JUSTICE DEPT SUES TO BLOCK US/AA MERGER

[Bob Owens]

if the merger is scuttled completely aa folks could see even more drastic cuts hope not for you aa folks

Doubtful, AA slowed up on hiring because of the expectation of a merger.

 

[Bob Owens]

The DoJ publicly said today that concessions won't change their mind; at this point, their goal is to stop the merger under their Clayton Act powers.

Unless the DoJ is bluffing, appeasing the DoJ would be pointless now that Justice has filed its suit to block the merger.

Procedurally, the DoJ has laid out their case and will present evidence. If the judge finds that the government has satisfied its burden and shown by a preponderance of the evidence that the merger would lessen competition, then the judge will rule for the government. It's not a criminal case - it's civil, so there's no "beyond a reasonable doubt" out for US-AA. The government doesn't file suits like this unless it thinks it can win.

If the court rules against the merger, it's game over. No merger.

Oh, sure, "we'll appeal" says Parker. Odds of getting the decision overturned are very long.

If there is a trial, expect disclosure of lots of additional stupidity by the executives like the emails and memos mentioned in the complaint.

Maybe Parker will ask his workers to go and Picket the DOJ? Let them do it in uniform? Lets see how many show up.

 

[Bob Owens]

IIRC, AA wasn't the carrier which really wanted to merge - nor was it Horton who as negotiating "behind the back" of the competitor the way Parker was (i.e.-to get AA unions join in the merger process).

Obviously US management "didn't do its homework" properly.

The ironic thing here is that if the merger doesn't go through, Horton can now really screw the AA unions with a new contract/agreement and the unions can't do too much besides striking (and I don't think that would work long-term).

I think Horton should redo contracts and completely dump the pensions the way UA and DL did.

Yea with record breaking profits he is going to get more concessions. Company man Little will be gone by the end of September, along with Gless and Videtich right behind him, a new team with no ties to AA management and real Union roots and beliefs will be at the helm of the TWU (Lombardo was involved in Strikes in PHL and Samuelson's Local 100 called the MTAs bluff in the old concessions or jobs game, they said NO to concessions, the company laid off hundreds, and hired them all back within a year) Go ahead and dump the pensions into the PBGC, either way we end up with around the same and the PBGC will own AA, then we can get raises, benefits and workrules that bring us up to UA and DL in a PEB. Yep, I'm all for opening up the contract again without Little, Videtich or Gless in the picture. The margin that provided the YES vote left with EO's and layoffs.

 

[Rogallo]

Company man Little will be gone by the end of September, along with Gless and Videtich right behind him,

Hip, Hip, Hooray,
Hip, Hip, Hooray,
Hip, Hip, Hooray,

 

[Silver Meteor]

WT...on that other airline board, someone suggests that "maybe" the reason that Texas joined the lawsuit, was that SW does have influence in Texas, and Southwest is mad about the restrictive Wright amendment.

Never thought of that. Is that even a small possibility?

 

[Bob Owens]

The merger provided me with a 4.3 percent raise via the MOU and took away my profit sharing...those are the only things that will change. The equity is probably gone or less than it would have been because AA will not come out as strong as it would have with the merger (imo). As for your assumption that "labor is not going to like the reality that AA mgmt and creditors will come back to them looking for deeper cuts" is wrong. We just signed a six year contract that had nothing to do with the merger...what we gave up was per the 1113 and it is finalized. What are they gonna do, threaten us with BK II before they ever emerge from I.

On a side note, I am still in the small camp that believes the merger will still go through, albeit drastically different and a ways down the road.

Wrong they can come back for more if they do so before exiting BK. But chances of them getting more while showing record profits are slim.

Changes in union leadership in the TWU favor a much more hard line position should they even try, by the end of September its likely that Little, Gillespie, Gless, & Videtich and all the other company men who destroyed our careers will be gone. Even the ever shrinking Tulsa has a more militant leader. Maybe they have finally seen the light? The vote yes regime was voted out by the members who remained, obviously they didn't feel that Hewitt saved their jobs or that Luis should come back either.

While I really don't know a whole lot about Lombardi, Samuelson is a pure Unionist who has studied Labor History for many years, studied the writings of James Connolly (and unlike Gless, Videtich or probably even Little knows who Mother Jones was and what she stood for). He was stunned when we told him what we had given up over the years and where we ended up under the Little, Gless Viditich regime. I do not believe that Lombardi and Samuelson would simply roll over and tell their members to lay all the blame on the law, or falsely claim that if you give management everything they wanted that it would save jobs.

To me blocking the merger creates better opportunities for us and heads off the sure fire disaster known as the TWU-IAM Joint Union where our members would be incoherently split between two unions where the structure at best appears to be random and the Locals are stripped of power. (BOS-IAM, NYC-TWU, DCA-IAM, CLT-IAM, RDU-TWU etc etc).

 

[Bob Owens]

Not immediately. In the immediate future, the creditors and AMR will throw together a "new" POR (if they don't already have one developed as a contingency to the one before the court requiring merger), embrace, call each other thou, and emerge with the new standalone AMR. (Which will be more of the same we're already doing and enduring. Complaints from management that none of us is productive followed by bonuses for management for recognizing same.)

Then like our erstwhile suitor, LCC, they will file a 2nd bankruptcy declaring that following the last employee screwing-over, they used lubricant. The cost of said lubricant made it impossible to make a profit; therefore they need more concessions from employees. Then there will be bonuses all around at Centerport when this has been accomplished.

Cynical? Moi? How could you say such a thing?

Hmm, did you forget that the concessions were based upon their stand alone plan as necessary for that plan to succeed? The merger came after the concessions, based upon the stand alone plan, were voted in place. (And show $3.5 billion a year in profits) Thats the whole basis for abrogation, that the company has a plan and the concessions are needed for the plan to work, if they didn't have a plan then they could not ask the court to abrogate.

 

[WorldTraveler]

WT...on that other airline board, someone suggests that "maybe" the reason that Texas joined the lawsuit, was that SW does have influence in Texas, and Southwest is mad about the restrictive Wright amendment.

Never thought of that. Is that even a small possibility?

Wright is coming down in a little over a year so it really doesn't effect the merger one way or the other.

Texas is a state all of its own and they don't want anyone to forget that but....
all of the states that joined the DOJ in the suit are hubs for AA or US and hubs already believe they overpay relative to most other markets because of the concentration of service. Eliminating a competitor has a larger effect in a hub than it does in markets where the market is more evenly divided among competitors.

 

[Bob Owens]

Good read, IMO...


http://www.forbes.com/sites/richardaboulafia/2013/08/14/does-the-department-of-justice-have-the-slightest-idea-how-airlines-work/

Does The Department Of Justice Have The Slightest Idea How Airlines Work?
Capricious. Incompetent. Misguided. These are some of the kinder words I’d use to describe yesterday’s Department of Justice (DoJ) announcement that it would sue to stop the American/USAirways merger.

Written by someone who believes that the market is self correcting and we exist to serve it instead of the other way around.

 

[Bob Owens]

There is no doubt that the Feds have been no help and no friend to the airline industry but that is the reality that US airlines have to overcome. Great to whine but figuring out to thrive in a very hostile environment is what is needed.

One of the pieces that is not being mentioned here is how difficult it is to merge any company and any industry in BK. There are all kinds of things that can happen to derail getting out of BK.

AA is severely handicapped in being stuck in BK while this all is settled – competition will make it harder and harder for AA. It will take months to come up w/ a new POR and put in place the plans necessary depending on whether the merger is on or off.

AA labor agreed to support Parker because they would lose less than in a standalone plan. The real question is how much AA employees would stand to lose now under a standalone plan vs. what Parker promised – even if he couldn’t deliver.

AA’s revenue growth forecast in its POR even as a standalone was very optimistic. The chances of achieving those goals is even more optimistic now as UA and WN have had more time to work out their mergers and focus on winning against AA post BK; everyone has seen AA’s emergence plans (ie transcon restructuring); other carrier’s strategic plans are more focused on where they need to be – esp. DL’s shift in focus to the west coast where AA was competitively vulnerable with or without the merger.

AMR creditors deserve a lot of the blame for the situation AA is in right now. They threw their support behind Parker in order to try to assuage AA’s labor groups even though AA mgmt had a plan to emerge as a standalone. Of course Parker was offering many things that many people saw as way too optimistic to become reality but he had managed to turn US around so he could be believed, right?

Now AA has a lame duck, destroyed mgmt group which has already been told that most of them won’t make it into the senior levels of the new company if it actually merges. But now, the creditors need AA’s current management to stick around and keep AA healthy and, while you’re at it – do you think you could put together a plan just in case this merger really doesn’t work out?

What a terribly position for AA to be in right now – an epic strategic fail on the part of the creditors.

Yes they are so bad off that they just posted huge profits for the last quarter. New plan? You forget they had to have a plan to get the Judge to agree to abrogate and that plan was a standalone plan. We rejected their crappy offer the first time and their boys Little, Gless and Videtich got it to squeak by with a buyout, so more than likely the overwhelming majority of those who remain voted against the deal we have in place. We were getting nothing from Parker but an empty promise that one day he would be 'able" to pay what UA and DL pay. We had to give up six or more years of Profit sharing for a 4.3% increase that we would get two years later anyway without the merger. I hope the DOJ wins. Never was in favor of the merger and I still feel that way.

 

[Flying low]

Even the fine folks at US Airways say consolidation will help raise fares...
(From the DOJ press release)

· 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.

 

[N288AA]

Even the fine folks at US Airways say consolidation will help raise fares...
(From the DOJ press release)

· 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.

Sort of sounds like what we have heard at AA for the last ten years how we need pricing and capacity restraints according to Arpey and Horton. Just look at how many wide-bodied aircraft AA put in the desert since 2008. You can't give away a product and compete forever you will eventually fail. But that's what the flying public wants.

 

[FWAAA]

Texas Attorney General explaining why he joined the DoJ in suing to stop the merger:

http://www.dallasnews.com/opinion/latest-columns/20130815-attorney-general-greg-abbott-why-i-challenged-the-american-airlines-us-airways-merger.ece

 

[WorldTraveler]

Texas Attorney General explaining why he joined the DoJ in suing to stop the merger:

http://www.dallasnews.com/opinion/latest-columns/20130815-attorney-general-greg-abbott-why-i-challenged-the-american-airlines-us-airways-merger.ece

lest their be any doubt as to how damaging those now unearthed, previously secret communications have been to the plans to merge - and why it will be very difficult to find an effect remedy.

It might not have hurt to wait another quarter for record revenues....

 

[Silver Meteor]

Best article I have seen about this yet, and one of the many damaging things it mentions.....

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/15/why-the-justice-department-blocked-the-american-us-airways-merger/

"Among the more embarrassing documents unearthed by the government was a string of e-mails among US Airways executives from 2010 complaining about a new “triple miles” promotion launched by Delta as it sought to move into new markets and bring some mothballed planes back into service. US Airways chief executive Douglas Parker complains that the aggressive move would hurt the profits not just at Delta but at all the other airlines that would be forced to match it. Then he suggests bringing pressure on Delta by contacting industry analysts to have them criticize the move. To reinforce the point, Parker even sent the e-mail string to Delta’s chief executive, who quickly remonstrated Parker for his ham-handed attempt at price fixing and forwarded the whole thing to his general counsel."