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

[FWAAA]

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.

Agree completely. As a lawyer who has advised corporate executives on what to never say and the things they should never put in writing, I'm as floored as WT that Parker would ignore the advice of his attorneys and write those things. As you correctly point out, divestitures of slots and gates at various airports won't undo that damage.

You'd think that having cut his teeth at AA as a young college graduate in the mid-1980s, Parker would understand better than most why you never talk price and capacity in public and never communicate with your competitors about price and capacity.

Perhaps Parker and the DoJ will announce a compromise by which AA gives up lots of LHR slots, lots of LGA and DCA slots and gates, some gates at PHL and CLT, subsidizes new-entrant competitors at DFW and MIA and gives up a large portion of its LAX operation in exchange for approval. As others have said, I hope that doesn't happen, as that would severely hamstring AA's chances going forward.

 

[nevergiveup]

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.


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.

The idea of having safe, healthy airlines that pay good wages is ridicules!

 

[cltrat]

Perhaps Parker and the DoJ will announce a compromise by which AA gives up lots of LHR slots, lots of LGA and DCA slots and gates, some gates at PHL and CLT, subsidizes new-entrant competitors at DFW and MIA and gives up a large portion of its LAX operation in exchange for approval. As others have said, I hope that doesn't happen, as that would severely hamstring AA's chances going forward.

they would walk away before doing all of that and rightfully so

 

[700UW]

They didn't borrow to stay in business, they refinanced an exsisting loan.

 

[A320 Driver]

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.


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.

Would you mind letting your buddies at the DOJ know that I have 1 internet provider, 1 phone service and 1 electric company that serve my home. I think they all stink and are stiffling competition. I need 5 competitors to choose from if they are to apply the same standard as they do the airline industry. I will expect my options to expand shortly...

 

[A320 Driver]

They didn't borrow to stay in business, they refinanced an exsisting loan.

How do you come up with more money if you refinance an existing loan Ace??? YOU BORROW!

 

[700UW]

It was to pay off the combined ATSB loan, they refinanced it to lower interests costs, not to stay in business and every airline borrows money and usually have credit arrangements.

 

[nevergiveup]

Would you mind letting your buddies at the DOJ know that I have 1 internet provider, 1 phone service and 1 electric company that serve my home. I think they all stink and are stiffling competition. I need 5 competitors to choose from if they are to apply the same standard as they do the airline industry. I will expect my options to expand shortly...

Remember when we had only 2 large aircraft manufacturers in the US, and they let one buy the other!

 

[Pi brat]

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.

Then maybe they should bust up DL and UA, because stopping this merger will only stifle more effective competition for them.

 

[A320 Driver]

It was to pay off the combined ATSB loan, they refinanced it to lower interests costs, not to stay in business and every airline borrows money and usually have credit arrangements.

Fess up...you're just pretending to be stupid.

 

[700UW]

Are you looking in the mirror?

http://www.airliners.net/aviation-forums/general_aviation/read.main/2709372/

 

[ekjkj]

Q. Would you be blocking this merger if there wasn’t the issue of Washington National?

BAER: If you read our complaint, you’ll see it’s not dependent on the problem at Reagan. That is a serious issue. But our complaint spells out in great detail – probably so much detail that no one’s had time to read it yet – why it is that there are other issues, including this Advantage pricing thing we talk about. There is an underlying concern here is that if you go to just three legacy carriers, all of whom will look alike, their economic incentives will be closely aligned. And you listen to what the executives from US Airways say, all they want to do is get along. They don’t want to compete. They basically want to fly where they fly without competition. This merger would facilitate that, regardless of whether you have an issue at Washington National or not.

In the same filing the DOJ admitted that the smaller carriers set the pricing not the big carriers!

They said in a certian market ( I think JFK) that when Jetblue entered it the ticket prices plummeted, so by their own words the little carries set prices not the big carriers.

Tom and Doug are going to have a field day with these clown's if it ever goes to court.

I wouldn't worry, I think the mearger still is very likely the same thing happened when US and DL were doing the slot swap, as long as both carriers continue to work with the DOJ it will happen. I believe Doug being a poker player was playing hardball and the DOJ is just trying to call his bluff.

 

[Crzipilot]

You'd think that having cut his teeth at AA as a young college graduate in the mid-1980s, Parker would understand better than most why you never talk price and capacity in public and never communicate with your competitors about price and capacity.

Much less forwarding those emails to a competitors CEO? Really?!?!? This whole debacle reminds me of some Frat boys proving how macho and smart they are.....

 

[AAviator]

Possibly no merger? Not necessarily a bad thing...

 

[wopr21]

If all the DOJ wants is for US to give up slots, then UA,DL and WN should give up some as well

Just say'n