JUSTICE DEPT SUES TO BLOCK US/AA MERGER

[robbedagain]

ia m but im not shocked by the doj given that they had secured approvals from all but the aa ch 11 judge and the doj

fwaa i dont know if youve seen bob crandall comments but i find it very interesting that he said aa would fail bec they cannot compete against dl and ua but the quest begs is that fail and go out of business or is that fail to compete yes us is profitable notably due to the lowly wages we the employees have had for yrs and bec of the fees i am not sure what aa folks make now but id imagin a lot of their profits they would have made would of been a lot higher had it not been for the ch11 expenses i do follow dl ua aa and us a lot as well as wn sometimes.

 

[AirwAr]

Are there things that Horton/AA execs can do to help kill this merger? Or are they contractually obligated to fight for it?

It would appear that absolutely no one at AA wants this merger to happen...especially after seeing what US has in store for the new AA. I personally hope this merger is killed quickly so we can move on to the next phase.

 

[AirwAr]

IIRC, NW tried to buy CO. But CO didn't seem too excited. I believe that merger was killed by the DOJ...but did it help that CO wasn't much of a will ling partner?

 

[eolesen]

Could AA sit back? Why not? They're not the ones who ultimately will be in charge of marketing and network planning after the merger.

It's the new team who was sending out all the emails, doing the analysis on how much bag fees were going to impact the bottom line, how getting rid of Advantage fares would be a good thing, emailing other executives (something the AA guys learned not to do decades ago)... They'd have been wrong not to consider all that, but there was only so much that they were allowed to do without immunity, and they didn't have it.

What's a little more troubling is how the guys in Tempe let this go so long without knowing how the DOJ was going to respond.

There are a bunch of people saying the DOJ is over-reaching, they're punishing companies for being successful, it's political... But like we've asked in other DC scandals, who knew what, and when did they know it? DOJ didn't just pull all this out of their butt over the weekend. I suspect that it wasn't a great secret, yet somehow, it looks like Tempe and Centerport were caught entirely off guard by this decision.


I've got a lot of respect for Crandall while he was at AA, but I can't say I'm impressed with anything he's done in the past 15 years. He'll always back up whatever management does, and in this case, he's going to bash the DOJ just like all the analysts seem to be doing.

And make no mistake, I'm no fan of the DOJ. They could be totally wrong here. But, there's also the chance that the facts are on their side. I think they've learned from the Microsoft case a few years back, and the T-Mobile/AT&T case is proof of that, as is the ABI-Modelo case.

At best, it's going to be 30 days before the judge hears arguments.

 

[Flying low]

From the DOJ press release
http://www.justice.gov/opa/pr/2013/August/13-at-909.html

 

[cltrat]

Are there things that Horton/AA execs can do to help kill this merger? Or are they contractually obligated to fight for it?

It would appear that absolutely no one at AA wants this merger to happen...especially after seeing what US has in store for the new AA. I personally hope this merger is killed quickly so we can move on to the next phase.

like BK part 2?

 

[jimntx]

like BK part 2?

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?

 

[MCI transplant]

http://www.foxbusiness.com/industries/2013/08/14/us-airways-american-airlines-open-to-settlement-in-doj-antitrust-case/

 

[Dont call me Shirley]

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.

 

[WorldTraveler]

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.

 

[AirwAr]

Conspiracy theory:​

1. Sabre is privately owned by Silver Lake & TPG
   
2. Sam Gilliand, CEO of Sabre, today announced his retirement? Maybe Silver Lake & TPG are taking Sabre public and Sam's not happy.
   
3. TPG uses funds from Sabre sale to purchase AA

You heard it here first...ok...well...maybe third or fourth. ;-)​

 

[FWAAA]

Good read, IMO...


http://www.forbes.co...-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.

Interesting that someone who admits that they don't really know how airlines work would ask that of the Department of Justice. The author's area of expertise is the airplane market:

I’ll leave it to my colleagues on the airline side of the industry to focus on why DoJ’s complaint makes no sense from an airline business perspective. Airlines are part of my job inasmuch as they are the primary market for aircraft. But that’s where the sheer foolishness of DoJ’s thinking becomes apparent.

He then goes on to allege (without any basis) that AA won't be able to take delivery of its 2011 order for new planes and that both US and AA will shrink.

He apparently doesn't know that low-cost airlines tend to expand and that higher-cost airlines tend to contract. AA's costs once it emerges from CH 11 will be far lower than UA's costs. US has low labor costs until its pilots get the raises they deserve, so US should grow as well.

 

[WorldTraveler]

First, what the EU did w/ this merger doesn’t matter to the US. The EU looked only at the part that involves Europe and the DOJ’s comments had nothing to do with Europe.

Second, as much as you and others support AA’s massive refleeting plan, it is unprecedented in aviation history and well beyond what most people understand to be part of being in bankruptcy. AA might be completely right about being able to lower costs and gain a huge maintenance holiday but they are blowing away all reason when it comes to way people see BK companies, esp. since AA had so much cash in the bank. Unfortunately, perception can become reality and AA has to live with that reality as it works it way thru BK. IN part, it is AA’s stable and relatively strong (for an airline) financial condition that the DOJ can now use to argue whether the merger is really necessary and whether American consumers need to pay the price for businesses which are profitable in an industry which has determined it can be profitable.

Third, BK companies usually do shrink but so too do companies that consolidate. Parker has been smart enough to not say he would cut capacity in AA-US like he did with his takeover attempt to DL (which backfired precisely for that reason) but everyone knows he can’t expect to force fares up (which he has said he intends to obtain) without removing capacity. Either way, it is very unlikely that there will be near as much growth that would come from AA’s fleet restructuring as they have said – on top of adding a whole bunch of new large RJs.

 

[Bob Owens]

do we ?

you know in other countries , take south Africa for example , the workers there actually have the backbone to oppose their own government , the miners strike a few years ago were horribly violent , but it brought world wide attention and forced their government to sit down at the table ...

I'm not advocating violence , I'm just trying to illustrate that in MANY countries , when the workers actually speak up and take to the streets instead of passively just going along with it , things tend to work out for those who stand up for themselves .

Yea right, you are funny. They would fight to allow companies to merge, which in the end will reduce the total number of people working, reduce options for workers and help these two companies do to the travelling public what they have done to their workers. This isn't our fight, they got their concessions based upon what they needed as a stand alone company. Horton went on for months saying he did not need or want this merger, the company testified that without it they expect to earn around $3.5 billion a year in profits. What does US bring to the table that AA needs? PHL? PIT? CLT? Old workers and old planes? all this merger does is eliminate another competitor and provide fewer options for consumers and workers alike.

The DOJ is actually doing their job for a change, they can use the AA's own Press statements and testimony to crush the merger if they really want to. There is no doubt that the merger would cut competition, reduce overall capacity and increase the cost of traveling for consumers. Anyone who says different is a liar, that is the objective of consolidation and that is why those laws were written.

They took away our profit sharing anyway, do we really want to see them earn billions in profits by doing to the consumers what they did to us? Yes things tend to work out for those who stand up for themselves and the time to do that was last year when we should have stood up to AA and that quack judge Lane and told them both to go pound sand with a NO vote and the second they abrogated the contracts walked off the job. If we didn't stand up then why the hell would or should we "stand up" now? Nobody cares, most of us are not looking forward to all the problems this merger would create for us either. Management screwed us now you expect us to fight to make them even richer? Maybe Horton wont get to walk away with his $20 million after all, maybe the board will simply fire him for providing the DOJ with everything they needed to block this merger and the huge windfall everyone except the workers would have seen? Maybe their arrogant and flagrant disregard for the law limiting such windfalls helped sparked the governments objection? Looks like Lane, by failing to squash the request and admonish the company for even proposing such a payout may have inadvertently screwed all the people he was pandering to? These are the two worst employers in the industry, do you really think any of us are going to fight for them? Our jobs are no more at risk as a result of this action than they were before they sued, if anything our jobs are more secure because mergers don't increase overall employment, they almost always result in lower overall employment.

I say go ahead and block the merger and give me back my profit sharing. The only bad part is that with USAIR still in the game with their pathetic IAM in two years they will likely still be waiting for the company to talk to them and continue to drag down the industry average and drag down the increase we will see with the mid term wage adjustment.

Yea, fight the government to help make sure Horton gets his $20 million, you are funny.

 

[737823]

Awesome post Bob.

Josh