ASA and Comair to merge

[FlyComAirJets]

Part of the deal to spin off CoEx included a half billion dollar note intended to fund Continental's pension plans. I believe it was a part of the initial 10k report.

As Delta is forced to confront its underfunded plans, it is not unreasonable to expect them to adopt a similar scheme.

Seeing as they have already invested several billion dollars in this company, it is difficult to imagine they would just liquidate Comair although one should never underestimate the stupidity of management. I don't think they can afford it.

 

[sleepy]

OK, so why did Continental sell off ExpressJet and Northwest sell off Pinnacle?

And the fact of the matter is that any major can make any of its wholly-owned regionals look as profitable (or unprofitable) as it wants, simply by changing the internal transfer pricing between them. So the profitability of a wholly-owned is a strange concept to start with.

A bigger issue for Delta selling ASA or Comair is that it would have to endow them with some growth to make them interesting to investors. And ASA and Comair are high cost regionals, so increasing the amount of flying there isn't necessarily something Delta wants to do.

In the end, it might be more profitable for Delta to liquidate ASA or Comair (or both) and simply lease out the RJs to a third party. Hmmm, Wexford is buying Midway right now as a CRJ platform...

Actually, ASA and Comair have the lowest CASM of any DCI carriers. That includes Skywest and ACA. It would make more sense to put aircraft with us, because we are the most efficient carriers in the portofolio.

 

[jarhead]

.....or to declare bancruptcy. That's what's usually done when liabilities exceed assests in publically held companies.

 

[General Lee]

Jarhead,

To just file for Chap 11 would allow every stcokholder to sue every board memeber for rendering their stock worthless. That will not happen. Delta still has over $2.7 billion in cash on hand, and many assets (like ASA/Comair, planes, terminals, they could still mortgage). The pension problem is shrinking as the stockmarket rises, and the debt problem will be helped by paycuts that are forthcoming. A lot of the problems are due in 2005, and the selling of the 11 738 aircraft just cut $500 million out of the projected Capital Expenditures due that year alone. Believe it or not, the management here (even with the CEO shift) actually sees what is happening and they are forwardly planning this out. And, in the mean time the economy is improving, which helps loads....

Bye Bye--General Lee

 

[jarhead]

General Lee

Yes, bancruptcy can not be entertained in a capricous way, as the board has a fiduciary responsiblity to the shareholders. That agreed to, going chapter 11, (or even chapter 7), does not necessarily render the stock "worthless". I believe in most cases, the event is meant to "cut the lossses" to the shareholders, through reorganization, (or in the case of Chapter 7, to liquidate the assets to pay off the debts owed to creditors at x cents on the dollar). Certainly not a desirable situation in any case, but when one buys stock in a company, they share in the profits, or they incur the costs of the "risk" they took when buying the stock. The annual shareholders meeting, is the place that directors can be appointed or fired, depending on the "mood" of the shareholders. There is no guarantee when one buys a share of stock in a publicly owned company, that it will be a good investment..

 

[vc10]

Continental currently owns 31% of ExpressJet. The original IPO sold 47%, proceeds to Continental were around half a billion dollars and had Continental not received this, it likely would have gone bankrupt in the past year. Significant? Your call.

Pinnacle was sold by the NW pension plan a week or two ago in an IPO. Northwest retains 11% for now.

 

[Richard]

Fred Buttrell's Opinion

From the Atlanta Journal Constipation:


Fred Buttrell comments on what he thinks about any such merger.



Q: You're running an operation that consists of two wholly owned airlines plus three independent carriers. Between all these units, it seems from the outside like there's a whole lot of overlap of routes, redundant management layers, etc. Is there? What are the advantages of having all these units?

A: Each of these carriers have the operational staff to operate on their own [commercial carrier] certificate. But in terms of network planning, revenue, inventory allocation -- basically everything that you see on the marketing side to distribute and sell tickets -- all of that is done at the Delta level. These carriers don't have any [corporate] staff.

We have done the analysis [and determined] it would be more cost-inefficient to merge and try to integrate [union employees'] seniority lists and all the disruption that could potentially create. ...

... In terms of the [route] overlap, absolutely. We're integrating schedules so that we can take advantage of as much [aircraft] utilization as we possibly can.



This ain't a done deal! Prepare for an ugly fight.

 

[Heavy Set]

If I were Buttrell, I would not want to deal with one large employee group that could destabilize the entire operation with a strike - I would pit the two groups against each other. So, I would not want to merge ASA and Comair. Of course, the introduction of bidding from Chataqua, Sky West and Mesa to the equation would change things I suppose.

A merger makes sense operationally, but not strategically from management's perspective... I wish you guys luck though...

 

[jarhead]

Of course Buttrell would not want a merger, for the very reason Heavy Set stated. But.....right now, Comair and ASA have some negotiating capital. Buttrell wants to open the current Comair contract for "discussions", and delay the negotiations on the ASA pilot contract for another couple of years. If he wants that bad enough, maybe he'll listen to the joint MEC resolution. Ya don't get anything for nothing with union groups in the airline industry. If he wants concessions, with no benefit to the pilot groups, they would/should just tell him "thanks, but no thanks". In other words, "take a hike"!

Anything the executives of an airline openly state to the public, is purely for public relations, and is a red herring to the unions. Utter B.S. Anything of substance will be decided upon behind closed doors with the union leadership, and with negotiations, and give and take, until both parties agree to something.....period.

 

[sleepy]

"If I were Buttrell, I would not want to deal with one large employee group that could destabilize the entire operation with a strike - I would pit the two groups against each other."

Hummm...........That sounds a lot like your pilot group. A combined ASA and Comair would be large enough that no U.S. President would ever allow us to strike. We would get the PEB, and that would give management a big advantage.

 

[jarhead]

Sleepy

Your speculation that a PEB would NEVER allow a strike, is not founded in reality. Northwest Airlines was released to strike just a couple years ago, and did just that for 15 days, and got a lot of what they wanted in a new contract. Size does not preclude being able to strike, and even a PEB is only good for sixty days.

 

[Bill Mostellar]

Atlantic Southeast-Jackson Airlines

Now that is funny!

And I'm a product of the Atlanta Public Education System...

 

[Oakum_Boy]

Unions can propose anything they wish. Management will throw it back in their face. I don't believe this will go anywhere...

 

[Krusty]

jarhead....

...a couple of years ago, that was CMR.
NWA, 1998!

 

[FlyComAirJets]

ASA and CMR pilots want to merge lists.

Management wants concessions.

The ASA pilots are in contract negotiations.

Management wants CMR pilots to renegotiate their contract.

It appears that each side has something that the other wants.

Sounds like a deal in the making .... it just comes down to how badly they want it.