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AWA, Airtran in consolidation race

  • Thread starter Thread starter mad691
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mad691

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http://news.ft.com/cms/s/69e2f430-23c7-11d9-aee5-00000e2511c8.html


Efforts to be first to consolidate the US low-cost airline sector intensified on Thursday as America West and AirTran continued last-minute talks with ATA, as it prepared for an imminent bankruptcy filing.

According to people involved with the discussions, ATA, the 10th-largest US airline, is trying to put together a pre-arranged bankruptcy filing, with one of the two airlines acting as its strategic partner in a new reorganisation plan.

Boeing Capital, which has significant exposure to ATA because of the number of aircraft it leases to the airline, has also been involved in the talks. It has already written off some of its equity stake in the carrier.

ATA is expected to file for bankruptcy in the next few days, although the timing is dependent on the talks. The two potential bidders have different interests in ATA's assets, and would proceed only after a bankruptcy filing. ATA, which is being advised by Citigroup, is also seeking about $75m in debtor-in-possession financing to fund a bankruptcy.

America West is understood to be considering a merger with ATA, taking over its operations at Midway airport in Chicago, assuming most of the leases for ATA's Boeing 737 and 757 aircraft, and scaling back ATA's operations at Indianapolis. It could also take over ATA's employees.

AirTran, which has headquarters in Orlando, is understood to be seeking to acquire just ATA's Midway gates, and the 737 assets rather than the 757 aircraft.

One person said that AirTran was the frontrunner, but that America West could still file an alternative transformation plan once ATA was in bankruptcy.

Considerable risks remain for both America West and AirTran. Both would be increasing their exposure to Southwest, which has a dominant position at Midway. In the first half, ATA lost $91m, on revenues of $778m.

There are also concerns that all three airlines are losing money, which is further weakening balance sheets. America West has more than $300m in debt to the Airline Transportation Stabilisation Board, which oversees loan guarantees. Under conditions of the loan, it would need to seek ATSB permission to pursue a deal and would also need to show that a merger would not lead to a credit downgrade.

On Wednesday, ATA warned that its cash problems had worsened since its filing on August 16. The 10 per cent wage concession approved by ATA's flight attendants would not be enough in cost-savings to satisfy these liquidity concerns, it said.

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Not surprising. AirTran has a great balance sheet and with DAL soon to be a lower-cost carrier it need's to expand outside of ATL and DFW. AWA has some cash but with fuel prices it's probably less inclined to part with it.
 
Either I'm confused or the author of the article is. I think he is referring to ATA based out of IND, not AirTran based out of MCO. ATA flies the 73's and the 75's and does the Midway gig.

Opps. Upon closer review I see where the author makes the distinction. Sorry.
 
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Very gutsy move by either carrier, especially as the majors have finally realized that overcapacity is killing all segments of the ENTIRE industry. If the deal comes out as a merger or buy-out prior to BK by ATA, then the acquiring airline will be toast. If however, either airline could have first right of refussal on select assets after a BK filing, then it may have some benefits only if the asset leases are completely renegotiated at current market values. Both AWA and Air Tran need to be very careful, as any missteps in this environment can take an airline down in short order. AWA still owes the ATSB a lot of money and has a reputation for over-expanding with little success. Air Tran may have a better business model for the MDW operations and possibly the 738 fleet, but I would stay away from the 800s and stick with the 700 plan.
 
SDF2BUF2MCO said:
Either I'm confused or the author of the article is. I think he is referring to ATA based out of IND, not AirTran based out of MCO. ATA flies the 73's and the 75's and does the Midway gig.
You are confused. Both Airtran and AWA are looking at some parts of ATA. Don't worry you aren't the first to confuse ATA with AAI
 
I think this is what will save ATA, albeit a different ATA.

ATA files BK showing DIP financing thru GECAS/Boeing under the terms that;



AWA acquires all the 757's. This would fit with their growth plan and with their existing fleet. I assume the crews would go with them.



Air Tran acquires the 737's and MDW gates/operations. This would fit with their growth plan as the -700's are next gen and they wouldn't have to "Dummy up" the -800's. Plus the -800's are already (most are almost done anyway) configured with BIZ Class, which Air Tran has on their planes. I assume the pilots would go with these planes as well.



ATA then works an agreement (now the A/C debt is gone) with Gecas/Boeing to acquire some 767's under new/ post 9/11 lease rates and can support the revenue for these with the Military Contract and other charter operations. The L1011’s not scheduled to retire till 07-08 would maintain the bulk of the fleet until being phased out. ATA would be saved but would be back solely to the charter/military business which does make money, look at the books and see that only the military flying ever made ATA money, not scheduled service. Plus look at the likes of World making money every 10Q.



All in all it might work. Capacity in the system would initially be reduced as ATA withdrawals from the schedule service. Then Air Tran would take over MDW and compete directly with SWA, which they can do alot easier than ATA can given the financial situation. AWA would supplement the 757's on some already existing routes, taking advantage of the ability of the etops (for shortcuts and such over water), but I understand they want to expand outside the domestic and would use the 757's for some of this flying.



Disclaimer - I am no aviation Biz expert or have no inside knowledge except being an ATA pilot (last to know anything) and the above is just my opinion...

 
My guess is that we may be interested in some of the gates, but probably not the 737-800, unless Boeing made us an offer that we couldn't refuse (like the TWA 717's we bought). We generally don't like to compete with SWA directly, all though we do co-exist at BWI pretty well).

In fact, I would be willing to bet that the only way we would take those -800's (which are used instead of new, require an extra F/A and have extra seats that are not needed in an overcapacity situation) is if they took 717's off of our hands and we moved to (gradually) an all-737 fleet.

Now, that might be possible, but I don't see AirTran buying those planes from ATA- we would probably only buy them if they were less expensive than we could get -700's from under our current agreement w/Boeing.

I really feel for the ATA pilots. I had an ATA application partially filled out when I got hired by AirTran (all but those essay questions!).
 
Ty Webb said:
In fact, I would be willing to bet that the only way we would take those -800's (which are used instead of new, require an extra F/A and have extra seats that are not needed in an overcapacity situation) is if they took 717's off of our hands and we moved to (gradually) an all-737 fleet.

Now, that might be possible, but I don't see AirTran buying those planes from ATA- we would probably only buy them if they were less expensive than we could get -700's from under our current agreement w/Boeing.
Ty, you might be on to something. Boeing has offered Aloha 717's, but many of us have been wondering how Boeing could come up with 13-20 717's in the span of a year. Maybe this is the master plan?

Is Boeing still making the 717? I thought the plant at LGB was shut down.
 
No, the plant is still open.

If Joe is reading this...please don't take away my toy -- (717). I just love flying the airplane that takes care of itself. :)
 
Anyone have info on the ATA pilots merger and fragmentation policy in a scenario where there is a partial asset sale?
 
Here ya go, see if you can make sense out of it.



Subject: Amendment to Section 1 (Fragmentation)

THIS LETTER OF AGREEMENT is entered into by and between ATA Airlines, Inc. (the "Company" or "ATA") and the Air Line Pilots Association, International (the "Association"), collectively referred to as “the Parties,” pursuant to the terms of the Railway Labor Act, as amended.

NOW, THEREFORE, the Parties agree to the following:

This shall confirm the Parties agreement to replace the language in Section 1.F. of the Collective Bargaining Agreement effective July 1, 2002 in its entirety with the following:

F. Fragmentation

1. If the Company transfers (by sale, lease or other transaction) or disposes of aircraft or route authority which produced thirty percent (30%) or more of the Company’s operating revenues over the prior twelve (12) months, or which produced thirty percent (30%) or more of the Company’s block hours over the prior twelve (12) months net of additions to the Company’s operating revenues or block hours produced by aircraft or routes acquired during the same twelve (12) month period, or ten (10) aircraft whichever is less, to a person or entity or to a group of persons or entities acting in concert (the “Transferee”) that is, controls or is under the control of an air carrier or that will operate as, control or be under the control of an air carrier following its acquisition of the Company’s aircraft or route authority (any such transaction, a “Substantial Asset Sale”), then:

a. The Company shall require the Transferee to offer employment to Crewmembers from the ATA Crewmembers’ Seniority List who are Status Qualified on the aircraft being transferred and whose identity shall be determined consistent with the seniority provisions of the Agreement (the “Transferring Crewmembers”). The number of Transferring Crewmembers shall be the sum of (i) the average monthly Crewmember staffing per aircraft over the prior twelve (12) months actually utilized in the operation of the aircraft transferred to the Transferee in connection with the Substantial Asset Sale plus (ii) the average monthly Crewmember staffing over the prior twelve (12) months actually utilized in the operation of the route authority transferred to the Transferee in connection with the Substantial Asset Sale to the extent such Crewmember staffing is not included in the calculation of paragraph 1.a.(i) above; and

b. The Company shall require the Transferee to provide any Transferring Crewmembers with the seniority integration rights provided in Sections 2, 3, and 13 of the Allegheny-Mohawk LPPs except that the integration of the Transferring Crewmembers into the Transferee’s seniority list shall be governed by Association Merger Policy if both pre-transaction Crewmember groups are represented by the Association. The Company shall require the Transferee to agree, and the Transferee shall agree, to provide the seniority integration rights specified in the preceding sentence in connection with a Substantial Asset Sale in a written document.

c.[font=&quot] [/font]For purposes of this Subsection 1., the fragmentation provisions contained herein shall not apply to the Company’s retirement of the L1011 fleet.



This Amendment to Section 1 (Fragmentation) Letter of Agreement shall be effective upon execution of and shall run concurrently with the Flight Deck Crewmembers’ Collective Bargaining Agreement that became effective on July 1, 2002. However, if a letter of commitment for the acquisition of a 100 to 110 seat aircraft is not signed by ATAH by June 30, 2005, this Amendment to Section 1 (Fragmentation) Letter of Agreement shall become null and void.
 
I'm no lawyer but it seems to me that the fragmentation policy is pretty easy to get around. If ATA where to file Ch. 11 and the aircraft lessors were to repossess the aircraft then the aircraft are not being transferred to an entity which is an air carier or controls an air carrier. If the lessor then signs a lease agreement with another airline for the ex-ATA airplanes I don't think the fragmentation policy would apply.

As others have mentioned before it is a very risky time for an airline to enter into a merger agreement with another airline. Mergers are very complex and often require the melding together of very different corporate cultures, training, procedures and methods. A merger is a time consuming and expensive process that almost never goes smoothly and often creates inefficiencies that take years to overcome. It's far easier to aquire equipment and property without any strings attached. Another problem with a merger is that the stronger carrier in the deal (not ATA) is often required to bring employees on board who are given credit for years of service and therefore are paid much more and have more accruals such as sick leave and vacation. It's often cheaper to bring new employees in who are at the bottom of the pay scale and lower the overall cost per employee. It doesn't seem fair but cost is the big concern in this economy. I think that preferential interviews and hiring at the bottom of the AWA or Airtran lists is about the best that the ATA employees can hope for.

I wish ATA and the employees the best. There a lot of pilots who worked for my airline and now work for ATA and they are a good group of guys/gals. I wish them all luck in the future and hopefully this thing will turn out OK one way or another for them. If fuel prices continue to go up I think that there will be a lot more airlines in ATA's shoes in the near future. With the exception of SWA and possibly JetBlue and AirTran I wouldn't bet $5 that any of the carriers that exist today will still be here 5 years from now without some drastic improvements in the economy and fuel prices.
 
Yes, I can see you are no lawyer. It continualy amazes me how access to a web board changes average joes into experts.

Do I think that that the above fragmentation policy is bullet-proof? No. Do I think it was written by ALPA laywers who have a keen sense of past precedences, and have crafted the language in the best possible way to protect the ATA pilots? Yes.

I think the ATA can hope for more than "preferential interviews". But that's just my "Expert Opinion".
 
If you want to know how easy it is to get around any fragmentation policy, scope clause or an entire contract for that matter, just ask any former TWA pilot.

Here's why...As soon as ATA declares BK (and they will have to in order to renogotiate the leases on their airplanes) the entire contract is up for grabs via the 1113 process. This process allows a Bankruptcy Judge to ammend all or part of the CBA based on the needs of the company and the creditors.

If AirTran or AWA wants the planes, gates, etc from ATA without the crews, all they have to do is tell the BK Judge that they want ATA's CBA ammended to waive scope and fragmentation clauses. That's it.

Personally, I hope that doesn't happen. After being on the receiving end of that kind of treatment it just doen't seam right. Unfortunately, the BK process makes an ALPA CBA virtually worthless.
 
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75M said:
If you want to know how easy it is to get around any fragmentation policy, scope clause or an entire contract for that matter, just ask any former TWA pilot.
Wasn't it the TWA pilots themselves who waived their scope protection?
 
FDJ2 said:
Wasn't it the TWA pilots themselves who waived their scope protection?
Yes, we did, under the advice of the ALPA-National supplied attorney and Woerth. AA was telling us that our successorship clauses conflicted with the APA's CBA and hence had to go. We were given the choice of having the bankruptcy judge abrogate our entire contract, or we could voluntarily waive just the offending clauses. At the time the section 1113 filing was unprecedented in the airline industry so we just had no idea what was in store. In retrospect we shouldn't have given in so easily, though the end result would've likely been the same.
 
jettypeguy--Your scenario seems the most likely to me. George doesn't want to lose his company and he has always come back to save it by returning to its roots--non-sked.

Several times in the past, George has tried to get out of the business but the monkeys they hired to run the place drove it to the edge of extinction. George has always come back, pulled back and gotten things back on track.

This time, he has a much more difficult job. Tague and 9/11 got them in much deeper than before. I think George would now be much happier to have ATA reclaiming a chunk of the somewhat lucrative charter/AMC business.

JMO, though.

TC
Hired at ATA 9/87. Furloughed by ATA 11/87. :rolleyes:
 
Good point. Technically that's true, but the decision was made because the choice was to waive the scope or have the entire contract stripped.
 

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