US Airways cancels Delta acquisition

[turbocraig]

^Exactly. In mergers, corporations will say anything they think will appease the affected communities and to get people 'on board'. Thing is, a few years pass, and things just don't seem to make the sense they did during the initial PR campaign. Expected "synergies" aren't realized, "market conditions" dictate the closing of whatever, "forcing" these companies to make the so-called difficult decisions that they new they'd make from day one. Remember when NationsBank bought BankAmerica? Yeah, the HQ would be in Charlotte, but San Francisco was still going to remain an important base for corporate functions which, over the years, seemed less and less necessary. Today, virtually no BofA operations are based in SFO. BofA even sold its stake in their famous tower there.

In other words, don't believe the hype.

[A2]

Probably true...Clt would offer up a lot to save the hub...but what would Atlanta and the state of Georgia do to save the hub there? If a hub in Clt is important to Charlotte...how important is keeping the busiest airport in the world at ATL? Also, all of this speculation has already been decided if this merger goes through. Companies don't make 8 billion dollar purchases with out have all details planned out for at least the next 5 years. Us Air knows what and where it will be...and they said there will be no significant changes for the next few years....few being the key word.

[monsoon]

^^^I agree^^^

Atlanta will always be the Hub for the newly married company. However, I think it can be strategic to have two realtively close hubs. .....

[turbocraig]

I don't know that big government is the answer when it comes to the airline industry. In fact, they were regulated by the government until the very early 80's, when Reagan began the process of industry deregulation. When the government was in control, airfares were sky-high and travel was pretty much reserved for the select few that could afford the fares. I don't know that's a solution we want to entertain.

[A2]

^Exactly. In mergers, corporations will say anything they think will appease the affected communities and to get people 'on board'. Thing is, a few years pass, and things just don't seem to make the sense they did during the initial PR campaign. Expected "synergies" aren't realized, "market conditions" dictate the closing of whatever, "forcing" these companies to make the so-called difficult decisions that they new they'd make from day one. Remember when NationsBank bought BankAmerica? Yeah, the HQ would be in Charlotte, but San Francisco was still going to remain an important base for corporate functions which, over the years, seemed less and less necessary. Today, virtually no BofA operations are based in SFO. BofA even sold its stake in their famous tower there.

In other words, don't believe the hype.

[A2]

I don't know that big government is the answer when it comes to the airline industry. In fact, they were regulated by the government until the very early 80's, when Reagan began the process of industry deregulation. When the government was in control, airfares were sky-high and travel was pretty much reserved for the select few that could afford the fares. I don't know that's a solution we want to entertain.

[turbocraig]

I'm not saying that the Charlotte powers-that-be wouldn't pull out all the stops to try and convince US to maintain their status here. But how long and how much would it cost to maintain 600+ flights per day when to USAirways, it'd be cheapest just to shift the hub to larger and more established Atlanta? Charlotte would have to subsidize one hell of an operation on a long-term basis. I just don't see that happening.

[A2]

Except it is very technically difficult if not impossible to make it work. The Hub and Spoke system does not lend itself to having two hubs in the same geographic location.

[A2]

I'm not saying that the Charlotte powers-that-be wouldn't pull out all the stops to try and convince US to maintain their status here. But how long and how much would it cost to maintain 600+ flights per day when to USAirways, it'd be cheapest just to shift the hub to larger and more established Atlanta? Charlotte would have to subsidize one hell of an operation on a long-term basis. I just don't see that happening.

[turbocraig]

Well since the gov't let go of control, we have had several planes rammed into buildings and even more companies go under. I think that the business model is a set-up for failure. I, Mr. Taxpayer, have been bailing out airlines for years now through my tax dollars. Billions and Billions are used to keep these puppies above water. It is ridiculous, since in the end a business SHOULD be allowed to fail, if we are a believer in capitalism.

A2

[A2]

Government involvement doesn't equate to safety. The FAA is a goverment body and they did little to prevent 9/11. Why were people legally allowed to take any knife (as long as it was less then five inches in length) aboard an aircraft? That was a government rule, not an airline one. The best government involvement doesn't guarantee safety. El-Al, the Israeli national airline, has one of the most intense passenger screening processes of ANY carrier in the world, for obvious reasons. Still, in 1968, terrorists were able to hijack one of their aircraft.

I'm not trying to be argumentative, I want things to work out the same way you do, I just see the glass as half-empty if this deal were to come to fruition.

[turbocraig]

I think it is near impossible to move more flights in and out of Atlanta. Currently they are the busiest in the world, and increasing flight capacity is a bit ridiculous from a Hub that is jam packed with flights daily. Would it not make since to have another Hub to relieve congestion?

Plus with Charlotte, you are growing your capacity to move more planes. In Atlanta the infastructure is almost maxed. You can only move so many planes in and out of one airport at any given time without having them run into one another on the ground or in flight.

A2

[lukedog]

I think it is near impossible to move more flights in and out of Atlanta. Currently they are the busiest in the world, and increasing flight capacity is a bit ridiculous from a Hub that is jam packed with flights daily. Would it not make sEnse to have another relatively close Hub to relieve congestion? Maybe, maybe not.

Plus with Charlotte, you are growing your capacity each and every year to move more planes. Esentially we are in growth mode, where as Atlanta is already matured.

In Atlanta the infastructure is almost maxed. You can only move so many planes in and out of one airport at any given time without having them run into one another on the ground or in flight.

A2

[A2]

The direct flights could cause issues, but overall would it make it more difficult to recruit international business or just hurt our flight times?

[A2]

The more I look at this deal on paper, the more I see it not going through. This is just simply a deal to squash a competitor. It is not getting approved IMO. (Turbo you are right).

I would be almost shocked if shareholders would approve it. Delta is busted from this side to that. Their debt is unreal and USAirways is finally making a bit of money. The fiscally responsible thing to do is use the profits to reinvest and grow your profitable operations, not sink money into a black hole. Any analyst should just see the numbers DONT' work. Any simple minded shareholder should also see this.

A2

[monsoon]

I never thought of it totally like that A2 but that is an interesting theory. Like you said, when Atlanta is shut down because of weather the planes sit on the ground costing the airlines Millions. What a great deal it would be if some of that congestion could be diverted 45 minutes to Charlotte? Delta also has Cinici. Us air has Philly. Could this be the business model of the future? I know everyone will say it is impossible but this idea seems to make sense. I know the planes/fleets are different now but maybe the future will be a merger into one fleet of planes.

[Ryepow]

I never thought of it totally like that A2 but that is an interesting theory. Like you said, when Atlanta is shut down because of weather the planes sit on the ground costing the airlines Millions. What a great deal it would be if some of that congestion could be diverted 45 minutes to Charlotte? Delta also has Cinici. Us air has Philly. Could this be the business model of the future? I know everyone will say it is impossible but this idea seems to make sense. I know the planes/fleets are different now but maybe the future will be a merger into one fleet of planes.

[uptownliving]

Regarding the DOJ approval...I think that DOJ is going to have a hard case to say that the new Delta can't be the same size as the current American Airlines. After the merger both Delta and American would have roughly the same market share. How would the DOJ be able to make the argument that its ok for American to have 18% market share, but its not ok for Delta to have 18% market share? I think that this deal could get DOJ approval with very little having to be sold off.

[lukedog]

2. What happens to the outbound leg if the plane is now in CLT rather then ATL? I can hear the gate agent in Atlanta now, "we have a gate change for your flight to Miami, it is now leaving at gate B-9 in Charlotte." Maybe they can dig the tunnel for the airport subway in ATL all the way to CLT. Baggage and freight would pile up or get lost because they were supposed to be on a connecting flight leaving ATL to Rome later in the day but CLT doesn't serve Rome so it sits waiting for another flight to ATL. Etc...

[uptownliving]

Well if the weather is bad in Atlanta the planes are going to have to divert anyways, so it would be easy and make sense to send the plane to Charlotte, where most of the connecting passengers could be accomidated on the next bank of CLT flights..and then whoever could not be accomidated would ride the plane on to Atlanta when the weather cleared up.

This would avoid some of the headaches of restarting a stopped hub operation due to weather.

[dubone]

Just out of curiosity, would it make sense to keep Charlotte and Atlanta as a hub and close Cincinnati? Cincinnati isn't that much farther away.

[Miesian Corners]

A couple of points just to clear up some misunderstandings. First, Reagan didn't deregulate the airline industry, Carter did. Reagan fired all of the ATC controllers (a move that hurts to this day).

US has no plans of divesting of anything except the Delta Shuttle. From the research the company did, it feels that the DOJ will not have any problems with what it has proposed. While I think the DOJ SHOULD make US divest some of its or DL's assets, ultimately under the current administration, it could go off just as US management has planned.

CLT is the 12th biggest airport in the world (in operations) because of US Airways. The economic impact of CLT is tied directly to US. Without the hub, most all of the peripheral jobs connected to the airport would dry up. Even if more airlines come into CLT offering flights, the city would never see the scale of positive economics it does by having a hub. US outsources many functions at CLT; those jobs would disappear. US carries more USPS packages than any other airline. The USPS has a huge sorting facility at CLT for this reason. The Department of Homeland Security employs nearly 300 people at CLT in various departments. TSA, Customs, and Federal Air Marshals are all employed here because of hub status. The FAA has a district office that employs 110 here partly because of the US training and maintenance facilities that must have Federal oversight. That number also includes a large number of ATC controllers who would likely be transferred somewhere else if air traffic dwindled. Then there are contract cleaners, concession workers, and contracted maintenance jobs that are tied to US affiliated contract carriers such as Mesa and Air Wisconsin (and for the record, US Airways Express jobs at Mesa and Air Wisconsin are not included in the 5,600 USAirways mainline employment numbers).

So, I guess my point is that losing the hub would hurt far more economically than just the absence of non-stop flights and how they affect industry recruiting efforts in the region. The impact of the closure of the AA hub at RDU was far less damaging for these reasons. AA had no training facility, no heavy maintenance hangars, and at its height, it only offered 205 non-stop flights a day to 52 destinations in the US, France and the Caribbean. Even the RDU airport facilities were not advantageous as a hub operation. The two parallel runways there are too close together to allow for simultaneous take-offs and landings; a big negative for a large operation. By contrast, US at CLT has 541 flights to 120 destinations in the US, Canada, Central America, Mexico, the Caribbean and Europe. It has one heavy maintenance hangar and one line-maintenance hangar, and the airline's only crew training center (not including the one in PHX, as we are not operating as one carrier (yet)).

Make no mistake, there is no reason to have CLT and ATL as hubs for one airline. USAirways management will say anything is feels it has to in order to placate every community it serves to get this done. USAir did it when it purchased Piedmont in 1987. There were hubs in Dayton, Indianapolis, Cleveland, Pittsburgh, Syracuse, Philadelphia, Baltimore, Los Angeles and Charlotte. By 1991, Dayton was gone, two years later Cleveland, Syracuse and Indy were shut down. AA did the same thing to St Louis when it absorbed TWA.

All in all, there is nothing good about this for Charlotte. If the US/DL deal goes through, CLT will be the loser and it will take many years before the city sees air traffic return to the level it has today.

Edit: this post rambles; sorry. been a long day and all the synapses are not firing when it comes to writing. I hope it makes a little sense.

[kickazzz2000]

In todays Charlotte Observer, there is at least one CEO's mention of our airport.

Q. Why Charlotte? Why now?

We always knew SouthPark was the center of better retailing in Charlotte. Charlotte has continued to boom as a city -- it has a much broader range of stores and interests, the airport is now one of the busiest in the country. All these things have not only made Charlotte a very nice place to live, but also a very nice place to do business.

Gordon Segal, CEO Crate and Barrel

http://www.charlotte.com/mld/charlotte/business/16033907.htm

[monsoon]

That sounds like he isn't keeping up with the news. Many people attribute the lack of retail in downtown Charlotte to the fact that people like him that keep putting their stores in the suburbs. Crate & Barrel would have been a nice addition to downtown Charlotte but instead its promoting more sprawl by following the tried and true. Like all CEOs including the one at USAir, they are going to do what is best for their business, not the cities they are located in.

[turbocraig]

I know USAirways is proposing just selling the Delta Shuttle, and of course trying to squeak this through giving up as little as possible shouldn't be surprising, but I highly doubt that small sacrificial lamb is gonna win approval for this merger. Just look at the routing maps for each carrier. It would totally dominate the entire East Coast. What DOJ guy is going to look at those two route map overlays and say, "Yeah... DC-NY-BOS is really the only problem there. The rest looks fine... where's my rubber stamp?" I'm sorry, I just don't see it happening that way. If this is going to get approval, they're going to be forced to dump a lot more than Delta Shuttle, and that's going to be the deal-breaker here IMO.

This is what I was referring to when I mentioned the combined airline not being allowed to hold onto all that the individual airlines currently have. It has nothing to do with total size of the company in terms of percentages overall. It's about market domination (in this case the eastern US) and that's why this will not go through. I may be eating my words months from now, but that's just the way I see it.