Airline stocks down sharply - DOJ reportedly to block AMR/LCC
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nycbusdriver
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IMO, the DOJ will be pressured by the Administration to settle before any Trial to avoid embarrasment. Support for the merger appears to be growing as more and more analysts and respected airline business experts jump on the bandwagon refuting of the DOJ's weak position. The investment community also appears to have taken a negative view of the DOJ's position and its affect on the stability of the entire airline sector. Once the Trial begins (if it ever does), I'd bet the Judge will never permit the government to appear as having a weak case, or a bias against AA/US and force a settlement. My ? is, assuming Parker feels his legal team will prevail if the issue goes to Trial, what will he offer to divest? One confusing issue that I have a problem with is the DOJ's position that they do not want a compromise, but instead to "stop the merger", which of course is a meaningless threat if there is a Trial. IMO (I have read the Complaint), the major risk for the company - and possibly the DOJ's strategy, are delays in gettiing a resolution, since eventually the legal fees and operational uncertainties will become intolerable. Hopefully, the Judge is astute enough not to accept a trial start date beyond end of 2013, regardless of what the DOJ asserts - such as more Discovery time.
OP
WorldTraveler
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just ask yourself why the investment community is supporting the merger and it is because of the idea that reduced capacity - which will come from the merger even if AA/US won't say it now - will lead to higher profits for the industry, including investors.
The DOJ is not charged to increase profits for the airlines or investors. It is charged to protect consumers and ensure the US' competition laws are followed.
The administration will likely distance itself from the DOJ's actions because they will be unpopular but that doesn't mean they will tell the DOJ to call off their dogs.
There are no major elections this year which might otherwise help to provide pressure were this an election year. The vast majority of voters will be worrying about other issues by this time next year.
The DOJ is not charged to increase profits for the airlines or investors. It is charged to protect consumers and ensure the US' competition laws are followed.
The administration will likely distance itself from the DOJ's actions because they will be unpopular but that doesn't mean they will tell the DOJ to call off their dogs.
There are no major elections this year which might otherwise help to provide pressure were this an election year. The vast majority of voters will be worrying about other issues by this time next year.
Any index constructed like this is misleading since its doesn't consider substitution effects (people changing their quantity demanded given a change in price) and changing trends influencing the quantity and types of goods people purchase. Also misleading because this isn't a hedonic model-a new car in 2013 obviously costs more than a new car in 1978 but you need to consider the characteristics and its not an apples to apples comparison. An automobile in 2013 is night and day from an auto 1978, there is more technology (anti lock brakes, navigation systems, air bags, etc) that were not packaged into a car in that era as they are today. Similarly a passenger traveling in 1978 was able to check in at least two free bags, was served a hot meal on a two hour flight, today?...So for the same $100 there was significantly more "value" packaged into the purchase so its not an apples to apples comparison.
Your concessions/wages do not subsidize what you may consider low fares. Rather it is the market at work that determines what the airlines can charge. If anything in a collective bargaining process unions force companies to pay ABOVE market wages and benefits than if they negotiated individually with each supplier of labor.
Josh
Phoenix
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- Apr 16, 2003
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There is indeed an injunction against the pilots, and if he gets that injunction lifted he will have his third quarter loss.
You forgot a couple Josh. Our pay raises, haven't had one since 1991. Also gone our defined pension plan, it was dumped on the PBGC and is terribly under funded. Can you say taxpayer bailout. Also gone 12% company contribution to our 401K's. Also gone, retirement healthcare. Not to mention 1000's of good middle class ramp jobs.
How the middle class goes, so goes America.
The airplane you fly around on in 2013 is far more advanced than in 1978.
jimntx
Veteran
Only in the minds of LCC employees who know they need us for long-term survival.
Phoenix
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So cars and airline plane rides are different (but probably not so much so to account for the exponential inflation in price for the former and stagnation of price for the latter)...
Is a dozen eggs still a dozen eggs, or are there differences you need to tell us about...
How about a gallon of milK, or gasoline....
Seems to me it is a very good illustration.
There is too much competition and people need to accept the true value of a plane ride safely across the wilderness. 
nycbusdriver
Veteran
How much is AA bleeding every day? While the current financial picture has improved, do you really think it's sustainable against the mega carriers (of which AA is not one.)
AA might very well come out of this alone. But they will be back in Chapter 11 looking to take you further into the poor house. You will be right-sized and look amazingly like LCC in five years. And be compensated to match.
OP
WorldTraveler
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Playing a "your worse off that us" game doesn't help anyone. AA and US both have significant revenue challenges to overcome. New airplanes don't fix revenue problems; they fix cost problems. Only if an aircraft can do things that nothing else before it could do does a new aircraft type really make a difference - and at best that only happens with the E175 aircraft which provides mainline cabin standards to a smaller aircraft. And remember the E175 class jets are flown by regional partners which doesn't do anything to improve mainline cost performance.
The reason why AA and US are both pushing for the merger is because there is real potential to improve the outlook for both via a merger. Both can help the other some but the merger itself brings a certain amount of baggage - not the least of which is the market concentration that will result in certain parts of the combined AA/US network - exactly where the DOJ is focused.
Neither side should be poking sticks in each others' eyes as if they are invincible.
The reason why AA and US are both pushing for the merger is because there is real potential to improve the outlook for both via a merger. Both can help the other some but the merger itself brings a certain amount of baggage - not the least of which is the market concentration that will result in certain parts of the combined AA/US network - exactly where the DOJ is focused.
Neither side should be poking sticks in each others' eyes as if they are invincible.
jimntx
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I can retire at any moment and go do something else if I wish--including do nothing. I do this job for fun. Lord knows I don't do it for the income.
Re: your question regarding AA bleeding money...
You really should read the financials before making statements or asking questions such as that. AMR made a profit in both quarters 2013. Click here for July results: http://www.airlineforums.com/topic/56093-american-airlines-parent-company-reports-earnings-of-292-million-and-thats-just-in-july/
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