LCC/AMR Merger offer

[wms]

It's official.

http://www.reuters.com/article/2012/12/07/usair-amr-idUSL1E8N7C6Y20121207

 

[ackattacker]

I'm sure it's only coincidental that this is announced the same day AMR pilots voted in the new contract...

 

[fam62c]

How much value does LCC bring to the combination, especially after their labor costs rise as a result of the deal? Considering there is no offer of cash to the creditors are they better off with 70% of the combined airline or 100% of American as an independent company? It looks like it would be another ugly, long, drawn-out merger where any synergies and inefficiencies will take years to realize. In this industry mergers always seem to be far harder and more expensive to carry out than promised and deliver less value in the end. LCC hasn't even gotten it's last merger straightened out and they want to merge again? Where is the real "fit" here? What about system overlap on the east coast and potential divestment issues? Do you need hubs in CLT, PHL and MIA? What about the fleet?

I think we may see other parties get involved with this situation yet, I don't see LCC management being the ones to remain in control of this combination if this happens. If LCC had a boatload of cash to put in the deal that would be one thing but I think if this gets done it will be the American side that calls the shots. This will be interesting as it unfolds.....drama.

 

[KarmaPolice]

I can't believe this!!! I did NOT see this coming.

 

[dollacrackho]

What other parties would get involved? Unless there are some top secret discussions going on, LCC and AMR are the only ones at the party. And as far as American management remaining in control the creditors have already said they want Horton out. This sounds like its gonna happen . If Parker didn't think it was gonna happen i don't think he would have even made an official offer and would have just said they couldn't come to agreeable terms and have decided not to pursue a merger at this time. It's gonna be a big long messy merger. Bigger office for Doogie and more money to pay off his drunk driving tickets.

 

[ackattacker]

How much value does LCC bring to the combination, especially after their labor costs rise as a result of the deal? Considering there is no offer of cash to the creditors are they better off with 70% of the combined airline or 100% of American as an independent company? It looks like it would be another ugly, long, drawn-out merger where any synergies and inefficiencies will take years to realize. In this industry mergers always seem to be far harder and more expensive to carry out than promised and deliver less value in the end. LCC hasn't even gotten it's last merger straightened out and they want to merge again? Where is the real "fit" here? What about system overlap on the east coast and potential divestment issues? Do you need hubs in CLT, PHL and MIA? What about the fleet?

I think we may see other parties get involved with this situation yet, I don't see LCC management being the ones to remain in control of this combination if this happens. If LCC had a boatload of cash to put in the deal that would be one thing but I think if this gets done it will be the American side that calls the shots. This will be interesting as it unfolds.....drama.

Interesting speculation, but I think that objectively the labor costs that AMR has signed into place with it's various Unions and the MOU that Parker signed with the AMR unions have similar cost structures so I doubt the creditors will see a big difference there between stand alone and merged labor costs.

And the LCC/AWA merger, while a disaster from a labor standpoint, was fairly successful from a business standpoint. I don't think the creditors care too much about pilots fighting with each other over seniority so long as the airline makes money.

I think it comes down to long-range planning and future value. If the creditors see the combined airline as being more sucessfull competing against DAL and UA, then they go for it.

Basically it comes down to this... LCC is worth $2 billion right now (actually that number may be a bit inflated due to merger speculation... but bear with me).

Parker claims a combined LCC/AMR is worth $8.5 billion. AMR creditors get 70% of that - $6 billion dollars worth of equity. LCC shareholders get the other $2.5 billion.

If Horton can make a convincing argument that a standalone AMR is worth more than $6 billion and can hold that value in a competitive market, then he puts the kabosh on the merger. I'm guessing that will be a tough sell on Horton's part.

 

[Scoot 11]

The desperation of Doug Parker is laughable. He's a child trying to get into a "grown ups only" club.
I wonder if he'll get another DUI after this failed attempt!:laugh:

 

[fam62c]

What other parties would get involved? Unless there are some top secret discussions going on, LCC and AMR are the only ones at the party. And as far as American management remaining in control the creditors have already said they want Horton out. This sounds like its gonna happen . If Parker didn't think it was gonna happen i don't think he would have even made an official offer and would have just said they couldn't come to agreeable terms and have decided not to pursue a merger at this time. It's gonna be a big long messy merger. Bigger office for Doogie and more money to pay off his drunk driving tickets.

Private equity possibly, TPG....they can bring in cash where LCC can't.

 

[ackattacker]

Private equity possibly, TPG....they can bring in cash where LCC can't.

I don't really see why they would need cash. You need outside cash when neither airline can bring in the money themselves to finance the exit from bankruptcy and the costs of the merger... LCC has around $2.5 billion in unrestricted cash and AMR has around $5.1 billion. Both have operations currently operating in the black, as well. I don't see why they would want or need to bring in outside money.

 

[scoreboardII]

Last ditch attempt by LCC to become a big boy and wear big boy pants. If AA exits as planned solo, LCC is in for trouble.

 

[Dornier 335]

Huh?

If AA exits as planned solo, LCC is in for trouble.

Really? How so? Using your logic Alaska should be in trouble, too. What facts do you use for this statement?

 

[jonjuan]

The desperation of Doug Parker is laughable. He's a child trying to get into a "grown ups only" club.
I wonder if he'll get another DUI after this failed attempt!:laugh:

He's more successful than you've been in life, apparently.

 

[jonjuan]

Last ditch attempt by LCC to become a big boy and wear big boy pants. If AA exits as planned solo, LCC is in for trouble.

No way AA can exit stand alone. The one airline who should be most worried here is SWA. They will soon be surrounded by post bankruptcy, lean, low-cost, aggressive companies.

 

[kf4amu]

No way AA can exit stand alone. The one airline who should be most worried here is SWA. They will soon be surrounded by post bankruptcy, lean, low-cost, aggressive companies.

Don't underestimate the power of happy motivated employees...

 

[jonjuan]

Don't underestimate the power of happy motivated employees...

Agreed- DAL out of CH11 now with very motivated employees-about to be same with UAL, AMR and LCC. The unhappy, unmotivated ones are looking like the AT folks who feel screwed.

 

[OurMoney1]

US Airways is bringing ZERO cash to the table. It will be a 100% stock transaction. If Parker thinks the combined company will be valued at 8 billion he is dreaming. Far from a done deal ... Especially in current market conditions considering this is an all stock transaction Airline stock is junk!!!!! Just ask all the holders since 9/11........This isnt anywhere near even interesting yet.

 

[Turtle21]

US Airways is bringing ZERO cash to the table. It will be a 100% stock transaction. If Parker thinks the combined company will be valued at 8 billion he is dreaming. Far from a done deal ... Especially in current market conditions considering this is an all stock transaction Airline stock is junk!!!!! Just ask all the holders since 9/11........This isnt anywhere near even interesting yet.

A comparison to the drop of 911 may be a little over the top, but the fiscal cliff and the coming recession certainly makes airline stocks a bit bearish. Even so, the posturing in public about the value, who should get what, who should stay, and who should step aside... seems to indicate more concerted interest in it actually happening rather than less. Ie. when and how, rather than "if".

 

[GIZMONC]

Some of you guys need to checkout: http://www.drinkinganddriving.org/ over 900,000 individuals are arrested each year for DUI. DP just happened to be one of those 900,000. Just think of the number of drivers that do not get arrested. Having been in the airline business for over 22 years this industry has it fair share of alcholics. We are all make mistakes over the years, God knows I have made many. At least he is not like Miss Lohan and in the news all the time for something.

 

[jonjuan]

Some of you guys need to checkout: http://www.drinkinganddriving.org/ over 900,000 individuals are arrested each year for DUI. DP just happened to be one of those 900,000. Just think of the number of drivers that do not get arrested. Having been in the airline business for over 22 years this industry has it fair share of alcholics. We are all make mistakes over the years, God knows I have made many. At least he is not like Miss Lohan and in the news all the time for something.

Yep- Herb sure liked his Wild Turkey.

 

[Lear70]

Don't underestimate the power of happy motivated employees...

Ummm... where are these people?

In all seriousness, my motivation these days is primarily professional pride in my work. Doesn't have anything to do with who I work for, and I know several thousand other employees around me who pretty much think the same thing.

Many of the SWA pilots on this board have said as much as well. They do their job, collect the paycheck, and go home, as do most airline employees at every other carrier.

GK has said something to the employees in a news letter a few months ago - with all the other Legacy carriers restructured in bankruptcy, lower CASM's than they used to have, and the fuel hedging nowhere near what it used to be, SWA has to compete on a much more level playing field, which is going to require some changes in how SWA operates.

The reality is the AAI purchase is part of that restructuring for SWA, a shift towards international flying where there's still yield to be made and markets to stimulate with the SWA model. Will it be the same model SWA has always had? Of course not, but the game has changed and at least SWA management seems to realize it and is trying to shift accordingly.

That aside, the seniority integration in this AA-UAir-AWA deal is going to get ugly, and with the route overlap and relatively younger group at AWA. The TWA guys may not even WANT to come back anymore. After being recalled BEHIND all the younger guys at AWA and new-hires at UAir, even with the retirements at AA plus what LCC brings, they may never see the left seat if they came back.

What a mess.

 

[scoreboardII]

Some of you guys need to checkout: http://www.drinkinganddriving.org/ over 900,000 individuals are arrested each year for DUI. DP just happened to be one of those 900,000. Just think of the number of drivers that do not get arrested. Having been in the airline business for over 22 years this industry has it fair share of alcholics. We are all make mistakes over the years, God knows I have made many. At least he is not like Miss Lohan and in the news all the time for something.

Yet, Doug boy kept his job, never had a threat of losing his job and those two AW pilots that got caught, how did they fair again?

 

[WSurf]

Yet, Doug boy kept his job, never had a threat of losing his job and those two AW pilots that got caught, how did they fair again?

I don't think Parker would've took out 150 people in his BMW after blowing slightly over the legal limit. Not saying that the AW guys wouldn't have safetly took off from MIA and Slept to PHX and nothing would've made the news. Yet these two AW guys partied all night and then wanna get into a pissing match with Airport Security folks over Coffee, thus allowing them folks to get such a good wiff of Bourbon on their breaths. Pretty Dumb..

I understand where you're coming from.... But its a big Club and guess what?? We ain't in it!!!

 

[rajflyboy]

Guys

Its up to the creditors what to do with AA. What the AA management or pilots think doesn't really matter.

That's the fact jack

 

[get2flyin]

Guys

Its up to the creditors what to do with AA. What the AA management or pilots think doesn't really matter.

That's the fact jack

That's a fact, Jack!

 

[Turtle21]

That's a fact, Jack!

Arrrmy training, sir.

 

[C Festerpuss]

This ain't no merger...Now this here is a merger....


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Hillbilly Report..... Question For The Supreme Court: How About Same Sex Mergers?

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NOW That there is sum type o' merger....

 

[Flyby1206]

I don't really see why they would need cash. You need outside cash when neither airline can bring in the money themselves to finance the exit from bankruptcy and the costs of the merger... LCC has around $2.5 billion in unrestricted cash and AMR has around $5.1 billion. Both have operations currently operating in the black, as well. I don't see why they would want or need to bring in outside money.

I dont fully understand how this whole thing works, but if half of the UCC didnt want the standalone plan could TPG buy them out so to speak and take their place on the committee?

 

[Green]

APA INFORMATION HOTLINE

This is APA Communications Director Gregg Overman with the APA Information Hotline for Monday, Dec. 10.


We would like to thank our counterparts at USAPA for agreeing to attend our latest discussions with the UCC and US Airways about our pending merger transaction. We would especially like to thank the USAPA officers for agreeing to serve coffee and donuts while the grown ups in the room talk business. APA President Wilson added, "we will certainly be finding room for our new union counterparts on the Food and Beverage Committee. We look forward to having USAPA leadership serve nothing but the finest breakfast and lunch items while we conduct business on behalf of all native American pilots".

That's it for now. Thanks for checking this hotline.

 

[Russ]

Yup, it doesn't take everyone being torqued off to sour the mood, just a few filoks who perceive they got the shaft.

 

[fam62c]

I dont fully understand how this whole thing works, but if half of the UCC didnt want the standalone plan could TPG buy them out so to speak and take their place on the committee?

I think that prior to any final deal bondholders would be free to sell their debt to anybody they want. LCC got on the creditor committee by purchasing some bonds from another debt holder. What the bondholders want is 100 cents on the dollar, they want their investment paid back at the terms in place before the bankruptcy. This is not likely to happen so they will end up having to convert all or some of their claim from cash to equity which carries a risk. If somebody like TPG came along and started making offers to buy debt in cash at more than the creditors thought they would get from a reorganization they could possibly buy enough debt to end up with the majority of the equity after the reorganization. A company like TPG may be much more likely to take the risk of an equity stake of unknown future value than many of the institutional bondholders.

If the American management team didn't have the exclusive right to propose a reorganization plan I think we might see some competing plans. It always seems to me that in bankruptcy competing plans should be allowed from day-1 so the creditors can compare deals (including the option of partial or total liquidation) to get the best return. The idea of leaving the management team of a failed company in place with the exclusive right to offer a reorganization plan always seemed strange to me. It's one of the things that makes bankruptcy such an attractive option; it creates a moral hazard issue especially when management teams are awarded new management contracts and equity stakes after the reorganization. Failure can be very profitable for a management team.