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

[robbedagain]

cnn.com is also reporting it based on anti competitve grounds and appears that at least 6 us states ag are also trying to block it with the help of the doj

 

[flyer63]

I'm assuming this did not happen in a vacuum. Parker must of known what was coming with discussions with DOJ. I can't say I'm surprised.

 

[700UW]

DOJ Press Release:

http://www.justice.gov/opa/pr/2013/August/13-at-909.html

 

[WorldTraveler]

here is the DOJ's press release. DCA is indeed a problem and they also used some of the words from US execs about consolidation resulting in increased fares.

Concessions might not change anything at this point.

http://www.justice.gov/opa/pr/2013/August/13-at-909.html

· President Scott Kirby said, “Three successful fare increases – [we are] able to pass along to customers because of consolidation.”

· At an industry conference in 2012, Kirby said, “Consolidation has also…allowed the industry to do things like ancillary revenues…. That is a structural permanent change to the industry and one that’s impossible to overstate the benefit from it.”

· As US Airways CEO Parker stated in February 2013, combining US Airways and American would be “ the last major piece needed to fully rationalize the industry.”

· A US Airways document said that capacity reductions have “enabled” fare increases.


“The merger of these two important competitors will just make things worse –exacerbating current airline industry trends toward reduced service, increasing fares and increasing passenger fees,” added Baer. (DOJ official)

as well as internal AA information:

An internal analysis at American in October 2012, concluded, “The [Advantage Fares] program would have to be eliminated in a merger with American, as American’s large, nonstop markets would now be susceptible to reactionary pricing from Delta and United.” And, another American executive said that same month, “The industry will force alignment to a single approach–one that aligns with the large legacy carriers as it is revenue maximizing.” By ending the Advantage Fares program, the merger would eliminate lower fares for millions of consumers, the department said.

The department’s complaint describes US Airways executives’ fear of American’s standalone growth plan as “industry destabilizing.”


The department’s complaint states that executives of both airlines have repeatedly said that they do not need the merger to succeed.

 

[swamt]

It's all political posturing. Who's going to give in. As another poster has already revealed they are concerned about 1000 routes (I find that a rather large number). The DOJ will use their muscle to get AA and US to divest what the DOJ sees fit to be divested in order for them to approve a merger to go thru. They will have meetings, back and forth, and back and forth some more, both sides will move to an agreement both sides can deal with, slots will be forfeited, and a merger will be done, just like some of the other airlines had to do for their mergers. As for the suit being filed, I am sure this is in response to either AA or US or both claiming that they don't need to divest certain slots, so the DOJ decided to flex some of their muscle. Stay tuned this could get very interesting. Notice that Tx. is one of the states getting involved. Wonder why that is??

 

[Pi brat]

“The merger of these two important competitors will just make things worse –exacerbating current airline industry trends toward reduced service, increasing fares and increasing passenger fees,” added Baer. (DOJ official)

Translation-"We did nothing when the other airlines wanted to merge and now the national right to cheap airfares is put at risk. We can't have that so we are going to step in and pick the winners and losers."

 

[freedom]

Translation-"We did nothing when the other airlines wanted to merge and now the national right to cheap airfares is put at risk. We can't have that so we are going to step in and pick the winners and losers."

that sounds exactly right , and the government has decided that WE are going to be the losers .....

HELL NO !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 

[USFlyer]

I am curious if Parker takes this to Court to fight it.

 

[WorldTraveler]

swamt,
I know this is all moving very quickly but the DOJ specifically highlighted a number of comments that both AA and US execs have said that seriously question whether the merger could have ever produced the consumer benefits the merger claimed.
It also says that they have done enough analysis of the airline industry to see that those exec comments have been well-supported by airline history over the past several years. Thus, it is very possible that there will not be any large mergers in the US any more - and the industry will now evolve into "survival of the fittest."


Yes, Flyer, it is possible to take the Justice Dept. to court but I don't think any US airline has done so and won. Many other mergers in other industries have been stopped by the DOJ.

 

[freedom]

swamt,
I know this is all moving very quickly but the DOJ specifically highlighted a number of comments that both AA and US execs have said that seriously question whether the merger could have ever produced the consumer benefits the merger claimed.
It also says that they have done enough analysis of the airline industry to see that those exec comments have been well-supported by airline history over the past several years. Thus, it is very possible that there will not be any large mergers in the US any more - and the industry will now evolve into "survival of the fittest."

and as the smallest carrier of the big boys that means WE are most likely to go down ....

 

[autofixer]

Isn't LCC making a potful of money without the merger? Why all of the wailing and gnashing of teeth?

 

[WorldTraveler]

and as the smallest carrier of the big boys that means WE are most likely to go down ....

not necessarily at all

 

[28yrsnojob]

lcc will be looking for concessions now from the top, down to rank in file if there going to try to grow airline to compete with the big boys. This must be done now to get me to buy
back in. Parker better get things going now , this is what we pay him for.

 

[freedom]

not necessarily at all

well I will say this ... our ability to resist negative economic conditions is certainly lessened by being small ...

the economy might be swell for today but as well all know , good times and bad times come and go .

 

[WorldTraveler]

Marketwatch is live blogging on the DOJ's conference call.

http://blogs.marketwatch.com/capitolreport/2013/08/13/live-blog-of-justice-department-conference-call-after-blocking-us-airways-amr-deal/?mod=MW_home_latest_news