RockBottom

http://www.forbes.com/home/feeds/afx...fx2267060.html

WatchThis!

I keep hearing this and I think it's lunacy!

Three issues make this a really bad idea.

1.) Mergers are expensive. In a time where razor thin margins are the rule in this industry, not doubt that airlines want to consolidate costs. However, the costs of the merger will drag on for years and eleminate the benefit.

2.) Ownership Concerns. There is a limitation of how much equity a non-US carrier can own of a US carrier. While I'm sure the model will be a multi-national holding company (like Exxon), there has never been a merger like this in the airline sector. I think the feds would be justified in stripping US Flag carrier staus from the resulting airline as they are no longer a US company. Remaining US Flag carriers would vie for the abondoned routes. Jumping through the hoops with the DOJ, FAA, and the UK counter-parts will take years. The added expense could mean live or die (or at least Chapter 11 in a post Oct. 17, 2005 world). I'm surprised that shareholders would approve a make or break proposal.

3.) Cabotage. By far the worst by-product for labor would be the ability to whip-saw US pilots with cheaper forgein labor. There could be right-to-work issues with homeland security, although there would still be huge pressure on labor. APA would do well to fight the merger on that issue alone, as I don't think that any resulting scope clause will be worth the paper it's written on.

The Drama Continues.............

B757200ER

What if the combined Super-Airline dominated the North Atlantic, producing higher revenues than elsewhere (except Asia)? Would that be worth eliminating foreign ownership restrictions?

Mergers are expensive, but AA certainly got a bargain in buying TWA, which they paid $750 million for a $2.5 billion-asset-rich airline, then eliminated almost all TWA employees. APA could'nt do much about that one, either, but their members certainly reaped great benefits and a windfall in seniority over it.

HSLD

Revenues aside, I agree, that is exactly the point that the DOJ will take issue with and rule that such a merger does indeed violate anti-monopoly laws.

And that was a good thing? In a BA/AA merger, you'll see two lists, maybe three, whipsawed against each other to produce a much lower labor cost. It won't be a good deal for anyone but shareholders IMO.

Fools & Horses

BA has a very extensive route system. They fly to places, on their own, right now that just make you wonder why they aren't being attacked or threatened everyday. If you combine American ownership with their current route structure, I believe, you're just asking for trouble. BA and AA have a very good working relationship, as it stands. Personally, don't think that there is really anything beneficial to be gained by either one, in an all out
merger.

B757200ER

But, unlike Syteam and Star Alliance, they do NOT have anti-trust immunity, so no code-sharing is allowed on the highest revenue flights---those BA/AA flights to London-Heathrow. Their relationship may be good, but it is'nt great; and certainly they are'nt earning as much revenue as they could if they had ATI.

HSLD

I'd bet that code-sharing is the best AA/BA could hope for, I just don't see an all out merger happening this decade.

Superfly

Don't forget about TWA's debt(in the billions), the $750 million was just the cash payment, the whole deal cost far more! What exactly were the "great benefits and a windfall in seniority?"

Av8tor

I would say that the furlough protection they received from 75% of the TWA guys being stapled and furloughed in their place is a windfall and a blessing for many AA guys. But I know AA would never have had to furlough and would never have had any financial difficulties if it weren't for TWA....blah...blah...blah....

B757200ER

Over 2/3rds of the TWA pilot group was stapled below the newest, new-hire, probationary pilot at AA, and all TWA pilots were fenced into STL and only allowed to fly MD80/757/767 aircraft. Out of 2,400 TWA pilots, only 495 remain, and these are all Captains with early '88 seniority and up. Also, according to a recent article in both Aviation Week and Airways magazine, less than 2,000 TWA employees remain at AA out of the 22,500 employed when AA bought TWA.

Under 'windfall' in the dictionary, it says: "an unexpected and fortunate acquisition". This certainly applies here.

Av8tor is correct when he states that without the 'windfall' in seniority for many junior, new-hire AA pilots, they would have been furloughed right after 9-11. Instead, more-experienced and more senior TWA pilots were sent packing. Junior AA pilots should thank their lucky stars they got an extra 2-3 years at the mainline before furlough.