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

[nevergiveup]

can you show me where they said they would reconsider their objections based on concessions?

"At a news conference, Assistant Attorney General Bill Baer said the Justice Department was always prepared to discuss a settlement but that it preferred this time to seek an injunction to block the deal." From the Huffington Post article.

 

[WorldTraveler]

thanks, I see some of those comments.

There are other comments that show that the DOJ was very concerned about the anticompetitive language that was used in conversations at AA and US as well as in public comments. Thus, it is hard to imagine how the DOJ would now say "those things didn't really matter if you can give enough of your network away to reduce competition."

One of the top markets mentioned as problematic was DFW-CLT, a market that AA and US now fly separately. how does AA and US combined make the govt happy that a competitor can really be a significant force in the industry?
How does AA/US now convince the DOJ that AA/US will now continue the same policy of undercutting fares in other carriers' hub markets with the other carriers doing the same thing to US? They specifically said that the Advantage Fares are a key component of the way US operates today that would likely be lost.

And finally even if it was just a matter of DCA, suppose, as some of us have believed all along, that the DOJ approved the slot swap with US ending up with 55% of the slots at DCA with the intention of not allowing them to gain ANYTHING else of any significant size again. IIRC, AA operates about 50 mainline and RJ flights per day, about 20% of the size of US. If the DOJ really is telling AA/US that they have to divest 50 flights per day at DCA, then the economics of the DCA hub very well could be in jeopardy and it isn't worth moving forward... precisely why AA and US execs apparently walked away from the table, knowing full well that the DOJ would file suit.

I'm not sure I see a settlement near as easy to come up w/ as other people think esp. given that there are major implications to how the airline industry prices based on size that cannot be undone. The DOJ is not telling the airline industry it cannot price as it has; it is telling AA and US that their size is problematic because it would remove a lot of the incentive that the network carriers have had to compete against each other, esp. US' policy of undercutting other carriers.
I don't see how you can fix that problem w/o undoing the economic value that should come from the merger.

But I am open to hearing how someone thinks that could happen.

 

[Reed Richards]

WorldTraveler pondered: "I don't see how you can fix that problem w/o undoing the economic value that should come from the merger.

But I am open to hearing how someone thinks that could happen. "


Indeed. Over 100k employees of both airlines are wondering the same thing. Sad day for us all. RR

 

[im back..!!]

they have to divest of enough assets, size, competition, as necessary to allow DOJ the ability to say thats better, comprtition is maintained or increased. Then they will drop there suit and the remaining portion of the carriers can merge.
I believe the easiest way for this is to fragment a portion of the carriers that will still be a viable entity on there own and or allow them to join with other like sized carriers to create a 4th large carrier.
Fragmentation requires union aproval above a certain threshold, I believe USAPA would be enthusiastic in spinning off the PHX operation (all pilots remaining with) and the previouse America West ops becomes stand alone again.
This could be enough (approx 35% of existing Usairways) to satisfy DOJ.
It also allows an overnite carrier that has a proven track record of surviving, they then could stand alone or pursue expansion via merger with Republics Frontier division etc.
American could then combine with the Remaining Usairways and be come No.2 or 3 in size as a remaining legacy.
This is what I see as the easy fix, its built in and solves several problems, allows for several entities to survive and thrive.

 

[nycbusdriver]

can you show me where they said they would reconsider their objections based on concessions?

It's not up to the DOJ to decide anything. Now, it's up to the judge who presides over the lawsuit in the D.C. Federal District Court.

 

[jimntx]

As WT had tried to point out...if significant portions of either airline have to be divested--particularly, if those portions end up going to a competitor--the merger no longer makes economic/financial sense. AA, as is, is already number 3. Why ever would they do a merger where they ended up #4? And, why bother if, after the merger, you are still #3?

And, you keep forgetting that regardless of what one DOJ official says, the court documents are directed at the anti-competitive statements made by airline executives. No amount of divestiture can fix that.

 

[autofixer]

"Either other airlines didn’t make those statements or the DOJ didn’t find them." I guess in today's political environment, Parker and Horton should have just lied to advance the agenda...like our politicians do?

 

[UPNAWAY]

Most of the media and analyst today are very critical of the DOJ positions and are fairly easily knocking big holes in their points. I wonder what the chances of succesful defeating the DOJ in court if they infact do not want to compromise?

 

[jimntx]

The talking heads are always excellent at "knocking holes" in the government's case, or the defendant's in criminal case or in the increase in the price of a cup of coffee. Problem: the talking heads do not have standing in the court. As has been pointed out before, the DOJ has almost never lost a case of this nature. And, this is small potatoes, give-it-to-the-junior attorneys-to- handle compared to some of their anti-trust cases--think the breakup of AT&T in our lifetimes, and going back...the breakup of Standard Oil into several companies back in 1911. This ain't the DOJ's first rodeo.

 

[A320 Driver]

As WT had tried to point out...if significant portions of either airline have to be divested--particularly, if those portions end up going to a competitor--the merger no longer makes economic/financial sense. AA, as is, is already number 3. Why ever would they do a merger where they ended up #4? And, why bother if, after the merger, you are still #3?

And, you keep forgetting that regardless of what one DOJ official says, the court documents are directed at the anti-competitive statements made by airline executives. No amount of divestiture can fix that.

I think some of these "anti-competitive" statements are being taken out of context. The leadership at LCC has made no secret for years that over capacity in the industry has made it virtually impossible to raise fares to cover costs, especially with oil over $100/barrel. This is the same LCC that borrowed over $1 BILLION to stay in business in 2008 and still owes money on that debt. Bag fees represented the only difference between profit and loss for years. It seems that the DOJ won't be happy until we back on the brink of failure as an industry. Why doesn't a healthy airline industry interest them at all? That is much of what this merger was about...matching supply and demand so we can make a profit in the good times to carry us through the inevitable bad times that will follow and having money to upgrade our fleets and technology. I can remember when Congress was warned when we tried to merge with United the first time... how they crowed at the mention of possible bankruptsy with a failure of that merger. It happened. When are these people going to learn that this industry can take care of itself if left alone. Consumers decide when the pricing is too much. NOT the government.

 

[cltrat]

Maybe Eric Holder wants his name on something besides being a gun runner?

 

[psa8979]

OH NO ! HERE IT COMES ! THIS MUST BE OBAMAS FAULT ! Just say NO to FAKE NEWS and THE PIG/MAN Brothers and Sisters. NO THEY ENEMY / SOLIDARITY WORKS !

 

[WorldTraveler]

I think some of these "anti-competitive" statements are being taken out of context. The leadership at LCC has made no secret for years that over capacity in the industry has made it virtually impossible to raise fares to cover costs, especially with oil over $100/barrel. This is the same LCC that borrowed over $1 BILLION to stay in business in 2008 and still owes money on that debt. Bag fees represented the only difference between profit and loss for years. It seems that the DOJ won't be happy until we back on the brink of failure as an industry. Why doesn't a healthy airline industry interest them at all? That is much of what this merger was about...matching supply and demand so we can make a profit in the good times to carry us through the inevitable bad times that will follow and having money to upgrade our fleets and technology. I can remember when Congress was warned when we tried to merge with United the first time... how they crowed at the mention of possible bankruptsy with a failure of that merger. It happened. When are these people going to learn that this industry can take care of itself if left alone. Consumers decide when the pricing is too much. NOT the government.

to be blunt - and honest - the only thing the Justice Dept. is charged to do is ensure that US laws are followed and that anticompetitive behavior is not allowed to begin or punished if it happens.

The DOJ is not focused on profitability of any company. There are often other cabinet depts. that do have more control over each industry... it is the DOT and its agencies that have greater direct responsibility for airlines but the DOJ still has legal authority when mergers and consolidations (including stuff like the slot swap) are involved.

In a pure market, consumers do decide but the airline industry is highly concentrated in the hands of a few players and thus pure competition cannot occur as it could with grocery stories, for instance.

And it doesn't change that there were many highly uncompetitive comments made over a number of years indicating that the intention of the merger or consolidation in general was to raise prices - and that will never fly with the Justice Dept. regardless of the industry.

Remember that Parker's plan was to cut capacity in the SE if the DL merger had gone through and legislators jumped all over that. You just can't say some things and then expect the gov't to bless your efforts.

This ain't the DOJ's first rodeo.

so true... somehow the phrase "you can't fight city hall comes to mind and the DOJ is a whole lot more powerful than ANY city hall.

AA and US may try to fight externally but esp. AA has to move on and figure out how to make the company be long-term viable.

 

[cltrat]

OH NO ! HERE IT COMES ! THIS MUST BE OBAMAS FAULT ! Just say NO to FAKE NEWS and THE PIG/MAN Brothers and Sisters. NO THEY ENEMY / SOLIDARITY WORKS !

of course you're right, nothing could ever possibly be Obamas fault.....

 

[Real tired]

United.......

Delta........

Mid Atlantic...........

Business Select........

The "Nic"..........

The IAM.......

The Teamsters.......

And now a gum flapping CEO that has ruined it for all of us. This place is a failed mess.

I look forward to Home Depot.