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

[USFlyer]

I'm not aware of any other airline trying to challenge a DOJ antitrust suit like this. I don't see the airlines walking away. The approved AA reorganization plan is predicated on the merger, so that sets the bankruptcy process back quite a bit.

Regardless, it does seem a bit unfair to let three other mergers go through unscathed but sue to stop this one.

 

[johnny kat]

So what's next? Does this announcement mean AA will be delayed leaving bankruptcy? If the merger is nixed will AA have to redo POR to reflect less payout to the creditors? Will US still compete effectively? Will US start fare wars? This raises alot more issues and makes the industry recovery more tenuous. I don't think anyone should be surprised...deja vu DCA...what to do with DCA?

 

[freedom]

So what's next? Does this announcement mean AA will be delayed leaving bankruptcy? If the merger is nixed will AA have to redo POR to reflect less payout to the creditors? Will US still compete effectively? Will US start fare wars? This raises alot more issues and makes the industry recovery more tenuous. I don't think anyone should be surprised...deja vu DCA...what to do with DCA?

we should not allow OTHERS to determine our own fate ...I promise you that if we got all 90K of this airlines future combined employee's and their families out rallying and protesting the government WILL back down ..

we CANNOT just sit here and take it .

 

[swamt]

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.

Good point. And here are some more quotes and interesting thoughts coming from the DOJ. With both companies stating that they can "very easily survive on their own, and compete" why should the DOJ approve the merger? Most all the other airline mergers there was an airline involved that would have gone out of bus if the mergers were not done, but not in this case with AA and US. Here are 2 interesting para's on that issue:

“If this merger goes forward, even a small increase in the price of airline tickets, checked bags or flight change fees would result in hundreds of millions of dollars of harm to American consumers. Both airlines have stated they can succeed on a standalone basis and consumers deserve the benefit of that continuing competitive dynamic.”

And: The department’s complaint states that executives of both airlines have repeatedly said that they do not need the merger to succeed. The complaint states that US Airways’ CEO observed in December 2011, that “A[merican] is not going away, they will be stronger post-bankruptcy because they will have less debt and reduced labor costs.” US Airways’ executive vice president wrote in July 2012, that, “There is NO question about AMR’s ability to survive on a standalone basis.” And, as recently as January 2013, American’s management presented plans that would increase the destinations it serves in the United States and the frequency of its flights, and would position American to compete independently as a profitable airline with aggressive plans for growth.

 

[nycbusdriver]

Parker and Kirby will still move to Texas, so no worries there.

Dave Siegel is tanned and rested and ready to retake the helm of the also-ran US Airways.

 

[28yrsnojob]

Top management wasted alot of money here not to get deal done.
stock holders should be furious, Top people need to be replaced.

 

[swamt]

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.

I see now. I have read further. Thank you. The merger may very well be doomed.

 

[nycbusdriver]

we should not allow OTHERS to determine our own fate ...I promise you that if we got all 90K of this airlines future combined employee's and their families out rallying and protesting the government WILL back down ..

we CANNOT just sit here and take it .

Ahem. You would be lucky to get 10% of AA employees to actually protest. Most, even the pilots, mechanics and flight attendants whose UNION OFFICERS pushed for Parker, really don't want this to go through.

Make no mistake. There will be plenty of champagne bottles uncorked tonight in the homes of AA employees.

 

[CactUSmx]

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 .

Bigger is not necessarily better. Look ex.: Eastern Pan Am TWA

 

[nycbusdriver]

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.

The case is ALREADY IN COURT. The DOJ is suing in the District Court to block the merger. No need to sue the DOJ; only to defend the lawsuit already filed.

 

[FWAAA]

Top management wasted alot of money here not to get deal done.
stock holders should be furious, Top people need to be replaced.

Parker again demonstrates that he's not up to the task of merging with another airline. He failed to get cooperation from anyone at Delta (rank and file, management or creditors) and now, having obtained some cooperation from rank and file and creditors of AMR (not so much the management, which was dragged kicking and screaming) he has failed miserably at convincing the DoJ to approve the combination.

Perhaps the drunkard from Tempe isn't the wunderkind so many people think he is.

 

[snapthis]

Got to take care of the Chicago boys!

Yep. It goes all the way up to Obama.

Antitrust? No, anti-business liberals.

LEGAL/REGULATORY | MERGERS & ACQUISITIONS AUGUST 13, 2013, 11:07 AM 20
U.S. Seeks to Block Airline Merger
BY DEALBOOK

Mike Theiler/Reuters
US Airways Express and American Airlines planes at the Ronald Reagan Washington National Airport in Arlington County, Va.
The Justice Department, along with the attorneys general of six states and the District of Columbia, filed a lawsuit on Tuesday seeking to block the proposed merger of American Airlines and US Airways.

The Justice Department, in announcing the suit, said that if the deal went forward it would substantially reduce competition for “commercial air travel in local markets throughout the United States and result in passengers paying higher air fares and receiving less service.”

The $11 billion merger, announced in February, took American out of bankruptcy. The combination of the two carriers would create the nation’s biggest airline, a company with the size and breadth to compete against United Airlines and Delta Air Lines, which have grown through mergers of their own in recent years and are currently the biggest domestic carriers.

But in the complaint filed on Tuesday in Federal District Court in the District of Columbia, the Justice Department said the merger “will leave three very similar legacy airlines – Delta, United and the new American — that past experience shows increasingly prefer tacit coordination over full-throated competition.”

The complaint goes on, “By further reducing the number of legacy airlines and aligning the economic incentives of those that remain, the merger of US Airways and American would make it easier for the remaining airlines to cooperate, rather than compete, on price and service.”

US Airways stock was down 7 percent in trading after the suit was filed.


Larry Downing/Reuters
Eric. H. Holder Jr.
“Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure,” Attorney General Eric H. Holder Jr. said in a statement. “By challenging this merger, the Department of Justice is saying that the American people deserve better. This transaction would result in consumers paying the price — in higher airfares, higher fees and fewer choices. Today’s action proves our determination to fight for the best interests of consumers by ensuring robust competition in the marketplace.”

The action is the latest in a series of prominent antitrust moves by the Obama administration Justice Department. In January, the agency sought to block Anheuser-Busch InBev’s $20.1 billion acquisition of Grupo Modelo, the Mexican maker of Corona beer (that deal was later modified to win approval), and in 2011 it thwarted AT&T’s proposed $39 billion takeover of T-Mobile USA. (Those companies abandoned the merger.)

 

[freedom]

The case is ALREADY IN COURT. The DOJ is suing in the District Court to block the merger. No need to sue the DOJ; only to defend the lawsuit already filed.

bigger is most CERTAINLY better , for AA and for US .......

Considering the economic climate of today , we most certainly need to be the biggest and we shouldn't allow this government that doesn't know what the hell it's doing when it comes to ANYTHING to stand in our way .

 

[WorldTraveler]

Parker again demonstrates that he's not up to the task of merging with another airline. He failed to get cooperation from anyone at Delta (rank and file, management or creditors) and now, having obtained some cooperation from rank and file and creditors of AMR (not so much the management, which was dragged kicking and screaming) he has failed miserably at convincing the DoJ to approve the combination.

Perhaps the drunkard from Tempe isn't the wunderkind so many people think he is.

drunkard is not the issue according to the lawsuit... repeatedly saying that the merger will result in higher fares is what appears to have gotten the DOJ all wound up.

 

[nevergiveup]

Even less votes for Hillary!