AA Potential Merger Partners

[Eric Diffoot]

http://finance.yahoo.com/news/americ...003453922.html

Apparently its at least US Airways, jetBlue, Alaska, Frontier, and Virgin America. Looks like US is the front runner with the unions in agreement already. jetBlue, possibly, with fleet commonality and its agreements with AA already. Alaska, doubt it as it seems they like being a stand alone. Frontier, maybe as Republic does want to unload Frontier. Virgin America, that's surprising.

[Peter Kesternich]

A merger with anybody but USAirways would be a big surprise and in my opinion the certain end of American as a big player in the US and international market.

[AA 1818]

The article seems to be grabbing at straws, or for the very least naming a few airlines (outside of the US Airways Group) if only to show that they (AMR) are upset by the way that negotiations are moving with the US Airways Group. The following are pertinent:

1). JetBlue - perhaps, the easiest stretch to make given their current closer-than-normal relationship with AA, but keep in mind that JetBlue has received funding from (and if I am not mistaken is still partly owned) Lufthansa. Yes, joining AA may be beneficial to JetBlue (in a few respects), but it would be greatly opposed by the employees/unions because the picture of employee relations, payment and salaries, and company identity are better at JetBlue than they are at AA. I think also that despite these hard economic times, JetBlue has room to expand and has a lot of things to still experiment with before merging with another carrier (such as greater International operations, larger aircrafts et al).

2). Virgin America - yeah right. I highly doubt anything with the Virgin name will be sold to a BA/AA entity. Plus, what would Virgin add to the American fleet/network? It's highly unlikely that the level of service, that the amenities, and niceties of Virgin would be adopted fleet wide at American. It would only fit in one respect - that AA would purchase a smaller carrier out west (as it has done with Air California, Reno Air, and Wings West) fold them into the fleet, and eventually abandon the hub.

3). Alaska Airlines - What's the point? AA is already codeshares so extensively with them, that whether or not they merge, Alaska will feel like an AA subordinate anyway. Someone on these forums once referred to Alaska Airlines as the 'codeshare wh*ore' and it's hilariously true. What would Alaska Airlines gain from such a move - nothing. I mean, it's not as if AA is going to start providing broad-ranging services to Alaska, or to Seattle, or better, expand in the way (and into markets) that only Alaska Airlines can. They have all the benefits, and none of the real costs, and that's for both partners. If Alaska Airlines were to go to AA, then the state of Alaska and/or Seattle would be the losers in the exchange.

4). Frontier - why?

I have a reasonable other option:

5). Hawaiian Airlines - well, it's another option. It would be the smartest option to link AA with QF, and JAL due to geography and markets. You can get a pretty fleet, and another great option for expansion into the Hawaiian market, where Hawaiian is the only major player. Yes, there is stiff domestic competition, but it's not as if AA is immune to that, and they can (not legally, but in this market - where I have to pay for sneezing on a plane, so no one might sweat it) run those competitors out.

[B757300]

It will be USAirways if a merger happens at all.

Might as well just nationalize all the carriers and merge them into Ameroflot and be done with it. Then they can all suck equally.

I long for the days when air travel was actually fun. Juan Trippe, C. R. Smith, and the rest are rolling in their graves.

[CathayPacific]

US Airways is a natural choice. The end product will be in OW.

JetBlue is a possibility as well. Lufthansa is looking to raise some cash after extensive loss in some of its European adventures. JetBlue would be a fit for AA to strengthen its presence in East Coast.

Alaska is a long shot. AS is in the sweet spot in Pacific Northwest, competing with almost no one, and playing friends with both DL and AA. From AS's perspective, why stick with one when you can get two?

[AA 1818]

Originally Posted by B757300

Might as well just nationalize all the carriers and merge them into Ameroflot and be done with it. Then they can all suck equally.

How can I nominate this for 'Quote of the Year'?

LOL, as a Liberal, I like the ring of it - Ameroflot! Long live the Motherland!

[Peter Kesternich]

Originally Posted by AA 1818

The article seems to be grabbing at straws, or for the very least naming a few airlines (outside of the US Airways Group) if only to show that they (AMR) are upset by the way that negotiations are moving with the US Airways Group. (...)

I wonder why AA are upset? The state they are in they should be happy anybody is interested in mating with them at all. I begin to wonder whether the smart thing for USAirways would be to let American Airlines die and then pick up those parts and pieces they want. Might be a lot more effective and there won't be any need for a postmerger capacity reduction.

[TeeVee]

Originally Posted by Peter Kesternich

I wonder why AA are upset? The state they are in they should be happy anybody is interested in mating with them at all. I begin to wonder whether the smart thing for USAirways would be to let American Airlines die and then pick up those parts and pieces they want. Might be a lot more effective and there won't be any need for a postmerger capacity reduction.

um, yeah, it doesn't work that way. if aa goes under it's creditors will swoop in and chop up every piece of hardware, software, property, and so on. not so easy to pick up the pieces of the 3rd largest airline.

[Peter Kesternich]

Originally Posted by TeeVee

um, yeah, it doesn't work that way. if aa goes under it's creditors will swoop in and chop up every piece of hardware, software, property, and so on. not so easy to pick up the pieces of the 3rd largest airline.

Yes, it does work that way. If AA goes under, USAirways can enter the markets no longer served in force and maybe even get a bargain price on some of the aircraft. Maybe they could even get the delivery slots for the A320NEOs that AA ordered at a discount.

As for the property, I think USAirways don't need anything that AA has, maybe with the exception of a large base in the NYC area.

So, all in all, I think if American wants to play hard to get, USAirways and the rest of the "vultures" should just wait till they go belly-up and then swoop in. If I recall correctly that was pretty much what happened when Eastern Airlines died (or got killed - depending on your point of view) before their time.

[AA 1818]

Originally Posted by Peter Kesternich

Yes, it does work that way. If AA goes under, USAirways can enter the markets no longer served in force and maybe even get a bargain price on some of the aircraft. Maybe they could even get the delivery slots for the A320NEOs that AA ordered at a discount.

As for the property, I think USAirways don't need anything that AA has, maybe with the exception of a large base in the NYC area.

So, all in all, I think if American wants to play hard to get, USAirways and the rest of the "vultures" should just wait till they go belly-up and then swoop in. If I recall correctly that was pretty much what happened when Eastern Airlines died (or got killed - depending on your point of view) before their time.

However, you are assuming that;
1). AA is in a much worse position (financially) than it really is.
2). That US is in a much better position (financially and organizationally) that it really is.

While under Chapter 11 protection, AA is using this time in much the same manner that every other major carrier in the nation did (even US). However, unlike other carriers, none of them entered Chapter 11 protection with a $4 Billion USD reserve sitting on the side, and then decided to place the largest order in aviation history.

US is not as much as 'vulture' as you assume them to be. They are interested in a merger, much more so, because they understand that attaching themselves to AA now is in their best interest as well. What other options do they have? Not merge with AA now, and fight bitterly against other, stronger, larger U.S. carriers (such as DL, and United) with no real recourse. At least with AA, they can help even that fight.

AA has for years (even before the DL merger) stated that they were searching for other partners to merge with. They spent a lot of time with BA and IB shoring up alliance and joint ventures, and though neither of those carriers are in great financial shape, I doubt that either of them (or any of the OneWorld Alliance members) would allow AA to die. Keep in mind, when BA, AA and others were in worse conditions, they assisted JAL in staying alive.

So, all in all, I think that you're downplaying one aspect, and exaggerating another, and heavily so. I'll venture to say that the picture may not be as rosy as I paint it, but it is certainly not as bleak as you do.