General Lee
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American Frowns on US Air Merger
By Ted Reed 06/15/10
DALLAS (TheStreet) -- Airline industry buzz has it that American and US Airways ought to merge, but American CEO Gerard Arpey is apparently not buying it.
"At a certain point, [you] have enough scale," Arpey said Tuesday at a Bank of America Merrill Lynch investor conference. "[Then] you're just creating more scale over and over again. That's not something we see as being shareholder-friendly."
Arpey, who historically has been reluctant to discuss potential merger scenarios involving American, was responding to an analyst's question referencing American's purchase of TWA, a deal seen as a response to United's(UAUA) 2000 attempt to merge with US Airways. The deal would have made United larger than American, and American acted to prevent that from happening -- with notably unfavorable results, since it gained nothing but headaches from acquiring TWA. The question, essentially, was: "You bought TWA, so don't you feel threatened today?"
Arpey responded by saying, as he has repeatedly, that consolidation is good for the airline industry. Then he reiterated his principal point of the past several months, which is that American has put together a network with hubs in the four largest U.S. metropolitan areas -- New York, Los Angeles, Chicago and Dallas -- as well as London, Tokyo and Miami, the best hubs for Europe, Asia and Latin America.
"We believe that we have a strong network," Arpey said. "It is not only strong, it's strong in the right places. Couple that with partners we have in the most important regions around the world, and I think our network can stand up today to any network."
In that context, what would US Airways' hubs in Charlotte, Philadelphia, and Phoenix add? Arguably, not very much. However, it is also true that Charlotte is one of only two Southeast hubs. Avondale Partners analyst Bob McAdoo argues that American and the Oneworld alliance need the trans-Atlantic feed available in Philadelphia.
Additionally, US Airways executives believe that the carrier, while it does not need a merger to be profitable, will at some point become a desirable partner for one of the big three U.S. carriers.
Meanwhile, American CFO Tom Horton noted at the Tuesday conference that the planned merger between United and Continental(CAL) would have only minimal impact on American in two key cities. "United doesn't add much to Continental in New York, and Continental doesn't add much to United in Chicago," Horton said. "It really doesn't change much in any of those markets."
-- Written by Ted Reed in Charlotte, N.C.
Bye Bye--General Lee
By Ted Reed 06/15/10
DALLAS (TheStreet) -- Airline industry buzz has it that American and US Airways ought to merge, but American CEO Gerard Arpey is apparently not buying it.
"At a certain point, [you] have enough scale," Arpey said Tuesday at a Bank of America Merrill Lynch investor conference. "[Then] you're just creating more scale over and over again. That's not something we see as being shareholder-friendly."
Arpey, who historically has been reluctant to discuss potential merger scenarios involving American, was responding to an analyst's question referencing American's purchase of TWA, a deal seen as a response to United's(UAUA) 2000 attempt to merge with US Airways. The deal would have made United larger than American, and American acted to prevent that from happening -- with notably unfavorable results, since it gained nothing but headaches from acquiring TWA. The question, essentially, was: "You bought TWA, so don't you feel threatened today?"
Arpey responded by saying, as he has repeatedly, that consolidation is good for the airline industry. Then he reiterated his principal point of the past several months, which is that American has put together a network with hubs in the four largest U.S. metropolitan areas -- New York, Los Angeles, Chicago and Dallas -- as well as London, Tokyo and Miami, the best hubs for Europe, Asia and Latin America.
"We believe that we have a strong network," Arpey said. "It is not only strong, it's strong in the right places. Couple that with partners we have in the most important regions around the world, and I think our network can stand up today to any network."
In that context, what would US Airways' hubs in Charlotte, Philadelphia, and Phoenix add? Arguably, not very much. However, it is also true that Charlotte is one of only two Southeast hubs. Avondale Partners analyst Bob McAdoo argues that American and the Oneworld alliance need the trans-Atlantic feed available in Philadelphia.
Additionally, US Airways executives believe that the carrier, while it does not need a merger to be profitable, will at some point become a desirable partner for one of the big three U.S. carriers.
Meanwhile, American CFO Tom Horton noted at the Tuesday conference that the planned merger between United and Continental(CAL) would have only minimal impact on American in two key cities. "United doesn't add much to Continental in New York, and Continental doesn't add much to United in Chicago," Horton said. "It really doesn't change much in any of those markets."
-- Written by Ted Reed in Charlotte, N.C.
Bye Bye--General Lee
