Also: Downsizing news from Barclays, Imation, Navigant Consulting, Thomson Reuters and more
The proposed merger of two of the largest U.S. based carriers, American Airlines and US Airways announced this past week, would be the fourth major consolidation of domestic airlines during the past five years, according to Fitch Ratings. Based on analysis of those mergers, Fitch said the potential U.S. airport hub disruptions are possible.
Other mergers have included Delta-Northwest, United-Continental and Southwest-AirTran. In Fitch Ratings’ view, such events are material to the U.S. airport sector from a credit perspective as consolidation allows airlines to make changes in their route networks and hub arrangements. As seen in recent mergers, there will be winners and losers among hub airport markets from the ongoing industry consolidation.
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If the merger between American and US Airways is completed, the combined carrier would effectively maintain six hub airports in Dallas-Fort Worth (DFW), Miami, Chicago, Philadelphia, Charlotte, and Phoenix and maintain a sizable presence in other markets, such as New York, Los Angeles and San Francisco.
While geographic location and separation helps support a rationale for hubs, Fitch said it is fair to ask whether maintaining as many as six hub airports at the same level of operations will be necessary to maintain an efficient single network. In addition to the hub airports, smaller regional airports may be at risk for service reductions particularly if there is an overlap of destinations and frequencies across the two merging carriers.
Given the fierce competitive nature of the airline industry, carriers are constantly seeking ways to maximize yield and reduce costs, including service adjustments at airports. Further, as history has indicated, carriers have demonstrated a willingness to pare or eliminate large-scale hubs post-merger, as has occurred in Pittsburgh, St. Louis, Cincinnati and Memphis.
Fitch said it would be a reasonable to expect additional operational shifts from the latest airline merger over time.
Facility Closures & Downsizings
Barclays plc plans to reduce its employee headcount by at least 3,700 globally this year, including 1,800 people in the corporate and investment bank group and 1,900 in Europe retail and business banking. In doing so, it will close its scandal-tainted structured capital markets business unit, which has been accused of orchestrating tax avoidance on an "industrial scale" and has generated vast profits for the bank.
Imation Corp., a global scalable storage and data security company, is currently in the midst of a strategic transformation to build a long-term platform for growth, by exiting lower margin businesses. The Oakdale, MN-based company has decided to divest its Memorex and XtremeMac consumer electronics businesses. As previously reported, Imation is implementing various cost savings initiatives as management is targeting a reduction of 25% or more in operating expenses.
Navigant Consulting in Washington, DC, is looking to reduce its overall real estate costs throughout the firm. The company said it has been working on a plan “for some time” and expects to make meaningful progress on the plan this year. The company has about 50 operating leases for office facilities, principally in the United States. Due to acquisitions and growth, it has ended up with more than one operating lease in the cities in which it has offices and is looking to eliminate some of those duplicate costs, including Atlanta, Boston, Chicago, Denver, New York, San Francisco and Washington, DC.
Thomson Reuters will reduce the number of positions in its financial and risk business unit by about 2,500 by the end of this year. However, the New York-based company expects to spend about $100 million for severance cost, predominantly in the first quarter.
Sheet2 | | | | | | | |
. | Company | Address | City | State | Closure or Layoff | No. of Layoffs | Impact Date |
. | Ball Corp. | 1717 Gifford Road | Elgin | IL | Closure | 245 | 12/1/2013 |
. | Sun-Times Media Productions | 495 North Commons Drive, Suite 200 | Aurora | IL | Closure | 114 | 3/24/2013 |
. | Walgreens | 5300 St. Charles Road | Berkeley | IL | Layoff | 65 | Immediately |
. | Georgia-Pacific Corrugated | 440 E. 138th St. | Chicago | IL | Closure | 108 | 3/25/2013 |
. | Kroger | 264 Southtowne Shopping Center | DuQuoin | IL | Closure | 65 | 3/23/2013 |
. | Cardinal Health | 1300 Waukegan Road | McGaw Park | IL | Closure | 63 | 4/7/2013 |
. | Lyon Workspace Products | 420 N. Main St. | Montgomery | IL | Layoff | 456 | Immediately |
. | Kmart | 1199 E. Ogden Ave. | Naperville | IL | Closure | 98 | 4/7/2013 |
. | Best Buy | 9625 Skokie Blvd. | Skokie | IL | Closure | 58 | 3/9/2013 |
. | Sun-Times Media Productions | 3701 W. Lake Ave. | Tinley Park | IL | Closure | 160 | 3/24/2013 |
. | LexisNexis, a division of Reed Elsevier | 1275 Broadway | Albany | NY | Closure | 220 | 12/31/2014 |
. | JPMorgan Chase - Mortgage Bank -Independent Foreclosure Review | 4 Chase Metro Tech Center | Brooklyn | NY | Closure | 529 | 4/10/2013 |
. | First to Care Home Care | 6323 Seventh Ave. | Brooklyn | NY | Closure | 84 | 4/15/2013 |
. | Oak Beverage (Warehouse) | 15 Huron St. | Brooklyn | NY | Closure | 53 | 6/13/2013 |
. | BorgWarner Morse TEC/Powerdered Metal Operation (PMO) | 3690 Luker Road | Cortland | NY | Closure | 30 | 10/31/2013 |
. | Pathmark | 1897 Front St. | East Meadow | NY | Closure | 118 | 5/4/2013 |
. | Mercury Insurance Group | 13 Cornell Road | Latham | NY | Closure | 65 | 5/6/2013 |
. | Beekman Tower Hotel | 3 Mitchell Place | New York | NY | Closure | 94 | 4/16/2013 |
. | Kaplan Inc. | 1 Liberty Plaza, 24th Floor | New York | NY | Closure | 58 | 5/6/2013 |
. | Barclays Capital | 200 Park Ave.; 745 Seventh Ave.; 1301 Avenue of the Americas | New York | NY | Layoff | 275 | 5/15/2013 |
. | NAES Corp. | 5300 Frontier Ave. | Niagara Falls | NY | Closure | 30 | 5/9/2013 |
. | Advanced Monolythic Ceramics | 3101 Constitution Ave. | Olean | NY | Closure | 65 | 8/31/2013 |
. | Closure Systems International Packaging Machinery, | 26 Center St. | Randolph | NY | Closure | 18 | 5/31/2013 |
. | Oberdorfer | 6259 Thompson Road | Syracuse | NY | Closure | 86 | 5/3/2013 |
. | Endo Health Solutions | 177 Cantiague Rock Road | Westbury | NY | Closure | 58 | 2/28/2013 |
. | Lutheran Social Services of Wisconsin and Upper Michigan | 3705 and 3707 S. Valley View Place; 3341 Kilbourne Ave.; 2604 and 2606 Shady Grove Road; 824 and 826 Violet St. | Eau Claire | WI | Closure | 44 | 4/15/2013 |
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