Airline stocks down sharply - DOJ reportedly to block AMR/LCC

[FWAAA]

I have no doubt that this merger will happen, but somehow the gov wants more than it's share. Never mind that B6 has come up with a solution to the lost luggage. Charge to deliver people's luggage to where they are within a 40 mile radius of the airport. Correct me if I'm wrong, but lost and recovered luggage is delivered for free. Now you have stupid people who pay for convenience offsetting B6's lost luggage cost. BRILLIANT!

B6 is about the last US airline to offer this service. AA, DL, UA,WN, AS and US all contract with this outfit, not just for delayed bag delivery, but the optional convenience you seem to complain about, Here is the US Airways page on this service:

http://www.usairways...ge/BagsVIP.html

 

[etops1]

I was exaggerating, but my point is that sometimes execs get so blinded by the "gotta do the deal no matter what" mindset that they might agree to give up what amounts to the crown jewels - as you pointed out.

I don't think the DoJ would approve of the merger even if US and AA give up more slots at DCA than AA currently holds, but I've been wrong before. I read the complaint as "game over." As in "merger ain't gonna happen, without very significant concessions that would hobble the ability of new AA to compete against UA or DL." I think Parker's dream died yesterday. The APA and APFA put on a brave face on Tuesday, but privately, if their lawyers are shooting straight with them, they've gotta be very disappointed. Horton and other AA managers who were gonna be out of a job are probably very happy. They didn't want the merger (at least not on Parker's terms) and now the DoJ has thrown up a big roadblock that helps them.

You know . You really talk a lot of #### . Just sayin ...

 

[USA320Pilot]

PilotAction Merger News for US Airways & American Airlines: August 14, 2013

DOJ's Opening Shot On American/USAir Merger May Be Last One

[background=rgb(250, 250, 250)]See Story: [/background]http://www.forbes.com/sites/danielfi...rtner=yahootix


US Airways, American Airlines attorneys come out swinging against antitrust accusations

[background=rgb(250, 250, 250)]See Story: [/background]http://aviationblog.dallasnews.com/2...usations.html/


U.S. judge in airline mega-merger once ran Microsoft case

[background=rgb(250, 250, 250)]See Story: [/background]http://finance.yahoo.com/news/u-judg...002533574.html


The Deal: Airlines Will Fight Against Antitrust Lawsuit

[background=rgb(250, 250, 250)]See Story: [/background]http://www.thestreet.com/story/12009...o&cm_ven=YAHOO


American/US Airways Lawyers Eye DOJ Trial 'Before The End Of The Year'; Aggressive Litigation Approach

[background=rgb(250, 250, 250)]See Story: [/background]http://www.forbes.com/sites/splevera...rtner=yahootix


Antitrust challenge could send AMR bankruptcy back to square one

[background=rgb(250, 250, 250)]See Story: [/background]http://finance.yahoo.com/news/antitr...235051926.html


US Airways, American Airlines vow to fight US government over merger

[background=rgb(250, 250, 250)]See Story: [/background]http://finance.yahoo.com/news/us-air...190554129.html


Uncertainty awaits airline industry without merger

Investors, employees ponder what's ahead for American, airline industry if merger gets canned

[background=rgb(250, 250, 250)]See Story: [/background]http://finance.yahoo.com/news/uncert...202936478.html


Criticism of DOJ decision to block US Airways/AMR merger

[background=rgb(250, 250, 250)]See Story: [/background]http://www.ft.com/intl/cms/s/0/e3f6d...#axzz2bzxKOJWG


AMR-US Airways Seeks Trial Soon With U.S. to Revive Merger

http://www.bloomberg.com/news/2013-0...tml?cmpid=yhoo


AMR UCC Jack Butler Says U.S. ‘Got It Wrong’

[background=rgb(250, 250, 250)]See Story: [/background]http://www.bloomberg.com/video/butle...t5d6ZfS9w.html


Former AMR CEO Crandall on AMR-U.S. Airways Merger

[background=rgb(250, 250, 250)]See Story: [/background]http://www.bloomberg.com/video/butle...t5d6ZfS9w.html


American-US Airways Deal Not Dead – Former Northwest CEO Doug Steenland

[background=rgb(250, 250, 250)]See Story: [/background]http://www.bloomberg.com/video/ameri...T1Mq2SCXg.html


AMR soldiers on in bankruptcy court despite suit

Bankruptcy case of American Airlines parent AMR goes on despite US lawsuit to block merger

[background=rgb(250, 250, 250)]See Story: [/background]http://finance.yahoo.com/news/amr-so...215136912.html


Justice Dept. Alters View of Mergers by Airlines

[background=rgb(250, 250, 250)]See Story: [/background]http://www.nytimes.com/2013/08/15/bu...oofinance&_r=0


DOJ's Merger Complaint Is Weak, Say American/ US Airways Lawyers

[background=rgb(250, 250, 250)]See Story: [/background]http://www.thestreet.com/story/12008...o&cm_ven=YAHOO


The Continuing Curse of US Airways

[background=rgb(250, 250, 250)]See Story: [/background]http://www.thestreet.mobi/story/1200...o&cm_ven=YAHOO


The Deal: Stormy Skies Ahead for American, US Airways

[background=rgb(250, 250, 250)]See Story: [/background]http://www.thestreet.com/story/12009...o&cm_ven=YAHOO


American, US Airways have to navigate the fuzziness of limbo-land

[background=rgb(250, 250, 250)]See Story: [/background]http://aviationblog.dallasnews.com/2...mbo-land.html/


Online Petition to the Obama Administration: Withdraw the Department of Justice's suit to block the planned merger between American Airlines and US Airways (Please forward to Others).

[background=rgb(250, 250, 250)]See Story: [/background]https://petitions.whitehouse.gov/pet...rways/hqZ3gs9v


USAPA Update (More on the Merger): August 14, 2013

[background=rgb(250, 250, 250)]By now you should have heard of the Department of Justice filing yesterday, to block the American Airlines and US Airways merger. After several conference calls with the Company both yesterday and today, it would appear they had little notice prior to the filing and were caught off guard by this decision. The Company says, however, they look forward with confidence to the trial and assured us they will vigorously pursue the completion of this merger, and this will be just a short delay in the process. Their goal is to have the trial behind us and the merger completed before the end of the year. There is no court date set at this time, but they expect an expedited conclusion. Throughout this process, USAPA has and will maintain regular communications with the airline and our counterparts at APA and keep you informed of any significant developments.[/background]

[background=rgb(250, 250, 250)]Here are some facts to consider moving ahead:[/background]

[background=rgb(250, 250, 250)]The confirmation hearing for tomorrow, Thursday, Aug. 15, in the Bankruptcy Court in New York is still scheduled. The purpose of this hearing is for U.S. Bankruptcy Judge Sean Lane to consider the plan of reorganization that American Airlines, US Airways, the Unsecured Creditors' Committee (UCC), and all classes of creditors have approved. While Judge Lane may choose to approve the plan, the "consummation" of the plan and hence the effective date will not occur without government approval.[/background]

[background=rgb(250, 250, 250)]The DOJ's lawsuit extends the period that the DOJ and the two airlines may negotiate a resolution of the antitrust issues, a process that began during the Hart-Scott-Rodino federal premerger notification review (which provides the Federal Trade Commission and DOJ with information about large mergers and acquisitions before they occur).[/background]

[background=rgb(250, 250, 250)]The DOJ lawsuit also triggers a 30-day stay provision in the agreement between the airlines and the DOJ during the Hart-Scott-Rodino process, so the soonest American Airlines could exit bankruptcy is 30 days from August 13. If negotiations do not result in an out-of-court settlement, then a trial before Judge Colleen Kollar-Kotelly, in Washington, D.C., will take place.[/background]

[background=rgb(250, 250, 250)]The DOJ did not file suit to block the mergers of Delta-Northwest and United-Continental, Southwest-AirTran, so it would seem to be applying a different standard.[/background]

[background=rgb(250, 250, 250)]Only once in the past 8 years has a Federal Judge stopped a merger. The DOJ cannot stop the merger, only a judge can do so.[/background]

[background=rgb(250, 250, 250)]If a plan of reorganization has not been finalized by Dec. 13, American Airlines and US Airways must jointly agree to extend their merger agreement. Rest assured we are doing a complete analysis of the Government's complaint, using all of our resources, and are prepared to take the necessary steps to ensure we are looking out for the best interests of the US Airways pilots. President Gary Hummel has called for a BPR Informational Conference Call for Friday, August 16, 2013. [/background]
[background=rgb(250, 250, 250)]Look for continued updates.[/background]


ALPA Responds to DOJ Lawsuit to Block American–US Airways Merger - August 13, 2013

[background=rgb(250, 250, 250)]WASHINGTON—The Air Line Pilots Association, Int’l (ALPA), has released the following statement in response to the antitrust lawsuit filed today by the Department of Justice (DOJ) to prevent the merging of American Airlines and US Airways: [/background]

[background=rgb(250, 250, 250)]“Today’s action by the Department of Justice (DOJ) has interfered with the steady progress that the airline industry has made to achieve an economically rational yet vigorously competitive industry. This merger has broad support by labor groups, investors on Wall Street, the Pension Benefit Guaranty Corporation (PBGC), and other stakeholders. [/background]

[background=rgb(250, 250, 250)]“The Justice Department’s move isn’t rooted in the economic reality facing the aviation industry and its workers, one of the most fiercely competitive industries in the global economy. Moreover, the DOJ appears to have completely overlooked the need for U.S. carriers, such as American and U.S. Airways, to position them to compete in the international marketplace against powerful—often government-supported—foreign airlines. [/background]

[background=rgb(250, 250, 250)]“By filing this lawsuit, the DOJ has completely ignored decades of instability in the airline industry that has caused many carriers to go out of business, communities to lose service, and employees to lose jobs. Now that the industry is finally making strides toward economic stability and creating a balance among the major U.S. carriers, the DOJ has moved to interrupt that progress. [/background]

[background=rgb(250, 250, 250)]“This industry is one of the most competitive in the global economy. The market share of a combined American–US Airways company would be roughly equivalent to the size of United and Delta. This is hardly anticompetitive.”[/background]

 

[nevergiveup]

Looks like the USA Today favors our position.

 

[P. REZ]

that is correct and the lawsuit will be about the law, not economics of the industry, esp. forwarding looking predictions of how a company might do as justification for a merger today. FWAAA is correct that mergers are not predicated on trying to determine some sort of future outcome for the industry, including whether AA or US can ever compete against DL and UA.

There is also no legal basis for arguing that the industry should have 3 network carriers or similar size plus WN. None.

The DOJ's case must be based on consolidation as it would exist today as a result of this merger and most specifically the uncompetitive nature of this merger...

and will due respect the verbal and written evidence the DOJ trotted out regarding expectations of higher fares and attempts to eliminate consumer-friendly competitive actions makes it VERY hard for AA and US to overcome whatever economic argument they might have been able to use. The fact that US' existence for much of its time since BK has been based on undercutting other carriers is key evidence that they have managed to succeed so far (and profitably so) yet walking away from that business strategy thru a merger would be damaging to consumers. IOW, perhaps US should have thought thru the long-term implications of being a bottom feeder in the airline industry and the role they would be locked into by doing so.

I'm not sure people here really grasp how damaging it is for a government official to hear that the merger will result in fewer choices for consumers and higher prices which is EXACTLY what a number of the internal documents AA/US produced and which were uncovered by the DOJ said.

As much as AA and US want to try to shift the argument to economic matters including the "unfairness" of DL, UA, and WN getting a merger but AA/US being denied, there was clear evidence that was presented regarding the uncompetitive effects of the AA/US merger which simply were not presented regarding other mergers.

OTOH the DOJ needs to drop its argument about "we've looked at the industry and decided we don't like what we see after consolidation" because that is problematic. At the same time, there never was any requirement on the DOJ that they had to approve subsequent mergers if they approved the first three. There is absolutely no legal basis for saying that AA/US should be approved because the others did. Having the DOJ say they don't like what they see now is not an acceptable reason; the simple fact that the current merger proposal is deemed to be uncompetitive is sufficient.

You make solid arguments but I've got 5 reasons why this merger should happen:

1. DAL lost $22,086,000,000 since 2003
2. UAL lost $8,058,000,000 since 2003
3. AMR lost $9,988,000,000 since 2003
4. LCC lost $162,000,000 since 2003 (all 4 total $40 Billion plus in losses)
5. If ticket prices get too high, people stop flying. They have other alternatives like the bus, train, car, etc. Competition is built in because whether or not an airline has any competition in a particular city, there is only so much a person would be willing to pay for a ticket.

P. Rez

 

[UPNAWAY]

The industry is rarley profitable any arguement that it is too concetrated is a complete joke.

 

[jimntx]

You make solid arguments but I've got 5 reasons why this merger should happen:

1. DAL lost $22,086,000,000 since 2003
2. UAL lost $8,058,000,000 since 2003
3. AMR lost $9,988,000,000 since 2003
4. LCC lost $162,000,000 since 2003 (all 4 total $40 Billion plus in losses)
5. If ticket prices get too high, people stop flying. They have other alternatives like the bus, train, car, etc. Competition is built in because whether or not an airline has any competition in a particular city, there is only so much a person would be willing to pay for a ticket.

P. Rez

Your bullet points about losses in the airline industry prove nothing. If anything they are argument against the merger. If all those airlines have lost that much money (and you don't differentiate between pre- and post- merger results), why should the stockholders of LCC and AMR be subjected to further losses?

Losing money in the airline business is not new. One of the founders of British Airways once said, "If you have to tighten your belt, it's a recession. If you lose your belt, it's a depression. When you have no trousers, you're in the airline business."

 

[Justme]

Question....

I remember reading somewhere that even after the court filing is resolved, DOJ still has to either approve or disapprove the merger. Is this correct? Could they lose the court case and then disapprove the merger, which would then require LCC/AMR to challenge that disapproval in court?

thanks for all correct answers!

 

[P. REZ]

Your bullet points about losses in the airline industry prove nothing. If anything they are argument against the merger. If all those airlines have lost that much money (and you don't differentiate between pre- and post- merger results), why should the stockholders of LCC and AMR be subjected to further losses?

Losing money in the airline business is not new. One of the founders of British Airways once said, "If you have to tighten your belt, it's a recession. If you lose your belt, it's a depression. When you have no trousers, you're in the airline business."

Do I have to spell it out? Airline CEO's and Industry analysts have stated time and time again that the industry needs consolidation because it will never be stable the way it was. The numbers prove that and if you look at the numbers now there is great improvement but not to the point it needs to be. The AMR/LCC merger would help to make this a viable industry. When the DOJ states that competition will be lessened I think they forget that people who fly use discretionary income. If ticket prices are too high, they won't fly. Also, I don't believe the DOJ is looking at what the industry has done in the past and is focusing on some misinterpreted words. They stated that to prove their point average ticket prices rose $25 over a given period but I think they fail to realize that with the increase 2 of the 5 biggest airlines still lost money last year. It is clear to any who follow the industry that there were too many airlines cutting each others throats to see who could lose the least amount.

Are you saying industry consolidation is not needed?

P. Rez

http://money.msn.com...er-isnt-too-big (read this article)

 

[FWAAA]

5. If ticket prices get too high, people stop flying. They have other alternatives like the bus, train, car, etc. Competition is built in because whether or not an airline has any competition in a particular city, there is only so much a person would be willing to pay for a ticket.

True, if plane tickets get too expensive, quantity demanded goes down - fewer people fiy; that truism doesn't excuse a violation of the Clayton Act. It's true about everything we buy: if gasoline gets too expensive, we buy less of it. So should we blindly approve mergers of all the oil companies?

When the DOJ states that competition will be lessened I think they forget that people who fly use discretionary income. If ticket prices are too high, they won't fly.

So it's ok for competitors to merge and reduce competition because, after all, consumers only have so much money to spend and if the reduced competition causes ticket prices to climb too high, then fewer tickets will be sold? That does not excuse anticompetitive mergers.

Economists generally argue that monopolists undersupply their product (which is then sold for a higher price) than the quantity that would be supplied in a competitive market (at, obviously, lower prices). Which is better for consumers? Tight supply at high prices or more of the product at lower prices?

If we accept your view, then the government lacked jurisdiction to control the monopolistic behaviour of, say, beer producers. Beer consumption is complely discretionary, no? So if the beer companies get together and fix prices and allocate markets, that's ok because if their illegal conduct causes prices to rise too much, they'll sell less beer? So under your view, it would be ok if all the beer producers merged into one big global brewery - a monopoly? InBev should merge with every other beer producer in the world because their product (beer) isn't essential? Along the same lines, all cell phone companies should be permitted to merge into one cell phone provider because their product is discretionary?

I'm curious - which industries should have to follow the antitrust laws if not the airlines?

 

[cltrat]

I don't se it as a monopoly there will be 4 major carriers and several others that are close to major them selves. They are also competing on a world stage with many other airlines.

Now my power company? there's a monopoly they have a product I have to have and they are the only game in town.
Flying is at least an option.
If the DOJ was gong to sing this song they should have done it a couple of mergers ago.

 

[700UW]

Good article on the fight:

http://www.businessweek.com/articles/2013-08-15/airlines-trash-the-justice-departments-antitrust-lawsuit-but-a-settlement-is-still-possible

 

[dash8roa]

Funny how they let UA/CO and DL/NW merge, I doubt they will succeed.

They killed the UA-US merger in I believe in 2001.

 

[dash8roa]

If the merger gets nixed, US should pull service from all those small cities out of DCA just for grins.

Might be a good idea since many of those slots are wasted on RJ's. Mainline flights in place of those smaller aircraft would yield more profits.

 

[700UW]

Actually UA walked away and neither US nor UA fought the DOJ and took it to trial.