I was just curious how it will work with the 13.5% stake in the future AA and how a US merger would affect that. I just listened to an airline analyst saying the 13.5% stake would be worth far more if AA exited from BK, then merged with US (he said the value would double from 150k to 300k). Is there something more beneficial about merging now while in BK for APA?

Here- (Skip to 53:40)
http://bcove.me/fh8munm8

 

Flyby1206 must have really bad hearing. I hope he didn't put this up as flamebait.

First of all, I respect Dan Akins (although I'm not sure he fully weighs scope) and he was saying the nominal value of the 13.5% equity stake could double in the first few years after a merger. HE SAID NOTHING OF WHEN THE MERGER TAKES PLACE. A merger inside bankruptcy would be the most efficient way of combining the companies and would lead to the greatest increase in synergies, economies of scale, and the nominal value of equity stakes.

I think Flyby1206 need to switch to a Bose headset or something.

 

Whaaaaat??? I cant hear you!

Sorry if I am misunderstanding this, but I was assuming the 13.5% stake wasnt given out until AA exited BK since that is when there is equity to be given out, and if AA/US merged during BK then the current US pilots get a piece of the pie since they would be AA pilots which would dilute the value compared to calculations for ~8000 APA pilots currently? If a merger occurs during BK, can AA/US exit BK without re-negotiating contracts?

Again my apologies if I am completely out of bounds, not trying to be a troll, just trying to understand the possible value.

 

No worries, it's a complicated issue. They are in negotiations now. If the two companies merged the new company would be worth significantly more money, so it wouldn't dilute anything.

Think of it as two, next door neighbor stores. One store(American) is about twice as big as the other store(US Airways). They want to break down the wall in between their stores to save on redundant merchandise, check out counter, and other features. The new store is bigger and more efficient, thus making both store owners more money.

If a guy owned 13.5% of the larger store and it was worth $150,000 before they merged, he would now own 9% of the new store but it is still worth $150,000. In the first couple of years of the new combined store the synergies start to kick in and new customers like the larger range of merchandise. The new store increases it profits and the value of the store doubles.

That guy with the 9% stake now has $300,000 worth of the store. He is thinking about buying a boat... and maybe a couple of Sea-Doos. Since his divorce he has been a bit depressed and maybe a couple of topless flight attendants on his boat would cheer him up.

 

Thanks for the explanation, it all makes sense now. There goes his 300k on a boat and topless FAs!

 

Ooh LCC and AMR F/As topless? No thanks.

 

Yukkk!!!!!!!

 

Let me get this straight, you're going to have a boat, something to relax on, and unwind with. And you're going to mix that with flight attendants?

I agree about the topless part, but best pit topless marlins on it. That'll be smarter. And with the marlin, all the fighting occurs upfront, after which it just lies there. Not the other way around.

 

Oh no. I think this would be his reaction when they finally took their tops off...