What will it take?
After a week of allowing the fallout from the US Airways agreements with American Airlines’ unions to settle, the question of what it will take to see an actual merger between the two airlines comes to mind.
It’s not just the union agreements that gets this deal done. To the contrary, there are several issues that will have to see deals made.
Aircraft manufacturers: Boeing wants to see an independent AA because AA is fundamentally a Boeing customer not withstanding the Airbus order made last summer. Boeing is going to need reassurance that it remains viable in future aircraft orders and that existing orders won’t be cancelled. US Airways can make those assurances with confidence.
Hewlett Packard: Hewlett Packard sits on the creditors committee because of all the IT work it has done to date to bring AA into the future. A lot is left undone and some reportedly isn’t really ready for prime time. Currently, US Airways uses SHARES and American Airlines uses SABRE. However, SHARES, originally developed by EDS, is now owned by HP. Do you see where I’m going here? A deal can be made to put both airlines on the new system being developed called JETSTREAM.
AA Executive Team / Board of Directors: This is a sticky area. Who wants a team or board that allowed the status quo to exist that long? It’s possible we might see someone like Tom Horton retained as non-executive Chairman (a la Glenn Tilton) and a few of the existing AA team retained but that would be it. The board has to go and its tenure is so high in average age, it has an incentive to fight this. Solving these two problems is possible and these two stakeholders have the least power in making decisions in many respects.
The when is the next question. US Airways is clearly getting good advice and it is clearly motivated to make a deal. I would guess that their intent is to use their own cash holdings and AA’s cash holdings to make a deal that creditors can’t refuse. I think that deal will happen between now and the end of June.
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