American Airlines to become US Air?Back to Forum
AnonymousGuest21 Apr 2012
A top-tier AA flyer in Washington DC told me last week that he was dreading USAir taking over American. He’s politically well connected but I ignored it at the time. Today, there’s a story on the Associated press that some of the AA unions have come out in support of the US bid. If you’ve been on USAir recently, you’ll know that this cannot be good news for the long-suffering AA passengers. Still, it’s good that management can’t rely on bankruptcy as a simple way of walking away from their obligations to employees. http://bit.ly/Ibqkix21 Apr 2012
“The announcement may have been made this week because American’s parent company is scheduled to begin discussion of modifying its union agreements in Bankruptcy Court on Monday — a move its unions oppose.” LA Times21 Apr 2012
While US and AA merging would be good for Oneworld as US Airways doesn’t really get that much from Star with its biggest competitor also a member, it is still a relatively long-term prospect at this stage.
In regards to IAG capital, I don’t think that is the issue as WW has previously mentioned his shopping list and has considered stakes in both JAL and AA. However, because both of these nations limit airline ownership, IAG no doubt questions the effectiveness of this expense. What can a 25% costing billions really achieve. Even spending this amount would not stop a Delta takeover. So it is therefore a wise move to save the cash for further full acquisitions.21 Apr 2012
This is all about the Unions. The proposal for thsoe who have not read the details is for an Airline called American Airlines to be headquartered in Dallas (as is American Airlines). American Airlines substantially larger with more routes,, more planes, more staff and larger overseas presence. USAIr needs a friend following the UAL CO deal. But make not msitake this is about the Union contract renegotiations under CHapter 11.21 Apr 2012
Since AA have amongst the most militant unions in the aviation industry then even if it is just them putting the case forward then that is a force to be reckoned with.
If the unions do not support the airline’s bankruptcy avoidance plan then they can easily inflict billions of dollars in damages. So, if US Airways is enthusiastic and the unions supportive that leaves the board, the creditors and the shareholders. US Airways are really trying hard on this one and should not be underestimated.21 Apr 2012
The Union deal with US Air is an attempt to side step the redundancies and cost savings that AA can ask the court to impose under Chapter 11. The union position is not strong under Chapter 11 which is why they have struck this deal. Strike action under these circumstances could be seen as contempt of court. To fully understand this move one needs to understand the provisions and purposes of Chapter 11 which does not exist in English Law.
Interestingly, I see the US Air unions have not reached agreement with USAir management over any merger.21 Apr 2012
AMR, owner of AA, have agreed today to “Consider Merger Options” (FT 12/05 – needs subscription)
It will be taking a “more positive view” of a tie up with US Airways. US Airways have promised to keep the American name flying.
Although Walsh has engaged an advisor, the serial underperformer Walsh has little room for manouver due to making poor previous deals plus no resource to manage 1 airline well, let alone 3 or 4 (TAP).
This could have dire consequences for One World.
The largest IAG shareholder is BANKIA, a Spanish Bank. Bankia was recently bailed out by the broke Spanish Governement who now owns 45% of Bankia. ( Am waiting for a potential fire sale to pick up some shares maybe)
IAG just posted a quarter of a billion euro loss (£211m loss) for the recent quarter which is over 5 times worse than the same prior year quarter loss of £38 million. Walsh continues to blame everyone else for his bad results.12 May 2012
So, what happens if they ditch oneworld in the process? That would be a disaster for OW, imagine *A’s consolidated position in north America in those circumstances. Surely it will not be allowed to happen.
Not sure what role IAG have in this Tete? Have you got the link to the FT article please?12 May 2012
Tete, keen to understand dire consequence for One World. US AIr are on record on wanting any merged acrrier to be called AA to be based at DFW and to be in One World. They want to get away from UAL and STar Alliance.12 May 2012
IAG has, like any other company would, appointed its own advisor in New York, to provide it with independent advice on the bankruptcy process. It has also signed a NDA with AA to secure access to AA’s restructuring plans.
AA merging/being bought by United or Delta is a non-runner. It will either stay independent or merge with USAir (most likely a reverse takeover).
Either way, Oneworld will be stronger by virtue of a stronger AA (see recent announcements about fleet & product upgrades and expansion of international flying) and if it merges with US a few extra Oneworld hubs to buttress the strong performance of the AA & BA joint business (don’t forget that BA and US have worked with each other in the past).
IAG investing in AA has never been on the agenda and the chances of AA leaving Oneworld are remote to non-existent. No buyer of AA would want to drop BA as a partner with its highly coveted transatlantic network out of LHR which is by far the single most important transatlantic gateway in Europe.12 May 2012
Of course were AA to join *A you might see a shift in the balance of transatlantic traffic away from LHR and towards FRA where after all they now have four runways and slots available. Connections through FRA are far superior in terms of destinations and in the main frequency to the four separate terminals at LHR as ultimately it’s all one building except for the LH FCT.
BA then may find their transatlantic network hung out to dry.
Anything is possible.12 May 2012
London has a huge O&D and premium transatlantic market. It is the single biggest market for premium traffic in the world. London-New York is one of the single biggest long-haul routes in the world. Hence why LHR can support a 2nd long haul home carrier in the form of VS which no other European hub can.
The idea that AA would turn its back on LHR in favour of another hub in Europe is ludicrous. If anything you’ll see more AA ops to LHR.12 May 2012