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

[robbedagain]

i agree there wt i would also imagine may be some carrier like virgin america would also come into play for some of those dca slots and i think may be the new aa would also keep the fare advantage as well in order to win govt approval i think if b6 is going to go for a lot of slots id imagine that may be wn will also go for more slots too it will be very interesting to see what happens

 

[swamt]

I have already stated it was going to be a costly merger if allowed to go forward. Matter fact I said it will involve more concessions than any past mergers that have taken place.
BTW; Heard some very interesting "rumor" the other day. SWA is examining the costs related with starting flts from DFW. Yes I said DFW. We all know that SWA would have to give up gate for gate from Love Field to DFW if they do, BUT, they are not restricted from doing so. Matter fact I was told they are looking at using "international flights only" from DFW as this would more than pay for the off-set. On a side note; also heard SWA may have found a loop hole where they may not have to give up any gates at Love as this would be "international gates" at DFW not domestic gates as the W/A calls for a 1 for 1 in gates, and this would be not be same gate for same gate. Time frame I was told was hopefully using DFW by 1st or 2nd quarter of 2015, has something to do with the expiration of the W/A. Just wondering if this will have something to do with some concessions or divestures at DFW for the AA/US merger. Very interesting to say the least. Bad timing for AA to have to worry about fighting against the W/A again, but it looks like they are going to have to. This would be the best time for SWA to slip into DFW as AA is focusing on the merger and coming out of BK. It would be 1 gate for now until results are seen then grow as needed. We were all told that SWA would benefit from this merger as they have from past mergers, just never thought we would consider DFW so soon, but I guess this would be the best time, and SWA has already experienced other big airports. I have not been able to confirm this since I heard it late last week. But you know how rumors are, hell, we were never able to confirm the AT purchase rumors. When I know more I will post...

 

[WorldTraveler]

guess you are excited about the prospect of WN DFW flights since you have posted it several places but let's also consider that one of the "outs" for Texas would be to argue that they will let the merger go forward with increased ability of WN to serve more of Texas.
The legal decision itself might be black and white but the remedy could very much be political and it doesn't necessarily just involve WN.

Every carrier that can argue that they have helped increase benefits for consumers will be lining up to receive benefits from the merger if it is allowed to proceed.

 

[jimntx]

"Ultimately, InBev made major concessions, selling assets worth almost a quarter of the acquisition value. "

if AA-US is willing to give up 20% of US, then perhaps the deal could pass muster:

make no mistake, though, that the price is very high... is it worth it?

The answer would be...NO. Giving up 20% of the combined company would put the new AA in 3rd place behind DL and UA. As they are already in 3rd place before the merger, why bother with the hassle and expense of doing a merger that gains them absolutely nothing?

 

[WorldTraveler]

20% of the acquired value in the above beer manufacturing example does not translate into 20% of the combined AA-US. The beer example was an acquisition of a smaller company by a larger company. At most, it would be 20% of US... but I still l think that would be alot in an airline example.

It might be 20% of the combined DCA slots, or roughly the size of AA's DCA slot portfolio but that is the closest to 20% this merger would involve, if it requires that much.

There will more likely be a larger portion of requirements that service be raised and that AA/US cannot initiate fare actions or raise fares in specific markets above an industry average set of markets.

 

[AANOTOK]

Very good read from Holly. Just waiting for E and FWAAA to show up and pick it apart. 🙂

 

[FWAAA]

Very good read from Holly. Just waiting for E and FWAAA to show up and pick it apart. 🙂

I'll post a longer review of it later, but one thing stands out:

Fact-checking is not her strong suit. She repeatedly posts that AA's stand-alone plan called for 20% annual growth, which is not accurate. The stand-alone plan called for 20% growth over five years (by 2017). It also called for $1 billion in revenue improvements by 2017, and AA achieved 88% of that in 2012. The link below contains the outline of the plan:

http://hub.aa.com/en/nr/pressrelease/american-airlines-outlines-plan-to-restore-its-industry-leadership-profitability-and-growth

Considering how much of her column is devoted to mocking the DOJ's writing and analysis - you can't help but laugh at the irony.

Holly knows the airline industry. She doesn't know #### about antitrust law. And it shows.

Like many people, she'll get props from the choir, but preaching to the choir doesn't involve much real ability to analyse and persuade. Many of the rank and file workers at airlines, especially US and AA, are understandably angry that the government might kill their pay raises and don't need convincing that the merger is "good." Same with the industry Wall St "analysts" who simply want to push stock and watch it go higher. There's a reason they're not charged with enforcing antitrust laws.

 

[Beancounter]

She repeatedly posts that AA's stand-alone plan called for 20% annual growth, which is not accurate. The stand-alone plan called for 20% growth over five years (by 2017).

Ummmmmm, the difference is between dumb and dumber? Maybe stupid and stupider?

Considering how much of her column is devoted to mocking the DOJ's writing and analysis - you can't help but laugh at the irony.

Holly knows the airline industry. She doesn't know #### about antitrust law. And it shows.

You've got to be joking, you read the DOJ's filing. It was like the rantings of an angry 10 year old, a clueless one at that. This from the US Department of Justice? Merger mania aside, am I the only one concerned by this?

Bean

 

[FWAAA]

Ummmmmm, the difference is between dumb and dumber? Maybe stupid and stupider?

20% over five years equals average growth of 3.7% a year. Perhaps that's unsustainable. Parker hasn't grown US at all since 2005 when he was handed the reigns, instead always holding out hope that he could merge his problems away.

Airlines with low costs tend to grow, except Doug Parker's US Airways. He squandered eight years of low labor costs when he should have been growing.

You've got to be joking, you read the DOJ's filing. It was like the rantings of an angry 10 year old, a clueless one at that. This from the US Department of Justice? Merger mania aside, am I the only one concerned by this?

The paragraphs in the complaint are numbered - which ones stood out as the most clueless, angry 10-year-old-style rantings? I don't see it but perhaps you could point them out.

 

[traderjake]

Subject: PHL inquirer

Some analysts still see good odds of airline merger Linda Loyd Inquirer Staff Writer August 20, 2013 8:04 AM Some industry analysts say there is still a good chance the American Airlines-US Airways merger will go through, with concessions by the carriers to divest disputed routes and add routes and services to perceived gaps in the network. That hardly eases what has been a grueling week for American and US Airways Group. A federal judge delayed approving American's plan to emerge from bankruptcy protection after the U.S. Justice Department and a half-dozen states, including Pennsylvania and Texas, filed suit last week to block the merger. One airline analyst, Daniel McKenzie of Buckingham Research, put the chances of the merger's being approved at 50-50. "We doubt Justice will prove its case if and when it comes to trial," bond analyst Vicki Bryan of the independent research firm Gimme Credit said in a client note. The government makes "blanket statements that consumers will pay more and get less" but the evidence "seems weakly supported," she wrote. "We assume the merger will close." Dan W. Goldfine, an antitrust lawyer at Snell & Wilmer in Phoenix and former trial attorney in the Justice Department's antitrust division, said the government would have a tough time proving its case.​

 

[zethya]

I'll post a longer review of it later..............

PLEASE DON'T, your agenda really doesn't require further confirmation.

 

[A320 Driver]

PLEASE DON'T, your agenda really doesn't require further confirmation.

I'll second that...we get it. He doesn't want the merger for his own personal reasons.

 

[WorldTraveler]

We all have our agendas... that is the nature of this type of special interest chat forum.

Whether you agree with FWAAA or not, he has valid points that no one can just toss out as if they are insignificant. The simple fact is that no airline has taken the DOJ all the way to court and won and there are very few examples - I don't know of any - where a high-profile deal went thru w/o concessions and against the DOJ's objections.

Holly's article has its own bias and echoes many of the same objections that people here and in the published media have said as well. It doesn't answer any more than any other opinion has.

The merger is problematic for a lot of reasons that the DOJ noted and a lot of people continue to brush aside as insignificant and driven by a mindset of "they are just out to get us compared to other airlines." No one with any intelligence should rule anything in or out but neither should anyone doubt the enormous mountain that AA and US have to climb to get a deal, let alone the one they thought they had all wrapped up just over a week ago. It also doesn't change that the trial will give competitors even more time to refine their actions. Whatever actions ultimately become necessary to make the deal work will also reduce the revenue benefits labor has been told to expect and which even under the best scenarios were necessary for Parker to deliver the benefits to labor that he promised.

 

[Reed Richards]

We all have our agendas... that is the nature of this type of special interest chat forum.

Whether you agree with FWAAA or not, he has valid points that no one can just toss out as if they are insignificant. The simple fact is that no airline has taken the DOJ all the way to court and won and there are very few examples - I don't know of any - where a high-profile deal went thru w/o concessions and against the DOJ's objections.

Holly's article has its own bias and echoes many of the same objections that people here and in the published media have said as well. It doesn't answer any more than any other opinion has.

The merger is problematic for a lot of reasons that the DOJ noted and a lot of people continue to brush aside as insignificant and driven by a mindset of "they are just out to get us compared to other airlines." No one with any intelligence should rule anything in or out but neither should anyone doubt the enormous mountain that AA and US have to climb to get a deal, let alone the one they thought they had all wrapped up just over a week ago. It also doesn't change that the trial will give competitors even more time to refine their actions. Whatever actions ultimately become necessary to make the deal work will also reduce the revenue benefits labor has been told to expect and which even under the best scenarios were necessary for Parker to deliver the benefits to labor that he promised.

I would be interested in hearing more of your commentary as to the state of USA airline competition sans this now dead merger. While understanding the very long term survival of US Airways is now in question, it might undercut the Mega carriers with its cost advantage and much lower labor costs. At some point, the AMR folks are also going to end up with haircuts, so they too will be at a cost advantage. And I am not suggesting that just the cost advantage could overcome a well-run Mega. I also don't suggest either of the two new outliers will end up as juggernauts, but it gives me pause that maybe such turmoil is what the DOJ wants to promote lower fares, rather than having a successful and long term stable airline system. RR (and tell me to stop now if I don't have a clue about airline economics!)

 

[Beancounter]

20% over five years equals average growth of 3.7% a year. Perhaps that's unsustainable. Parker hasn't grown US at all since 2005 when he was handed the reigns, instead always holding out hope that he could merge his problems away.

Airlines with low costs tend to grow, except Doug Parker's US Airways. He squandered eight years of low labor costs when he should have been growing.



The paragraphs in the complaint are numbered - which ones stood out as the most clueless, angry 10-year-old-style rantings? I don't see it but perhaps you could point them out.

Maybe you're not aware, but US has had a huge turn around, but since it is not a niche carrier it needs to be larger to compete with Delta and United in the long run. This merger takes care of that, along with taking AA out if bankruptcy (saving jobs, creditors, shareholders, customers, etc. etc), and helping the industry as a whole to stay out of the dark days of bankruptcy after bankruptcy. This industry and the nation as a whole doesn't need cheap airfare, it needs more decent paying middle class jobs. Of course some of this is beyond the scope of the DOJ, but since they're so good at over stepping their bounds....

Parker should have grown organically with US? MARKET SHARE, MARKET SHARE! Well at least I know we're you're coming from. That has worked so well in the past, hasn't it.

You'd like them numbered? Just look at the ones with the snarky attacks on Parker. The filing looks like a post on USaviation.com 🙂 Not to add, numbers taken years ago, incorrect figures........ Let me guess, you'd like a quote with highlights.

Bean