Just for grins, here's what Holly has to say. Personally I think Joe is getting desperate with his latest press releases (1000th pilot, confident, etc.).
Why America West May Not Be Crazy
If things go according to plan, America West will also place a bid for ATA on Friday. But unlike the bid from AirTran, which does not include any of ATA's employees, or the bid from Southwest, which appears now to be a type of marketing/codeshare set-up that includes gates, but allows a portion of ATA to remain in business, America West's deal will be for the whole enchilada.
Okay, we all know the situation. Why would America West, which is struggling with high fuel prices and falling earnings, now want to take a chance on taking over an airline that has a solid reputation for not making money?
Okay, first of all, why hasn't ATA made money at Midway? I think it is because, as we have written here many times in the past, it does not seem the airline knows how to make money -- period. They manage for load factor for one thing. I have always wondered if they even know the meaning of the words, "revenue optimization."
As a result, I think the revenue minds at America West could make improvement here.
Secondly, we know AWA has to grow. On this point, if you take both fleets (AWA and ATA) and re-gauge AWA's system and ATA's, guess what? I think that you end up with a company where aircraft size is matched to demand pretty closely -- which could improve revenue opportunities. In addition, AWA currently has no large aircraft orders in place -- a position that would allow AWA to take on the additional aircraft from ATA without having to worry about additional future aircraft coming into the pipeline.
We all know ATA's fleet is too large for the markets they serve. Heck, they know it..
As for hub size, ATA's 14 gates at Midway have been cited as being "too many" for AWA to handle effectively. But, if you look at the size of AWA, and look at the size of the airline's hubs at both Las Vegas and Phoenix, operating the 14 gates at Midway doesn't look particularly daunting. Remember too that AWA is a network carrier, not a point-to-point carrier. As a result, this too gives the airline more need for the 14 gates. Fewer than 14 gates, and the Midway operation might not be large enough to be profitable.
Then there is the ETOPS argument that we have already talked about here. ATA's ETOPS equipment would allow AWA to implement overwater flying (Hawaii in particular) sooner than AWA can do it on its own.
While AWA is currently working on their ETOPS certifications, from what I understsand, the airline is still another year away from completion of the process.
But what about the thorny problems of employee integration, or, "When has a merger ever worked?"
We put that question to one analyst last week who, although he is somewhat skeptical of the numbers side at this stage, having not seen any details, clearly has no reservations about the airline's ability to integrate two work forces, as he said, "I think America West has the culture in place, and has the management smarts to pull this kind of deal off in terms of employee integration. But not every airline could."
Another person close to the airline's bid said to me in an email this week:
"It's been a long hard road to get past the glamour era of Howard Hughes' TWA, Rickenbacker's Eastern, Trippe's Pan Am.We all still hear stories about those glorious Ozark Airlines' wine and cheese baskets. But you know what? Those days are gone. It's a different ballgame now. Those old romantic guys probably never considered planes flying into buildings, bloated cost structures, inefficient mainframe systems, proposed legislation to improve customer service, etc. If the current environment tells us anything, it's that airlines can stop flying (albeit a slow, painful death), airline employees are sometimes forced to find lives beyond this industry or take very steep pay cuts and make correlated lifestyle changes.
I would think that there will be a somewhat different approach to a combined carrier with longer term job security than perhaps either airline could offer on its own. Now of course you're going to have a lot of chest pounding and rhetoric, but if you can see past that and manage to that, I think AWA management can handle the transition."
Another person at America West whom I asked about the deal, and to whom I suggested that AWA didn't seem in the best of financial straits, said, "Yes, but the bulk of our problems right now are fuel based. However, just sitting still and saying, "It will get better if we just click our heels together three times, fuel goes down, capacity comes out, and pigs fly" isn't the answer either."
Could AWA pull a deal like this off? Are there any certainties in this business? No, but after taking a look at several of my key complaints of the past few months a bit more closely this last week, I have to admit -- I don't think Doug Parker and the folks in Phoenix have been smoking strange substances anymore. I can now see the method in the madness more clearly. I now understand why AWA seems convinced it can make the deal work.
