WSJ - US/UAL merger talks "becoming very serious"

[Marko Ramius]

No one seems to see the beauty in this. Route overlap = monopoly and increased yield. If PHL, IAD,DCA and CLT are all United then there is no one to undersell each other. If you live in the Mid-Atlantic you would be forced to use United and pay a high yield. Think evil empire!

You do know that they tried this before and the DOJ(even under supposedly merger friendly Bush) was none too happy about it. In a world where Congress comes out with new proposals for the airline industry seemingly daily, and a president that has said he is shifting his focus from healthcare to jobs what do you think the climate for an overlapping deal is? There are zero revenue benefits from a UA/US merger. They have been codesharing for years moving passengers between the two route systems, realizing the incremental revenue from that. The only benefits are in cost reduction and that means 'optimized' hubs and jobs.

 

[Marko Ramius]

I disagree with this. UAL has always been relatively weak on the east coast. No amount of tinkering with IAD has ever fixed this.

LCC brings a top 5 O&D market (PHL), along with a solid connecting hub with a reasonable, if not spectacular catchement area (CLT) and a very decent market share up and down the east coast. Add in a reasonable number of European destinations along with good number of Carribean destinations, and you really have something worth looking at.

It would provide UAL with something they never really had...a SOLID east coast presence. They could move all the N/S connecting traffic to CLT, and focus on DCA for O&D, and that would alieviate most of the DOJ worries.

CAL would be a better choice, because it would blanket both Europe and the Pacific, and it provides the #1 O&D NYC. OTOH, it does't provide the east coast blanket that LCC does, and you're left trying to make east coast connections through EWR rather than the relatively central and fair weathered CLT.

IMHO, LCC is a very viable choice. CAL is in the unenviable position of either jumping in and dealing with UAL or becoming a distant #4. Damned if they do, damned if they dont.

Nu

UA has been weak in the East and South, but revenue wise they cover that pretty well with US and CO codeshares. IAD may be a weak-sister compared to PHL, but to me it would play a big role on paper in a merger but for the DOJ. US is very strong at DCA and having a strong ledger of international and transcon flights out of IAD would seem to be a good marriage for their FF's, but Justice isn't going to let that happen.

Then we have the Doogie factor. Even if one were convinced that he wants to run an airline, he hasn't shown that he is all that good at it. Most passengers primarily fear price gouging when looking at mergers like this proposal, but with Doogie you have to fear the service changes too. Based on last years numbers, just under 2/3's of the combined airlines passengers would come from UA. I wonder how they're going to like it when they show up and find out that E-plus and EX-plus are gone? Or the movies? You like Easy Check-in? Welcome to not so Easy Check-in on some of the slowest and frustrating IT going. Power ports? That's what restrooms are for.

I also wonder how they're going to like it when Doogie completely restructures the flying so that O/D pax who had nonstops before have to change planes? Going from ORD to MIA or TPA? That will require a change in CLT now. Going ORD to LAX? That will require a change in PHX or DEN? ORD to Hawaii? Please report to LAX, SFO or PHX. Oh you liked your transcon flights out of LAX, JFK, BOS, SFO and IAD? Well those have been drastically cut or eliminated and you will have to stop in either ORD or DEN.

You can call this thing viable, something I saw more in 2000 than now, but once Doogie gets his hands on it, game over. UA is better off with Continental or going it alone with a new CEO/management team. If I were on their board, I'd be telling Glenn just that.

 

[hou757]

What is O&D?

 

[hockeypilot44]

What is O&D?

Originating and Destination traffic. It means passengers NOT connecting through a hub.

 

[pianoman]

I disagree with this. UAL has always been relatively weak on the east coast. No amount of tinkering with IAD has ever fixed this.

LCC brings a top 5 O&D market (PHL)...
Nu

Yes, but PHL is under assault by SWA, and it also has EWR and BWI within relatively close proximity for competition.

 

[eaglesview]

Yes, but PHL is under assault by SWA, and it also has EWR and BWI within relatively close proximity for competition.

Southwest is becoming more and more like a legacy carrier. The time for running from where ever Southwest goes is over.

PHL is still the preffered airport for all of south Jersey, Philly and it's suburbs, and Deleware. It deserves it's number 5 O&D ranking

 

[johnsonrod]

What happens when you combine two lame airlines? You get one big, LAME airline. This is a terrible idea. The fact is that the Washington DC DCA/IAD hub overlap is probably enough to kill the merger attempt. Looks like CAL ain't takin' the bait.

 

[Grandpa +65]

Yes, but PHL is under assault by SWA, and it also has EWR and BWI within relatively close proximity for competition.

I completely disagree. SW is cutting capacity in PHL

 

[Raoul Duke]

This is likely to induce a feces throwing contest, but it is a legitimate question none the less.

Exactly how would the UA and LCC pilot SL be merged? Correct me if I'm wrong here (and I'm sure someone will) but isn't an agreed upon joint contract between east and west the trigger that would implement the nic list?

So how does this all shake out if the merger (which some sources are stating could be finalized in as little as 2 or 3 weeks) happens before a joint contract?

Honest question. Anyone know how it would go?

what happens if only the West was merged and the East was left to wither. There is no combined contract or contract operations so why not merge UA with the West cert and avoid the snap back on East wages?

 

[eaglesview]

what happens if only the West was merged and the East was left to wither. There is no combined contract or contract operations so why not merge UA with the West cert and avoid the snap back on East wages?

Why would any pilot group want to avoid a situation where another pilot group gets a raise. That mentality is part of the problem in my opinion. To much, "I'm in pull up the rope."

 

[waveflyer]

Really?
You have your opinion, but it's not naive-
don't think that doug and tilton aren't figuring how to use the merger feuds to their advantage.

It won't be to the advantage of ANY work group

 

[Raoul Duke]

Why would any pilot group want to avoid a situation where another pilot group gets a raise. That mentality is part of the problem in my opinion. To much, "I'm in pull up the rope."

what does pilot groups have to do with it? I mean why wouldnt Doug and Glen sit down and say "well there is this snap back on the east contract so we are not going to merge them, we are only going to merge the west to get around it".

 

[eaglesview]

what does pilot groups have to do with it? I mean why wouldnt Doug and Glen sit down and say "well there is this snap back on the east contract so we are not going to merge them, we are only going to merge the west to get around it".

Well I see what you are getting at however from a business standpoint why would you merge with just the West in order to secure PHX and leave PHL, CLT, DCA,Europe and the Carribean on the table. I would venture to say that would cost more than a snap back. In reality our wages need to be snapping back anyway. Last I lookes us (UAL) and USAir are the bottom feeders when it comes to wages.

 

[Hpilot]

Well I see what you are getting at however from a business standpoint why would you merge with just the West in order to secure PHX and leave PHL, CLT, DCA,Europe and the Carribean on the table. I would venture to say that would cost more than a snap back. In reality our wages need to be snapping back anyway. Last I lookes us (UAL) and USAir are the bottom feeders when it comes to wages.

A stock swap with US as the aquiring airline would keep the snap back from being triggered.

 

[whymeworry?]

UAL's stock is up, what? 3-400% since last year? What are the chances the stock maintains altitude until the close of the deal. It's an airline stock, folks. Saddled with debt, a future of never-ending losses, no new aircraft any time soon. The deal won't work w/o i-bankers cash and both UAL and LCC have way too much debt to attract any cash at this point.

I don't see how the deal will get off the ground. Not at this time anyway.

But stranger things have happened.

CAL will do just fine going it alone vs. being forced into an un-happy marriage. Remember, they are already part of the Star Alliance, and the desired dance partner. It's not like UAL is going to steam-roll a JV partner w/o taking heat form the other alliance anchor tenants (ANA/ LH/ TG, et al).

 

[scoreboardII]

you underestimate the power of GE capital and leasing who wants, nay who needs those engines to be flown so they can pay down the principle. GE will cut some sweet deals so they don't take it in the face.

 

[Captzaahlie]

bump.....

 

[General Lee]

I disagree with this. UAL has always been relatively weak on the east coast. No amount of tinkering with IAD has ever fixed this.

LCC brings a top 5 O&D market (PHL), along with a solid connecting hub with a reasonable, if not spectacular catchement area (CLT) and a very decent market share up and down the east coast. Add in a reasonable number of European destinations along with good number of Carribean destinations, and you really have something worth looking at.

It would provide UAL with something they never really had...a SOLID east coast presence. They could move all the N/S connecting traffic to CLT, and focus on DCA for O&D, and that would alieviate most of the DOJ worries.

CAL would be a better choice, because it would blanket both Europe and the Pacific, and it provides the #1 O&D NYC. OTOH, it does't provide the east coast blanket that LCC does, and you're left trying to make east coast connections through EWR rather than the relatively central and fair weathered CLT.

IMHO, LCC is a very viable choice. CAL is in the unenviable position of either jumping in and dealing with UAL or becoming a distant #4. Damned if they do, damned if they dont.

Nu

If CAL doesn't go with UAL, look for them to try for AK next to give them some sort of West Coast presence. And what would happen then most likely? DL trying to C%^$ block them. Southwest will throw their hat in the ring also, but they have way too much overlap to be taken seriously.


Bye Bye---General Lee

 

[whymeworry?]

you underestimate the power of GE capital and leasing who wants, nay who needs those engines to be flown so they can pay down the principle. GE will cut some sweet deals so they don't take it in the face.

I wouldn't be so sure about GE's enthusiasm. There is a reason the stock has been a lackluster performer during the latest market rally. GE has a solid balance sheet with tons of cash. But GE Capital has been burned badly by the financial meltdown. I think they're going to be s conservative as all the other banks out there. There have been many articles about GE over the past year addressing their over-extention in the financial markets.

 

[Redmeat]

A stock swap with US as the aquiring airline would keep the snap back from being triggered.

The latest WSJ article stated that United would be the surviving entity.

Check this out...

http://www.philly.com/inquirer/business/20100413_Continental_expected_to_make_United_bid.html


Continental expected to make United bid

By Linda Loyd
Inquirer Staff Writer
A Wall Street analyst expects Continental Airlines to bid to acquire United Airlines, after reports that United and US Airways were in merger talks.
Stifel Nicolaus airline analyst Hunter Keay said in a client note Monday that a United-US Airways merger is "a suboptimal scenario" because of pilot labor issues, revenue risks, and "problems with regulatory review due to higher domestic overlap" on routes United and US Airways have in common.
"We expect Continental to respond to reported United-US Airways merger plans with a bid for United," Keay wrote, "partly as a defensive maneuver. . . .We expect Continental to respond relatively quickly." Keay said he had no knowledge of merger negotiations or discussions between Continental and United.......( I didn't paste the whole article...link is above).


So how does all this play out if Continental and UA hook up? Does this send the rest of the players scrambling for a dance partner?

Who ends up SOL when the merger musical chairs come to a stop?