AMR to mull options including merger CEO says
07-10-2012, 02:32 PM
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AMR to mull options including merger CEO says
Bankruptcy: American Airlines to mull strategic options, including mergers, CEO says | LeveragedLoan.com
In a marked change in approach, American's CEO Thomas Horton says company now at juncture where “it now makes sense to carefully evaluate a range of strategic options, including potential mergers.”
details...
Bankruptcy: American Airlines to mull strategic options, including mergers, CEO says | LeveragedLoan.com
In a marked change in approach, American's CEO Thomas Horton says company now at juncture where “it now makes sense to carefully evaluate a range of strategic options, including potential mergers.”
details...
Bankruptcy: American Airlines to mull strategic options, including mergers, CEO says | LeveragedLoan.com
07-11-2012, 06:58 PM
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http://www.nytimes.com/aponline/2012...r.html?_r=1&hp
Merger Dance: Rating American Airlines' Options
By THE ASSOCIATED PRESS
NEW YORK (AP) — American Airlines is weighing various options for its future, but most analysts say the nation's No. 3 airline only has one viable choice: combine with No. 5 US Airways.
American could leave bankruptcy protection as an independent airline. Or join forces with a much smaller airline such as JetBlue or Frontier. There has been talk of a tie-up with United or Delta, the nation's two biggest airlines, or possibly a large infusion of cash from either a foreign airline or a private equity firm.
Some of those scenarios might be wishful thinking, while others will at least be vetted by management. Tom Horton, CEO of American's parent AMR Corp., said Tuesday that he is now evaluating "a range of strategic options, including potential mergers." Here are some of the possibilities:
— US AIRWAYS MERGER
If you listen to Wall Street, this is the only outcome that makes sense. Analysts say the airlines have somewhat complementary route networks and both are too small to thrive on their own. Investors agree — the price of US Airways Group Inc. stock has more than tripled since Nov. 28, when American filed for bankruptcy.
US Airways CEO Doug Parker has aggressively pushed for a combination. He won the support of American's three largest unions — their leaders even posed for photos with him at the company's annual meeting. That's where he gave a slide presentation showing that the combined airline would have the largest market share east of the Rockies.
In many ways, Parker is right: Both airlines have to merge.
In the last five years, Delta combined with Northwest and United joined with Continental to create two behemoths that control nearly 60 percent of the market. American, which was once the world's largest carrier, has just under 20 percent of the market and US Airways has another 10 percent. Teaming up, they would be on par with Delta and United.
"They just aren't going to be competitive without merging together," said Robert Herbst, an independent airline analyst.
American would gain feeder flights from smaller cities to its hubs as well as US Airways' lucrative shuttle service between New York, Boston and Washington D.C. US Airways would gain higher-profit international routes.
Still, there would be headaches. Seven years ago, America West bought US Airways out of bankruptcy, taking its name. The two airlines still have not merged staffs, with former America West pilots flying only with other former America West pilots. Adding American to the mix will complicate matters but could also help. The larger American unions would have enough voting power to outweigh any of the disagreements between the two US Airways labor groups.
American still has the exclusive right in the bankruptcy process to work out a restructuring plan acceptable to the court and its creditors. If it doesn't find an acceptable merger partner, it could go it alone.
— INDEPENDENT AMERICAN
Before this week, American's management said it wanted to remain independent, vowing to emerge from bankruptcy protection as a more competitive, financially sound airline.
Indeed, American is using the bankruptcy process to slash employee wages. It also has an ambitious plan to replace its planes with newer, more fuel-efficient models.
But it still doesn't have the size or route network to compete with other airlines. Domestically, it is often undercut by low-cost airlines like Spirit Airlines Inc. and Virgin America. Internationally, it faces fierce competition from Delta and United as well as foreign airlines like Air France and Dubai's Emirates. In order to survive independently, American would have to beef up its presence on the East Coast and West Coast. That would mean expanding at a time when the rest of the industry has been cutting flights to deal with decreasing demand.
— MERGING WITH DELTA OR UNITED
A deal with Delta Air Lines or United, part of United Continental Holdings Inc. might make financial sense. But any such combination would control such a large share of flights that antitrust regulators would likely vote thumbs down.
The Department of Transportation has been trying to let smaller airlines like Southwest Airlines, JetBlue Airways Corp. and Virgin America compete in some markets such as New York and Washington, D.C. The Department of Justice did allow Southwest and AirTran to merge. But to put that in perspective, a merged American-United would be more than three times as large as the combined Southwest-AirTran.
"There's no way that the DOJ and the DOT are going to let Delta or United in any way, shape or form to get any part of American Airlines," said Herbst.
— JETBLUE, VIRGIN AMERICA, FRONTIER OR ALASKA
Merging with a smaller airline isn't practical. JetBlue, the largest of this group, would add only 170 planes to American's 900-plane fleet. JetBlue and Alaska have great feeder networks on the East and West Coast, respectively, but American already has partnerships with both carriers that bring passengers to its hubs in cities like New York and Los Angeles.
JetBlue has been expanding in the Caribbean and cities in the Northeast — many locations abandoned by American. JetBlue's lower labor costs make this possible, said Ray Neidl, an airline specialist with the Maxim Group.
"A lot of markets JetBlue is expanding into, American can't make money in," Neidl said.
Frontier would give American a foothold in Denver. But United and Southwest are already there, and the city isn't large enough to support three major airlines. Airlines want to dominate their hub cities, not fight for travelers there.
Virgin America is loved by its passengers but has struggled to post a profit and has large debt — not exactly what a company coming out of bankruptcy wants.
— FOREIGN OWNERSHIP
U.S. law prohibits foreign entities from having a majority stake in airlines here. A partial ownership could give American some cash but would do little to improve its route structure. The airline already has antitrust immunity to collaborate with British Airways, Iberia, Japan Airlines and Qantas on routes and pricing.
The same goes for a private equity investment — it would give American capital to make improvements but wouldn't solve the weakness in its route network.
___
Scott Mayerowitz can be reached at Scott Mayerowitz (GlobeTrotScott) on Twitter.
Merger Dance: Rating American Airlines' Options
By THE ASSOCIATED PRESS
NEW YORK (AP) — American Airlines is weighing various options for its future, but most analysts say the nation's No. 3 airline only has one viable choice: combine with No. 5 US Airways.
American could leave bankruptcy protection as an independent airline. Or join forces with a much smaller airline such as JetBlue or Frontier. There has been talk of a tie-up with United or Delta, the nation's two biggest airlines, or possibly a large infusion of cash from either a foreign airline or a private equity firm.
Some of those scenarios might be wishful thinking, while others will at least be vetted by management. Tom Horton, CEO of American's parent AMR Corp., said Tuesday that he is now evaluating "a range of strategic options, including potential mergers." Here are some of the possibilities:
— US AIRWAYS MERGER
If you listen to Wall Street, this is the only outcome that makes sense. Analysts say the airlines have somewhat complementary route networks and both are too small to thrive on their own. Investors agree — the price of US Airways Group Inc. stock has more than tripled since Nov. 28, when American filed for bankruptcy.
US Airways CEO Doug Parker has aggressively pushed for a combination. He won the support of American's three largest unions — their leaders even posed for photos with him at the company's annual meeting. That's where he gave a slide presentation showing that the combined airline would have the largest market share east of the Rockies.
In many ways, Parker is right: Both airlines have to merge.
In the last five years, Delta combined with Northwest and United joined with Continental to create two behemoths that control nearly 60 percent of the market. American, which was once the world's largest carrier, has just under 20 percent of the market and US Airways has another 10 percent. Teaming up, they would be on par with Delta and United.
"They just aren't going to be competitive without merging together," said Robert Herbst, an independent airline analyst.
American would gain feeder flights from smaller cities to its hubs as well as US Airways' lucrative shuttle service between New York, Boston and Washington D.C. US Airways would gain higher-profit international routes.
Still, there would be headaches. Seven years ago, America West bought US Airways out of bankruptcy, taking its name. The two airlines still have not merged staffs, with former America West pilots flying only with other former America West pilots. Adding American to the mix will complicate matters but could also help. The larger American unions would have enough voting power to outweigh any of the disagreements between the two US Airways labor groups.
American still has the exclusive right in the bankruptcy process to work out a restructuring plan acceptable to the court and its creditors. If it doesn't find an acceptable merger partner, it could go it alone.
— INDEPENDENT AMERICAN
Before this week, American's management said it wanted to remain independent, vowing to emerge from bankruptcy protection as a more competitive, financially sound airline.
Indeed, American is using the bankruptcy process to slash employee wages. It also has an ambitious plan to replace its planes with newer, more fuel-efficient models.
But it still doesn't have the size or route network to compete with other airlines. Domestically, it is often undercut by low-cost airlines like Spirit Airlines Inc. and Virgin America. Internationally, it faces fierce competition from Delta and United as well as foreign airlines like Air France and Dubai's Emirates. In order to survive independently, American would have to beef up its presence on the East Coast and West Coast. That would mean expanding at a time when the rest of the industry has been cutting flights to deal with decreasing demand.
— MERGING WITH DELTA OR UNITED
A deal with Delta Air Lines or United, part of United Continental Holdings Inc. might make financial sense. But any such combination would control such a large share of flights that antitrust regulators would likely vote thumbs down.
The Department of Transportation has been trying to let smaller airlines like Southwest Airlines, JetBlue Airways Corp. and Virgin America compete in some markets such as New York and Washington, D.C. The Department of Justice did allow Southwest and AirTran to merge. But to put that in perspective, a merged American-United would be more than three times as large as the combined Southwest-AirTran.
"There's no way that the DOJ and the DOT are going to let Delta or United in any way, shape or form to get any part of American Airlines," said Herbst.
— JETBLUE, VIRGIN AMERICA, FRONTIER OR ALASKA
Merging with a smaller airline isn't practical. JetBlue, the largest of this group, would add only 170 planes to American's 900-plane fleet. JetBlue and Alaska have great feeder networks on the East and West Coast, respectively, but American already has partnerships with both carriers that bring passengers to its hubs in cities like New York and Los Angeles.
JetBlue has been expanding in the Caribbean and cities in the Northeast — many locations abandoned by American. JetBlue's lower labor costs make this possible, said Ray Neidl, an airline specialist with the Maxim Group.
"A lot of markets JetBlue is expanding into, American can't make money in," Neidl said.
Frontier would give American a foothold in Denver. But United and Southwest are already there, and the city isn't large enough to support three major airlines. Airlines want to dominate their hub cities, not fight for travelers there.
Virgin America is loved by its passengers but has struggled to post a profit and has large debt — not exactly what a company coming out of bankruptcy wants.
— FOREIGN OWNERSHIP
U.S. law prohibits foreign entities from having a majority stake in airlines here. A partial ownership could give American some cash but would do little to improve its route structure. The airline already has antitrust immunity to collaborate with British Airways, Iberia, Japan Airlines and Qantas on routes and pricing.
The same goes for a private equity investment — it would give American capital to make improvements but wouldn't solve the weakness in its route network.
___
Scott Mayerowitz can be reached at Scott Mayerowitz (GlobeTrotScott) on Twitter.
07-12-2012, 03:46 PM
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USAirways gets desperate:
US Airways quietly became creditor of American Airlines | wfaa.com Dallas - Fort Worth
US Airways quietly became creditor of American Airlines | wfaa.com Dallas - Fort Worth
DALLAS - US Airways has quietly been buying unsecured debt of AMR Corporation, the parent company of American Airlines, to give it a seat at the table at the bankrupt airline.
“We own a small amount of AMR’s publicly traded debt," said John McDonald, US Airways spokesman in an e-mail to News 8. "We purchased the debt to ensure that we would have standing to participate in proceedings before the Bankruptcy Court in AMR’s Chapter 11 case. We think this will be particularly important now that AMR has publicly committed itself to a review of strategic alternatives.”
US Airways filed a motion in U.S. Bankruptcy Court on Thursday declaring itself a creditor of AMR.
US Airways also asked the court to extend American’s exclusivity period to reorganize alone until December 28.
Two sources told News 8 that USAirways quietly purchased about a million dollars worth of AMR debt recently. It's uncertain what, if any, influence that might have with the court or American's reorganization.
The Fort Worth-based carrier discounted the USAirways move as a stunt.
“US Airways’ filing in court is a meaningless ploy to garner publicity," said Bruce Hicks, American Airlines spokesman. "US Airways admits they own a very small amount of debt which gives them no special position with the court or in this process. Our focus remains on creating the strongest company and greatest value for our stakeholders.”
It is a clever and risky move, said Mark Drusch, a former executive at Continental Airlines and Lufthansa. "The move does show the court and labor unions that US Airways is serious in its efforts to acquire the bankrupt airline."
US Airways has made no secret that it wants to merge with American Airlines. The labor unions representing American’s pilots, flight attendants and ground workers support the merge attempt. This week, American said it would look at merger options.
But, American has worked hard to reach new labor contracts with its pilots and ground workers represented by Transport Workers Union. Those proposals offer pay raises and save jobs that were originally planned to be eliminated.
American is still trying to negotiate a new contract with the Association of Professional Flight Attendants.
“We own a small amount of AMR’s publicly traded debt," said John McDonald, US Airways spokesman in an e-mail to News 8. "We purchased the debt to ensure that we would have standing to participate in proceedings before the Bankruptcy Court in AMR’s Chapter 11 case. We think this will be particularly important now that AMR has publicly committed itself to a review of strategic alternatives.”
US Airways filed a motion in U.S. Bankruptcy Court on Thursday declaring itself a creditor of AMR.
US Airways also asked the court to extend American’s exclusivity period to reorganize alone until December 28.
Two sources told News 8 that USAirways quietly purchased about a million dollars worth of AMR debt recently. It's uncertain what, if any, influence that might have with the court or American's reorganization.
The Fort Worth-based carrier discounted the USAirways move as a stunt.
“US Airways’ filing in court is a meaningless ploy to garner publicity," said Bruce Hicks, American Airlines spokesman. "US Airways admits they own a very small amount of debt which gives them no special position with the court or in this process. Our focus remains on creating the strongest company and greatest value for our stakeholders.”
It is a clever and risky move, said Mark Drusch, a former executive at Continental Airlines and Lufthansa. "The move does show the court and labor unions that US Airways is serious in its efforts to acquire the bankrupt airline."
US Airways has made no secret that it wants to merge with American Airlines. The labor unions representing American’s pilots, flight attendants and ground workers support the merge attempt. This week, American said it would look at merger options.
But, American has worked hard to reach new labor contracts with its pilots and ground workers represented by Transport Workers Union. Those proposals offer pay raises and save jobs that were originally planned to be eliminated.
American is still trying to negotiate a new contract with the Association of Professional Flight Attendants.
07-13-2012, 05:34 AM
#6
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Joined APC: Jun 2008
Posts: 155
Originally Posted by LittleBoyBlew
You gotta hand it to Parker.... The man gets an A+ on creativity!!
That's not creative, BK debt purchase are the bottom dwellers in the industry and a very troubling use of LCC's shareholders assets.
I suspect Parker is drinking again.
07-13-2012, 06:15 PM
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Position: Right Seat
Posts: 1,458
Parker is actually a very smart businessman. He is doing what it takes to form a viable and productive company. He wouldn't have to be doing all this if it weren't for boneheaded AMR management. Everyone supports this merger right now but them. The only reason AMR management is fighting this merger is because they want to award themselves big bonuses upon bankruptcy exit.
07-14-2012, 06:43 AM
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Joined APC: Jun 2008
Posts: 155
Originally Posted by texaspilot76
Parker is actually a very smart businessman. He is doing what it takes to form a viable and productive company. He wouldn't have to be doing all this if it weren't for boneheaded AMR management. Everyone supports this merger right now but them. The only reason AMR management is fighting this merger is because they want to award themselves big bonuses upon bankruptcy exit.
If I was a sharholder, my next call would be to the SEC.
One of the characteristics of alcoholics are grandiosity.
Last edited by GW258; 07-14-2012 at 06:45 AM. Reason: SEC
07-14-2012, 07:33 PM
#10
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Joined APC: Dec 2010
Posts: 524
Originally Posted by GW258
Parker is investing a public company assets in a bankrupt company as if he was a high risk fund manager not reporting to a responsible board.
If I was a sharholder, my next call would be to the SEC.
One of the characteristics of alcoholics are grandiosity.
If I was a sharholder, my next call would be to the SEC.
One of the characteristics of alcoholics are grandiosity.
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