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

[FWAAA]

fwaa if both aa and us negogiat with the govt to get the merger... what kind of concessions do you think would be given up.... if i had to to guess most of the concession if not all would come from the us side.. but esp in dca not sure about any other place

I posted some wild-eyed fantasy divestitures the other day, like huge slot giveaways at LGA and DCA, gates at PHL and CLT (not slot controlled) plus subsidies for new entrant competitors at MIA and DFW.

Actually, after reading the complaint, I cannot envision concessions that would make everything ok and permit the merger. That's why I think it's over.

 

[WorldTraveler]

...because no amount of divestitures can deal with the communications at both AA and US - but so far were far more prevalent at US - showing that the combined entity would be driven by a desire to raise fares and eliminate competition.

I fully expect that the DOJ's first, third, and every other paragraph throughout this trial - if AA and US don't give up first - will focus on the uncompetitive language that was used to describe the benefits of consolidation. The government really doesn't have to show anything else to demonstrate why the merger should be blocked.

 

[freedom]

if we can prove that without the.merger there will be job losses at AA or one of the two airlines might go under then they will have no choice but to stand aside ...

The DOJ is basing their reasoning on the economy as it stands today ... If we can crush/destroy/annihilate the conventional wisdom that there is an economic recovery going on in this nation then they should also back down .

 

[AirwAr]

if we can prove that without the.merger there will be job losses at AA or one of the two airlines might go under then they will have no choice but to stand aside ...

The DOJ is basing their reasoning on the economy as it stands today ... If we can crush/destroy/annihilate the conventional wisdom that there is an economic recovery going on in this nation then they should also back down .

But how can we prove that when both CEO's have said, since the beginning of this process, that they don't need this merger to survive. They were very positive on the fact that they will thrive. You've got an uphill battle, dude.

 

[freedom]

Not really,hopefully by the time this gets to court it will be mid-September and the FED will have begun to ease off the QE which should in turn push interest rates higher and stocks lower ...if conflict in the middle east worsens with any luck that will push the price of crude oil up ....all helping to make the stand alone prospects of AA bleak .

 

[robbedagain]

it was reported that both airlines want to get a quick hearing... and as the anti trust division of the us fed govt bill baer has said he is open to negogiations... and both airlines at first said no but later on reported that they would also be open to negogiations as well and could still get it completed by year's end.. it will be very very interestin. fwaa thanks for the explanation there. its just a waiting and see type now... id imagine though that the creditors may make it difficult for aa if they and us allow the merger to die... it just seems to me that the govt is still willing to negogiate with both carriers but who knows itlll be very interesting

 

[Reed Richards]

Thanks for the interesting thread, and for many thoughtful posts. I am on record here that this deal is dead. I won't bore you with my recap. But watching the back and forth gave me pause. I have already been guilty of talking about what a terrible thing it will be for AMR when this deal fails, while working at LCC. If such pondering is to argue as to WHY the deal should NOT fail, fine. But I am going to be real considerate talking about "bad" things AMR going forward. I have lived enough bad things here to know what it feels like in BK, trying to get out, much less get out somewhat intact! When everyone finally accepts this deal as failed and moves on (most importantly the Management teams) we might, just might have a future here at LCC. RR

 

[Beancounter]

...because no amount of divestitures can deal with the communications at both AA and US - but so far were far more prevalent at US - showing that the combined entity would be driven by a desire to raise fares and eliminate competition.

I fully expect that the DOJ's first, third, and every other paragraph throughout this trial - if AA and US don't give up first - will focus on the uncompetitive language that was used to describe the benefits of consolidation. The government really doesn't have to show anything else to demonstrate why the merger should be blocked.

I'd have to disagree, the DOJ's case has more holes in it than a block of swiss cheese. They are going to have to provide a lot more than e-mails and quotes from the CEO's (who were at the time trying to raise support and capital), to prevent the merger.

If the DOJ was really concerned about protecting John Q public, why are they trying to support a duoploly? Why haven't they said anything about the record number of recent health care provider mergers that have caused up to 300% increases in costs to consumers?

Bean

 

[Beancounter]

Thanks for the interesting thread, and for many thoughtful posts. I am on record here that this deal is dead. I won't bore you with my recap. But watching the back and forth gave me pause. I have already been guilty of talking about what a terrible thing it will be for AMR when this deal fails, while working at LCC. If such pondering is to argue as to WHY the deal should NOT fail, fine. But I am going to be real considerate talking about "bad" things AMR going forward. I have lived enough bad things here to know what it feels like in BK, trying to get out, much less get out somewhat intact! When everyone finally accepts this deal as failed and moves on (most importantly the Management teams) we might, just might have a future here at LCC. RR

The best thing in my opinion for both sides is the merger. Looking at from our side, USAPA is incapable of getting a contract, because they will neither accept the Nic or move off DOH. Without the merger we will be the lowest paid pilots in the industry for a long time. Nothing like having to have a side job so you can afford to be a major airline pilot

Bean

 

[AANOTOK]

Thanks for the interesting thread, and for many thoughtful posts. I am on record here that this deal is dead.

And I'm on record saying the merger will "eventually" happen. Be back here in a few months to eat crow or accept the congratulations!

 

[traderjake]

I fully expect that the DOJ's first, third, and every other paragraph throughout this trial - if AA and US don't give up first - will focus on the uncompetitive language that was used to describe the benefits of consolidation. The government really doesn't have to show anything else to demonstrate why the merger should be blocked.

Says the Delta shill who wants the government to protect his company from having to compete against another world class airline.

We shall see if this merger gets approved and it won't be decided by emails.

The DOJ case is weak, did they include Southwest in their competition analysis?

 

[WorldTraveler]

I have never said nor is there any evidence that DL has tried to avoid competition with AA and/or US. Au contraire:
DL took 125 or so slot pairs at LGA that US was using and added millions of seats per year to the LGA market including to nearly all of the top markets, irrespective of other carriers that operated in those markets.
DL fought for the right to add LHR flights and continues to do so quite successfully and the Virgin Atlantic deal only helps bring DL closer to being able to compete at LH. DL has done the same thing in several other key limited access int’l markets including Brazil and Japan.
DL started the buildup at LAX which resulted in additions by AA which has gone back and forth several times.

DL hasn’t run from anything but has built its network where it needs to and has aggressively competed in markets where other carriers were happy with the status quo.
It is precisely that type of aggressive competition that the DOJ wants from companies in all industries.
The gov’t isn’t supporting a duopoly between DL and UA at all… it is precisely because US has had an aggressive practice of undercutting other carrier fares that the DOJ doesn’t want to allow a merger that execs on both sides have admitted will result in less consumer choice and higher prices. THAT is the definition of an uncompetitive merger and is precisely why the DOJ is acting.

I have a feeling that there will be many people learning a lot about antitrust law during the next few months. US could have argued for months about the benefits of consolidation IF IT HAD ONLY talked about network benefits and the ability to compete with a larger DL and UA. When emails were revealed saying that US saw consolidation as being essential to raising prices and limiting consumer choice, then the line was crossed about the type of communication and the purposes of consolidation that the DOJ allows.

The DOJ doesn’t FORECAST the health of companies, Freedom. You will find no support anywhere if you want to see the Middle East erupt in flames, fuel prices soar, and the global economy tank just so AA and US can merge.

And if the economy is that bad off, there will be incredible damage done to both AA and US and the rest of the global airline industry before there are any benefits from the merger.

As for health care mergers, the gov’t, the President wants a gov’t-controlled health care system or at least he thinks it is possible to implement a dual gov’t controlled/free market system; the free market side of the health care system is saying the economics won’t work the way the gov’t thinks it will.
The same policy decisions are not being made about other industries including the airlines.

 

[jimntx]

I'd have to disagree, the DOJ's case has more holes in it than a block of swiss cheese. They are going to have to provide a lot more than e-mails and quotes from the CEO's (who were at the time trying to raise support and capital), to prevent the merger.

Well, since you obviously understand anti-trust law better than the DOJ, perhaps you could enlighten us on exactly what the DOJ will have to provide to prevent the merger. Expecially, since they have statements by executives involved in the merger that they intend to reduce service and raise prices as soon as the merger is complete--the essence of the prohibited involvement in the internal affairs of the merger partner prior to completion of the merger.

This has nothing to do with how many slots some airline has at some airport. There are other parts of the anti-trust laws besides the monopoly prohibitions. As FWAAA said above...go read the complaint, then accept the fact that no amount of route/slot divestitures will fix what the LCC (and to some extent AMR) executives have done to screw the merger.

Hey, there is hope for us peons, though. I just realized when the DOJ said they are open to negotiation, maybe they meant that if ALL the executives on both sides of the aisle leave without umpty-leven millions in separation pay, then the merger can go through.

 

[traderjake]

Well, since you obviously understand anti-trust law better than the DOJ, perhaps you could enlighten us on exactly what the DOJ will have to provide to prevent the merger.

The DOJ should stick to things they know something about, like shipping guns into Mexico.

 

[jimntx]

The DOJ should stick to things they know something about, like shipping guns into Mexico.

When all else fails change the subject. What a strong intellectual argument!