America West/US Airways Merger Doomed

[tonyw]

Why?

They're talking about "revenue synergies."

Any time you hear the execs talking about synergies, it's time to short the stock.

Carly Fiorina talked about synergies when she rammed through the Compaq/HP merger. Look at how successful that was.

Steve Case talked about synergies when he bought Time Warner. Turned out wonderful there, eh? So well that they're talking about spinning off AOL!

[flyover]

LOL. What would you expect them to say?: "We see no advantages to this combination, we're just throwing something at the wall to see if it will stick."

There is so much that can go wrong with this. But the most critical parts are out of their hands. What's going to happen in the rest of the industry and will anybody close any of their hubs?

[tonyw]

I know, I know, I know.

I'm just picking on them because every time I see the word "synergies" I'm thinking to myself that you just nailed it perfectly.

What they're really saying is "we're just throwing junk up against the wall and hoping some of it sticks."

[Mahesh]

Did they (at least US Airways) have any other choice but to merge with another carrier?

Mahesh

[flyover]

[ QUOTE ]
Did they (at least US Airways) have any other choice but to merge with another carrier?

Mahesh

[/ QUOTE ]

Nope.

[ QUOTE ]
The transaction includes about $1.5 billion in new capital, including $350 million from investors PAR Investment Partners LP, Peninsula Investment Partners LP, Air Canada Inc. parent ACE Aviation Holdings Inc. and an entity owned by Air Wisconsin Airlines Corp.

[/ QUOTE ] America West Gambles

It's all about creditors willing to back it. No creditors, no deal.

[flyover]

[ QUOTE ]
I'm just picking on them because every time I see the word "synergies" I'm thinking to myself that you just nailed it perfectly.


[/ QUOTE ]

The word "synergies" probably works better in airline mergers than other types. There has been a history of successful mergers in this industry where the combinations come out stronger. Look at the history of any legacy carrier and you'll see it's a conglomeration of many smaller airlines. A great example is the old flag carrers like Pan Am and TWA. It was clear they needed to merge with domestic US airlines after deregulation. But the government stood in the way until both, but Pan Am in particular, were basket cases.

This USAir/AmWest thing is just an acknowledgement of the coming consolidation. It's entirely possible that the only way UAL comes out of BK is with a financing package that picks up another carrier. There is only one thing driving what's about to happen. Finding creditors and investors willing to bet some money.