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Bloomberg says LCC and AMR

Ky.BrownBourbn

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US Airways Seen as Possible Partner for AMR
By Mark Clothier and Thomas Black
November 29, 2011 4:20 PM EST
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The bankruptcy filing today by AMR Corp. (AMR), the parent of American Airlines, may prepare the runway for a merger with US Airways Group Inc. (LCC) as the two seek to become more competitive on size and costs, analysts said.
US Airways, the fifth-largest U.S. carrier, failed in a 2006 hostile bid for Delta Air Lines Inc. (DAL) and in two rounds of merger talks with United Airlines. Chief Executive Officer Doug Parker said in April he saw “one big deal left” in the industry, one involving US Airways, after the purchase by Delta of Northwest Airlines Corp. and the merger of United and Continental Airlines.
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AMR Chapter 11 Filing, Airline Industry Outlook
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AMR Bankruptcy Filing and Company Outlook
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“American potentially needs a partner to achieve more scale,” Kevin Crissey, an analyst with UBS Securities LLC in New York, wrote in a note today. US Airways, based in Tempe, Arizona, “may provide that avenue.”
The consolidation of Fort Worth, Texas-based American Airlines and US Airways, whose stock symbol is “LCC,” would be the “final step” in the industry’s transformation to larger companies that seek to maximize profits instead of market share, Jamie Baker, an analyst with JPMorgan Chase & Co., said in a note today. American Airlines dropped from the world’s biggest airline to No. 3 in the U.S. after industry mergers.
“As indicated by the company, LCC wants a deal,” Baker wrote.
Andrew Christie, a spokesman for US Airways, declined to comment.
Andrea Huguely, a spokeswoman for American Airlines, said in an e-mail that the company doesn’t “comment on rumors.”
Court Protection
AMR filed for court protection from creditors today after failing to win cost-cutting labor accords and being left out of mergers. American will continue normal operations as it restructures to trim costs, new Chief Executive Officer Thomas Horton said today in a news conference.
AMR was determined to avoid bankruptcy proceedings in the years after the 2001 terrorist attacks, as peers used court protection to shed pension and retiree benefit plans and restructure debt. As other carriers combined, they gained route networks that were larger than American’s and more attractive to business travelers, who generally pay higher fares than other passengers.
United Continental Holdings Inc. and Delta “are likely immediate and longer-term beneficiaries of today’s actions by AMR on the capacity front and on the cost front,” Gary Chase, a Barclays Plc analyst in New York, said in a research note.
“Both contributed to this outcome for AMR by becoming more cost competitive and amassing larger, more powerful networks that eroded some of AMR’s historical revenue premiums,” said Chase, who rates United and Delta “overweight.”
Stock Trading
The shares (UAL) of Chicago-based United advanced 6.3 percent to $17.63 at the close in New York, while Atlanta-based Delta advanced 5 percent to $7.80. AMR tumbled 84 percent to 26 cents.
US Airways rose 4.4 percent $4.46 and JetBlue Airways Corp. (JBLU) climbed 10 percent to $4.06. The Bloomberg U.S. Airlines Index (BUSAIRL), which comprises AMR and 10 other companies, increased 1.7 percent.
AMR’s filing makes American the last of the large U.S. full-fare airlines to seek bankruptcy protection, after Delta, Northwest and United. Delta acquired Northwest in 2008, while United and Continental merged in 2010.
Management Change
Horton, 50, takes over the posts of chairman and CEO from Gerard Arpey, 53, who retired from AMR and is becoming a partner at Emerald Creek Group, a Houston-based private equity firm. Horton also keeps the president title.
American accounted for about 15 percent of U.S. carriers’ October passenger traffic, compared with 21 percent for United and 20 percent for Delta, according to data compiled by Bloomberg.
The AMR filing should be “good for the entire industry” and “especially good” for JetBlue and Alaska Air Group Inc. (ALK), which have code-sharing and passenger-connecting agreements with American, James Higgins, an analyst at New York-based Ticonderoga Securities LLC, said in a note today.
Crissey of UBS said in his report that investors should buy shares of major airlines such as Delta.
American has been in contract talks with unions for all of its major work groups since as far back as 2006, seeking to boost employee productivity and erase part of what it said was an $800 million labor-cost disadvantage to other carriers.
To contact the reporter on this story: Mark Clothier in Southfield, Michigan at mclothier@bloomberg.net and Thomas Black in Dallas at tblack@bloomberg.net
To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net
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gutshotdraw

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Oh good grief. Dysfunctional meets disasterous. It's an old notion and hopefully dies again lest we be forced to endure Rosemary's Baby.
 

Fubijaakr

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Well, it makes sense on a couple of levels:

1. Gives LAACC the mass to compete with NWDAAL and UACALL.
2. Combines the AWA/APA pilot groups to put USAPA out to pasture.
 

flythere

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Turtle21

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Well, it makes sense on a couple of levels:

1. Gives LAACC the mass to compete with NWDAAL and UACALL.
2. Combines the AWA/APA pilot groups to put USAPA out to pasture.

AA employees are going to lose jobs, wages, and pensions... and the vultures will circle and salivate about all the possibilities that are in it for them.
 

Fubijaakr

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AA employees are going to lose jobs, wages, and pensions... and the vultures will circle and salivate about all the possibilities that are in it for them.

Again, pensions frozen...not lost.
 

BILL LUMBERG

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Didn't they ALSO say USAir AND United would be out of business years ago?

Don't put too much faith in these empty suits with a laptop and a blog!
 

Old School 737

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Parker running airline with 3 pilot contracts and 2 labor groups!! This will be crazy!!!
 

The Prussian

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2. Combines the AWA/APA pilot groups to put USAPA out to pasture.

But...who's to say APA combines with AWA...suppose APA combines with USAPA....I don't know,...just asking...APA and USAPA have both gone rogue on ALPA...plus,...they both have a seniority "similarities"...
 
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Fly-By-Cable

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Parker running airline with 3 pilot contracts and 2 labor groups!! This will be crazy!!!

Oh yeah it will be one ugly mess. However Parker has been very vocal on more industry consolidation, and very clear that he wants to be involved. This deal hss been in the works for over a year now. The delta/us slot swap was a strategic play to reduce amr and usair over lap in lga. This way they wont be forced to give up as many slots during the merger to swa, b6 etc. Shortly after, amr orders a bunch of airbus aircraft (usairs choice of a/c, all 737s will be parked next year). Unprofitable PHX goes away as it is obsolete with a DFW hub, and the last piece of the puzzle just went into action. Reduce labor cost, relax scope and the deals done.
 
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Headfake14

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Man...if that deal comes to pass...I can only imagine what the moral will be like amongst East/West and AA guys. I suppose something like...

...a tornado, a hurricane and rabid honey badger walk into a bar..........
 
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