AWA looking for Merger Partner

[lowecur]

Well here's a CEO that is not myopic. Doug Parker realizes that the handwriting is on the wall. There is no way they can survive in this type of environment. Chapt 11 is allowing the legacys to crawl back into the game, and he realizes that he needs to do something. The question is, who would want to merge with AWA? Their fleet is not a good match for many other carriers, although the route network is perfect for AAI.

America West CEO expects to participate in mergers

Thu Feb 10, 2005 12:55 PM ET


By Kyle Peterson


PHOENIX, Feb 10 (Reuters) - America West Airlines (AWA.N: Quote, Profile, Research) expects a wave of mergers to sweep U.S. low cost carriers, thinning out the crowded industry, its chief executive said on Thursday, adding that he sees his company participating.

Speaking to reporters at America West headquarters, Doug Parker said there are too many low-fare carriers. Because of their low expenses, these airlines have stayed profitable as high fuel costs pushed many larger rivals into the red.

"We don't need seven low-cost carriers in the United States," Parker said. "That's far too many."

Still, America West, the No. 8 U.S. airline, has been trying to imitate those carriers' success at slashing operating costs and expects to be one of the survivors, he said.

Parker predicted that the number of low-cost airlines would fall to two or three over the next three to five years from at least seven today.

"We certainly believe we will be one of those and play a part in that consolidation as it happens," he said.

Low-fare competitors like Southwest Airlines (LUV.N: Quote, Profile, Research) , are the envy of the industry as they manage to reduce costs and cut into the business of the larger legacy airlines.

America West last month reported a fourth-quarter loss of $47.8 million, or $1.32 a share, reversing a year-earlier profit.

"The environment out there is a mess," Parker said, "and it's about as bad as it's ever been."

Parker stopped short of identifying which airlines are most likely to be acquired.

Aside from Southwest, leading low-cost carriers include JetBlue Airways (JBLU.O: Quote, Profile, Research) , AirTran Airways (AAI.N: Quote, Profile, Research) , Independence Air (FLYI.O: Quote, Profile, Research) and ATA Airlines Inc. (ATAHQ.PK: Quote, Profile, Research) . Analysts see Southwest, JetBlue and AirTran as the industry's most robust, while Independence Air's parent FLYi runs a risk of defaulting on its debt, Standard & Poor's has said. ATA is reorganizing under Chapter 11 bankruptcy protection.

 

[Dizel8]

Not that I am advocating a merger, but the fleet cold work well with jblu. That is, get rid of the 737's, use the 757 for "long" transcons, the A-320 for most and the 190 for connecting a lot of dots!

 

[CaptSeth]

Frontier.

 

[lowecur]

Jetblue will never merge with anyone. They don't need the baggage, and will be successful by themselves.

Frontier is a good fleet match, but they need more cities in the East.

My guess is they may talk to Bonderman at TPG(sugardaddy), and put a bid in on UAIR. He says he's not interested in a legacy, but he wouldn't tip his hand.

 

[Captain Overs]

Never say Never!

 

[Formula1]

How about AWA and Independence air? That would give AWA and east coast hub out of Dulles.

 

[VABB]

Frontier

This isn't the first time AWA has been shopping for a merger partner. Analysts and industry observers have long said Frontier would be the perfect match, with AWA being the dominant party in the deal.

Fleet: AWA's fleet consists of 737's, 757's, and A320's/319's, with the Airbus being eyed as the airframe of choice for future expansion. Frontier's fleet of A320's, A319's, and A318's would mesh nicely into AWA's fleet.

Routes: Both have a majority of their flying in the western half of the country, with few routes east at a very low frequency. This would allow AWA to expand eastward.

Finances: neither company is in bankruptcy at the moment, but both are just barely above hanging on. Survival of either one on it's own in the long-term is questionable.

This would be a bumpy road for some time to come. Don't exect any profits right away when this goes through, that takes a while after a merger.

AWA has done very well in the customer service area in recent years. They really turned themselves around in that area and have done well. Frontier is another story. They still receive quite a bit of complaints from customers. Lost bags, majority of the flights still not departing or arriving on time, and poor customer service are at the top of the list. Frontier would have to really get their act in order here. You can't have a merger and still have poor customer service. It's not a good way to start. By the way, I will pay more to fly on someone else than go on Frontier. I've never had a good experience with them. (late arrivals, lost bags, and very rude gate agents at some locales.)

Don't know how the seniority list thing would go. Since AWA would be the bigger of the two, my guess is that they would either just staple the Frontier guys to the bottom or somehow integrate them into AWA's list.

I don't think the days of mergers are over. Look for this one to happen. I believe this will begin a period of consolidation in the industry, a necessary step for it to be profitable again. It's exciting too. It will be interesting to see what happens when a major buys out a small airline and expands.

 

[VABB]

How about AWA and Independence air? That would give AWA and east coast hub out of Dulles.

That wouldn't work. Independence Air has a very high debt load that AWA cannot afford to take on at this time. Also, the high utilization of RJ's in the fleet is a hinderance because of the high operating costs and low seat yields.

 

[lowecur]

Frontier?

Just where do you think FRNT/AWA will be able to come up gate space back East? They will need focus cities, and right now gate space/slots are tight.

 

[Steeler Fan]

Their fleet is not a good match for many other carriers, although the route network is perfect for AAI.

Wow, that's the 2nd time I've heard that. The 1st time was yesterday.

 

[Captain Overs]

AWA has been rumored to merge for years with someone. I wouldn't hold my breath. The industry will shake out.

 

[lowecur]

Another thought is Spirit. They certainly have quite a few Airbus' on the way, and have a small network route structure on the East Coast. The problem with that is the investment group put $125M into the company and would like a return(they want to float an IPO, but that may not be viable with fuel prices this high).

 

[atldc9]

I still think AAI and AWA would make a good fit. Excellent route network. 90 more 737's on order for AAI could replace the exsiting Airbuses and older 737's. Boeing would love to stick it to Airbus. Moving forward, you get rid of Mesa's RJ's, and replace them with our own RJ, I mean 717, and use the 737 to standardize the fleet. -700's and -800s, maybe even the -900's to replace the 757 flying. Order the 787 to ramp up international flying. Bring on the world.

Instant airline with 220 planes, hubs in ATL, PHX, and LAS. Over 4 years you phase in the AAI order to replace the buses, and in 4 years you have a relatively young fleet, with maybe 2 or 3 types.

Could it work, who knows.

 

[xanderman]

I still think AAI and AWA would make a good fit. Excellent route network. 90 more 737's on order for AAI could replace the exsiting Airbuses and older 737's. Boeing would love to stick it to Airbus. Moving forward, you get rid of Mesa's RJ's, and replace them with our own RJ, I mean 717, and use the 737 to standardize the fleet. -700's and -800s, maybe even the -900's to replace the 757 flying. Order the 787 to ramp up international flying. Bring on the world.

Instant airline with 220 planes, hubs in ATL, PHX, and LAS. Over 4 years you phase in the AAI order to replace the buses, and in 4 years you have a relatively young fleet, with maybe 2 or 3 types.

Could it work, who knows.

But I like the bus and I don't want to be a 737 driver the rest of my career...!

 

[xanderman]

AWA has been rumored to merge for years with someone. I wouldn't hold my breath. The industry will shake out.

Yeah I agree. Doug is just talking about how much extra capacity there is... again.

 

[320AV8R]

AWA would be a good fit with USAir, assuming Bonderman still controls the financing.

JetBlue and Frontier would be brilliant. A comprehensive network, with good feed.
Same Airbus aircraft too.

Spirit....too small.

AirTran......

 

[JetMonkey]

I've said it before and here it goes again, AWA and Jetblue would be a perfect merge. After, they could start Low Cost flights to oversea markets with larger aircraft, with the low operating cost they could corner the world market to just about every European city and beyond...it's the future anyway.

 

[English]

Aloha...perfect entry into Hawaii that AWA has been looking for. ETOPs certificate on the 737.

Supposedly (according to a newspaper article) Bill Franke and Jonathan Orenstein are two of the potential investors so far. Keepin' it in the family.

 

[jetalc]

Frontier's fleet of A320's, A319's, and A318's would mesh nicely into AWA's fleet.

So....when did FRNT suddenly get A320's?

 

[Steeler Fan]

AWA would be a good fit with USAir, assuming Bonderman still controls the financing.

JetBlue and Frontier would be brilliant. A comprehensive network, with good feed.
Same Airbus aircraft too.

Spirit....too small.

AirTran......

I'm curious what follows "AirTran....." Do you care to elaborate???

(by the way, how many NWA guys are still on furlough...a few of these guys were in my former AF Reserve unit...just hoping they're back flying).