed bankruptcy, without any labor group progress, and bleeding cash. But with a billion more cash on hand than when they filed? It's quite expensive.

    I could be totally wrong, and Parker may absolutely be willing to overpay. But it'll no longer be for a song. Which means it is less likely than it was.
     
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  14. HaveMilesWillTravel
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    He could just submit his resume:

    http://www.aacareers.com
     
  15. Photonerd71

    Photonerd71 Silver Member

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    I agree, you don't get out of NYC for any reason. I could understand a scaling back in Philly, it's sort of in no mans land between NYC and DC.

    I also don't think leaving of scaling back in Chicago either is an option. Way to much traffic in the 3rd largest us city. Id say ramp it up and go after UA and wn
     
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  16. anabolism
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    This seems clear (that AA is at least working up the numbers for buying someone).
     
  17. LETTERBOY
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    I see what you did there. ;)
     
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  18. sobore
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    4 New Suitors for American Airlines - Analyst Blog

    The airline industry is awaiting another major consolidation. American Airlines, a subsidiary of AMR Corp. ( AAMRQ ) is evaluating its merger proposal with the fifth largest U.S. airline US Airways Group Inc. ( LCC ).

    Now, according to Reuters , four other candidates - JetBlue Airways Corp. ( JBLU ), Alaska Air Group ( ALK ), Frontier Airlines, a subsidiary of Republic Airways Holdings ( RJET ) and a privately held Virgin America have expressed interest to be the merger partner.

    After seven months into bankruptcy restructuring, the third largest U.S. air carrier has improved its revenue and reduced costs to a certain extent. The company is progressing well with the labor union negotiations aimed at generating more than $1 billion in annual cost reductions.

     
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  19. HaveMilesWillTravel
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    I have a hard time believing that all those airlines themselves have expressed interest in "merging" with (seems it would be more getting bought by) AA. Sure, for Virgin America it might be an "exit strategy" and Republic probably wouldn't mind getting rid of Frontier, but I thought Alaska has always stated its desire to remain independent and play with many partners. And JetBlue seems to be doing okay on their own, too, no?
     
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  20. kw335
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    While I think AS is the promiscuous little one, I think it fits AA's current network the best out of all. Being SEA-based EXP, I may just be a tad biased, but I'm a 'yay' for AA-AS merger, if there was to be a merger at all.
     
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  21. DestinationDavid
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    I have a hard time believing AS is interested in merging with anyone.
     
  22. Seacarl
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    That would just result in the end of Alaska and the Seattle hub.

    AA would just overwhelm AS - in terms of culture and cost. Eventually goodby what we know of as AS. AA took over OC (Air Cal) and then Reno Air (whose code I don't remember). Within a short while they ceased to exist and the routes were gone too. A lot of AS routes can only be profitably operated with the AS cost structure.

    I don't think AS management could take over AA and overcome the existing culture, unions, etc.
     
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