LCC/AMR Merger offer

[wms]

It's official.

http://www.reuters.com/article/2012/12/07/usair-amr-idUSL1E8N7C6Y20121207

 

[ackattacker]

I'm sure it's only coincidental that this is announced the same day AMR pilots voted in the new contract...

 

[fam62c]

How much value does LCC bring to the combination, especially after their labor costs rise as a result of the deal? Considering there is no offer of cash to the creditors are they better off with 70% of the combined airline or 100% of American as an independent company? It looks like it would be another ugly, long, drawn-out merger where any synergies and inefficiencies will take years to realize. In this industry mergers always seem to be far harder and more expensive to carry out than promised and deliver less value in the end. LCC hasn't even gotten it's last merger straightened out and they want to merge again? Where is the real "fit" here? What about system overlap on the east coast and potential divestment issues? Do you need hubs in CLT, PHL and MIA? What about the fleet?

I think we may see other parties get involved with this situation yet, I don't see LCC management being the ones to remain in control of this combination if this happens. If LCC had a boatload of cash to put in the deal that would be one thing but I think if this gets done it will be the American side that calls the shots. This will be interesting as it unfolds.....drama.

 

[KarmaPolice]

I can't believe this!!! I did NOT see this coming.

 

[dollacrackho]

What other parties would get involved? Unless there are some top secret discussions going on, LCC and AMR are the only ones at the party. And as far as American management remaining in control the creditors have already said they want Horton out. This sounds like its gonna happen . If Parker didn't think it was gonna happen i don't think he would have even made an official offer and would have just said they couldn't come to agreeable terms and have decided not to pursue a merger at this time. It's gonna be a big long messy merger. Bigger office for Doogie and more money to pay off his drunk driving tickets.

 

[ackattacker]

How much value does LCC bring to the combination, especially after their labor costs rise as a result of the deal? Considering there is no offer of cash to the creditors are they better off with 70% of the combined airline or 100% of American as an independent company? It looks like it would be another ugly, long, drawn-out merger where any synergies and inefficiencies will take years to realize. In this industry mergers always seem to be far harder and more expensive to carry out than promised and deliver less value in the end. LCC hasn't even gotten it's last merger straightened out and they want to merge again? Where is the real "fit" here? What about system overlap on the east coast and potential divestment issues? Do you need hubs in CLT, PHL and MIA? What about the fleet?

I think we may see other parties get involved with this situation yet, I don't see LCC management being the ones to remain in control of this combination if this happens. If LCC had a boatload of cash to put in the deal that would be one thing but I think if this gets done it will be the American side that calls the shots. This will be interesting as it unfolds.....drama.

Interesting speculation, but I think that objectively the labor costs that AMR has signed into place with it's various Unions and the MOU that Parker signed with the AMR unions have similar cost structures so I doubt the creditors will see a big difference there between stand alone and merged labor costs.

And the LCC/AWA merger, while a disaster from a labor standpoint, was fairly successful from a business standpoint. I don't think the creditors care too much about pilots fighting with each other over seniority so long as the airline makes money.

I think it comes down to long-range planning and future value. If the creditors see the combined airline as being more sucessfull competing against DAL and UA, then they go for it.

Basically it comes down to this... LCC is worth $2 billion right now (actually that number may be a bit inflated due to merger speculation... but bear with me).

Parker claims a combined LCC/AMR is worth $8.5 billion. AMR creditors get 70% of that - $6 billion dollars worth of equity. LCC shareholders get the other $2.5 billion.

If Horton can make a convincing argument that a standalone AMR is worth more than $6 billion and can hold that value in a competitive market, then he puts the kabosh on the merger. I'm guessing that will be a tough sell on Horton's part.

 

[Scoot 11]

The desperation of Doug Parker is laughable. He's a child trying to get into a "grown ups only" club.
I wonder if he'll get another DUI after this failed attempt!:laugh:

 

[fam62c]

What other parties would get involved? Unless there are some top secret discussions going on, LCC and AMR are the only ones at the party. And as far as American management remaining in control the creditors have already said they want Horton out. This sounds like its gonna happen . If Parker didn't think it was gonna happen i don't think he would have even made an official offer and would have just said they couldn't come to agreeable terms and have decided not to pursue a merger at this time. It's gonna be a big long messy merger. Bigger office for Doogie and more money to pay off his drunk driving tickets.

Private equity possibly, TPG....they can bring in cash where LCC can't.

 

[ackattacker]

Private equity possibly, TPG....they can bring in cash where LCC can't.

I don't really see why they would need cash. You need outside cash when neither airline can bring in the money themselves to finance the exit from bankruptcy and the costs of the merger... LCC has around $2.5 billion in unrestricted cash and AMR has around $5.1 billion. Both have operations currently operating in the black, as well. I don't see why they would want or need to bring in outside money.

 

[scoreboardII]

Last ditch attempt by LCC to become a big boy and wear big boy pants. If AA exits as planned solo, LCC is in for trouble.