CAL/UAL Merger

[seahorse]

Everyone know's we are merging with Aeroflot and opening a pilot base in Siberia.

I'll be the first to bid it. Then I would start up a brothel with hot Russian women, open for all CAL pilots.

 

[pkober]

The more senior the higher the rates ??

 

[ESS PWR]

Not to make the rumor any more complicated than it already is:


Since the NWA pilots had contractual language to block the March, 1998 transaction that bought Bonderman's majority preferred-stock interest in CAL (which gave him control of CAL, even though he only owned about 15% of the Common stock), they negotiated 4 Letters of Agreement that:

1. Set a maximum relative size of CAL airlines (in terms of blockhours). NWA has to remain at least 107% the size of CAL. It's about 120% now.
2. Restricted CAL owned or operated RJ's.
3. Defined and restricted some operations to prevent erosion of NWA Pacific flying.
4. Gave NWA pilots some goodies.

I don't know how much the blocking ability is worth, but any suitor to CAL would need to pay it.

You might want to check the OAG data. The 107% was related to code-share flights only. No company may restrict other businesses growth or it becomes an anti-trust issue. According to OAG data, CAL long ago passed NW in terms of ASM, Block Hours, and RASM.

In 1998, NW was 107% the size of CAL in terms of ASM, thus the scope restriction. Since, CAL has grown faster than NW and 2 years ago it surpassed NW in all three measures. It is interesting to note that even at 107% ASM, CAL and NW were within 100 million in total revenues.

Unfortunately, none of this is valid now since scope clauses have been stripped of its soul. NW however, still owns a golden share that's only good for a vote to block any transaction that involves the purchase of a majority stake in CAL. However, like anything else, everything has a price.

It all depends how airline sizes are measured, but if total revenues were used, Air France is the largest airline in the world with roughly 255 airplanes (360 with KLM). The reason is the enjoy nearly .20 cents RASM and that makes them a nearly $18B/Yr. corporation.

Food for thought.