South West wants D.C. slots!

[MetalMover]

Don't know about BNA...AA is a shadow of its former self there.
 
What remains to be seen is what the airlines offer to the DOJ and what the DOJ wants...
The price might be so great, the benefits of a merger might be outweighed.

 

[WorldTraveler]

Problem with the notion that the price might be too high is that AA and US could have decided that months ago... but have stuck with the merger. The DOJ's stance was even harder before but AA and US are sticking with us.

AA/US knew a long time ago that there would be divestitures and they will likely be far larger than what has been required of any previous merger.
Maybe it has to do with the concentration that AA/US will have on the east coast in cities that have limited competition and maybe it has to do with the timing of the AA/US merger relative to the rest of industry consolidation, but the idea that AA/US will walk out of court as complete victors and proceed with the merger without divestitures is purely a pipe dream.

AA/US can happen and I do think it will... but even those who thought that the merger would consist solely of DCA slot divestitures have underestimated what it will take to get the merger done.

We're down to a couple weeks before the trial... I am betting there will be a settlement before the trial and that WN will walk away with a good chunk of slots and asset divestitures will also benefit some of AA/US' network carrier competitors as well.

 

[MetalMover]

I know DCA is a main sore point with this merger. But the DOJ's definition or description of 1000's of flight pairs might be too far fetched.

 

[WorldTraveler]

the 1000s of flight pairs are markets, not flights. The media hasn't even grasped the concept.

The DOJ apparently wants to ensure access by competitors at a number of airports but the actual reduction of flights is probably less than several dozen because there are excess gates and/or slots at most airports and AA/US can operate their combined schedule from a smaller asset base than the combined current AA/US asset base today... which is part of the idea of cutting costs anyway.

AA/US will reduce the number of flights between CLT and other overlap cities, for example, but may use larger aircraft and will likely give up AA's gates at CLT which will allow competitors to add flights. The total size of Anew AA's operation at CLT is not going to get smaller because of the merger. If CLT shrinks it will be because the costs of the merger make some flights no longer viable.

 

[swamt]

Problem with the notion that the price might be too high is that AA and US could have decided that months ago... but have stuck with the merger. The DOJ's stance was even harder before but AA and US are sticking with us.

AA/US knew a long time ago that there would be divestitures and they will likely be far larger than what has been required of any previous merger.
Maybe it has to do with the concentration that AA/US will have on the east coast in cities that have limited competition and maybe it has to do with the timing of the AA/US merger relative to the rest of industry consolidation, but the idea that AA/US will walk out of court as complete victors and proceed with the merger without divestitures is purely a pipe dream.

AA/US can happen and I do think it will... but even those who thought that the merger would consist solely of DCA slot divestitures have underestimated what it will take to get the merger done.

We're down to a couple weeks before the trial... I am betting there will be a settlement before the trial and that WN will walk away with a good chunk of slots and asset divestitures will also benefit some of AA/US' network carrier competitors as well.

Couldn't agree more.  Like I said many, many months ago, these divestures requested by the DOJ will be huge and larger than any other request in past mergers.  The question for the future is, what will they settle on?  If they even settle.  Still could be too much for the carriers to agree and they could still take their chances in court.  However, I still say it will benefit all to settle out side of court.  Don't get me wrong here, as I would love for SWA to pick up more slots in both airports as GK has mentioned, but I also think there will be other areas brought to light as well.  I also know that SWA will not over pay for any slots, which is why they lost the last bidding war over some slots to JB.  SWA will bid more than they did last time, I believe, but just won't over pay for them like JB did.  If SWA is successful in the bidding, then we agree again that it will more than likely enhance the Dallas market reaching those said slots due to the W/A going away, as well as several other cities and markets.  Now I have said that the cost could be too high for the carriers to agree to, however, not sure if the carriers could afford not to merge, so who really knows about that one, only time will tell.   Pretty sure most all of us also agree that there will be a merger with divestures involved and come to an agreement, rather that is prior to or by Nov 25, not sure.  If the judge sees enough progress to an agreed upon settlement with out the courts I am sure the judge will extend or delay the hearings scheduled for the 25th in order for them to continue to come to an agreement outside of the courts, which I think would be best for all, including other airlines that would be involved with the bidding of slots, trading slots and whatever other agreements they might come up with that helps other airlines to grow or add anywhere.

 

[WorldTraveler]

The problem for AA and US as standalones remains that both have lost so much ground in key markets and are surrounded in key markets by DL and UA who AA/US say they need to compete with.
AA is slugging it out in ORD with UA who continues to make gains on AA despite UA's operational problems, AA has given up huge amounts of share to B6 and DL and now there is a real chance that LGA might well be one of the markets where the DOJ seeks divestitures, US is boxed in on the east coast by rivals in larger markets, and AA/US have both lost ground against competitors in the west.

AA/US have no choice but to merge at this point which is precisely why the DOJ is talking tough.

WN will bid higher but let's also remember that AA/US would rather not give up slots to low cost carriers flying mainline jets because the impact to AA/US down the road will be much greater. They would far rather give away slots to markets that only can support RJs. The chances are the DOJ will look at a combination of both types of markets but WN undoubtedly does realize that this is their last major chance to get significant amounts of slots at key east coast airports - and they aren't going to let the opportunity pass.

 

[swamt]

The problem for AA and US as standalones remains that both have lost so much ground in key markets and are surrounded in key markets by DL and UA who AA/US say they need to compete with.
AA is slugging it out in ORD with UA who continues to make gains on AA despite UA's operational problems, AA has given up huge amounts of share to B6 and DL and now there is a real chance that LGA might well be one of the markets where the DOJ seeks divestitures, US is boxed in on the east coast by rivals in larger markets, and AA/US have both lost ground against competitors in the west.

AA/US have no choice but to merge at this point which is precisely why the DOJ is talking tough.

WN will bid higher but let's also remember that AA/US would rather not give up slots to low cost carriers flying mainline jets because the impact to AA/US down the road will be much greater. They would far rather give away slots to markets that only can support RJs. The chances are the DOJ will look at a combination of both types of markets but WN undoubtedly does realize that this is their last major chance to get significant amounts of slots at key east coast airports - and they aren't going to let the opportunity pass.

Good points.  Agree.

 

[robbedagain]

the doj is now in talks for a settlement w the airlines..   on justplanenews.com theres an article pertaining to it  and in that article it states the doj would not be able to convince judge the merger cant be done based on anticompetitve grounds when they allowed dl/nw  ua/co and wn/fl to merge.    

 

[WorldTraveler]

the doj is now in talks for a settlement w the airlines..   on justplanenews.com theres an article pertaining to it  and in that article it states the doj would not be able to convince judge the merger cant be done based on anticompetitve grounds when they allowed dl/nw  ua/co and wn/fl to merge.

and that is the same song that we have heard since the day the DOJ filed.... and yet it has been shown numerous times that antitrust law does not require providing equal treatment to each merger and in fact allows the DOJ to become successfully tougher on subsequent mergers because the impact of mergers accumulates as more and more competitors are eliminated.

If the DOJ really had no basis for their complaint, then AA/US wouldn't be talking about a settlement and would just wait for the trial and then clean the DOJ's clock.
Because they are talking, AA/US aren't as convinced that they will win as some people want to believe.

 

[UPNAWAY]

WT, true but the law must show anti competativeness which the DOJ has also failed to prove.
 
The real irony is the most likely outcome of the merger will be the largest domsetic airline in the US will get thier pickengs of the cherriest routes and gates.

 

[WorldTraveler]

how do you know the DOJ has failed to prove that the merger will be uncompetitive? Remember that AA/US lost the right to examine documents related to previous mergers other than its own and they also cannot examine the list of witnesses which the DOJ called in the case against AA/US.

Maybe AA/US will have the best routes and maybe they won't. They won't be the largest airline in New York City or Chicago. They won't be the largest airline across the Pacific.
And it is too early to know that they will even be the largest once divestitures all take place.

Remember that the largest moniker is being tossed around based on a combination of both carriers' existing networks... we already know they will lose at least some of their existing networks in order for the deal to be approved.

Add in that the economics of the merger require that AA/US dump a lot of current routes just because the costs of AA/US are increasing and will increase even more after the merger and the assumption that AA/US will be the largest is itself a stretch.

It's hard to know what will happen but the 25th is just a few weeks away.... I suspect there will be plenty of surprises to go around before now and then.

 

[FWAAA]

WT, true but the law must show anti competativeness which the DOJ has also failed to prove.
 
The real irony is the most likely outcome of the merger will be the largest domsetic airline in the US will get thier pickengs of the cherriest routes and gates.

What do you mean by "which the DOJ has also failed to prove?"   

The trial doesn't start for almost three weeks and you've declared that the DOJ has failed to prove its case?   The governmnent starts proving its case on November 25.      Would you mind looking in that crystal ball and giving me the Powerball numbers for tomorrow's drawing?   
 
It's practically a given that the DOJ can prove that the merger will likely result in a substantial lessening of competition.    That's what Section 7 of the Clayton Act requires to prove a violation.    Parker has said that the mergers result in a lessening of competition.   That's the whole reason to merge.    

 

[UPNAWAY]

It's practically a given that the DOJ can prove that the merger will likely result in a substantial lessening of competition.

 
That is not true. A weaker and smaller US & AA stand alone my very well make Delta, United less competitive (i.e. mopre dominant). That arguement can easily go both ways.
And by failed to prove most all impartial observers think the DOJ has a weak, weak case.

 

[FWAAA]

 
That is not true. A weaker and smaller US & AA stand alone my very well make Delta, United less competitive (i.e. mopre dominant). That arguement can easily go both ways.
And by failed to prove most all impartial observers think the DOJ has a weak, weak case.

You have very little working knowledge of the Clayton Act, and it shows.    I don't know what job function you fill in Tempe, but it is clearly not advising anyone on the antitrust laws.
 
Making AA and US stronger so they might better compete against UA and DL is irrelevant under the Clayton Act.   There is no legal precedent that excuses a huge reduction in competition so that the merger partners can "better compete" against others in the industry.  If there were any Supreme Court cases (or cases from the US Courts of Appeal) that provided such an exception, then Parker and Horton and everyone everyone else would be talking about that precedent.   
 
"most impartial observers think the DOJ has a weak, weak case?"   Who are these "impartial observers?    The former America West pricing department Intern who is now a travel blogger?    Do you mean the stock pushing whores like Hunter Keay, Ray Neidl, Vicki Bryan and Jamie Baker?   Every one of their public statements reveals that they know even less about antitrust law than you.   Yes, a few pilots repeatedly post that the DOJ case is very, very weak.   None of them has ever argued an antitrust case.   

 

[eolesen]

I've yet to come across a true impartial observer in this argument...

Holly & Brett from PlaneBusiness are long-time friends, but they're also very close to the senior management team at US.

There's certainly no love lost between Horton and the media, especially with the local papers. AMR doesn't bend over backward to provide media access for interviews, certainly not to the degree some other airlines do.

There's also not a lot of support for AMR among the investment analyst community, especially after all the repeated denials of pursuing bankruptcy and then turning around and doing so.

So, FWAAA's absolutely right that you have a lot of bias among the people supporting the merger.

And none of that support will matter once opening arguments start. It will all be based on the facts before the judge, and how the judge interprets those arguments against what the law requires.

This isn't like arguing a grievance -- past practice shouldn't be a determining factor.