Today's Proposed Merger Thoughts

[USA320Pilot]

I believe there is about a 75% chance of a settlement between the DOJ, US Airways, and AMR. The principal reasons are:

1. Inconsistent Policy - How can the DOJ not oppose the DAL-NWA, UAL-CAL, & Southwest-AirTran deals from proceeding and not the AMR-US Airways deal?

2. Southwest (and JetBlue & Others) - How can the DOJ omit Southwest as a competitor from their complaint? Southwest carry's more domestic passengers than any other airline in our country.

3. Monopoly - The DOJ asserts that the combined AA & US business enterprise would be so strong that they would dictate pricing. Whether we have 5 carriers or 4 carriers anybody who understands the industry knows if a company increases if the fare is not matched the fare increase dies?

These are just a few of the major problems the DOJ will have if the case proceeds to trial. If there is a settlement I believe it is like to include Structural and Behavioral Remedies.

The Structural Remedy will be slots at DCA around the number UAL & CAL divested at Newark.

The Behavioral Remedies could be an agreement to not reduce service in any market currently served by either company, to not increase ancillary fees, or lead an industry fare increase for a period of time. By not reducing service in any market (for a period of time) the New American and the DOJ would appease legislative demands to not pull out of markets like Tallahassee-D.C. and limit fare/fee increases (for a period of time) unless the increase is a reaction to an industry increase initiated by a competitor.

I believe there are a number of key signals leading towards a settlement that include:

1. Why would the DOJ not submit a brief to the bankruptcy court objecting to AMR's POR confirmation if they wanted to kill the deal? Why not have the court do the Justice Department's work instead of preparing a time consuming and expensive trial?

2. Why would the DOJ and the two companies sign a joint brief filed in federal court informing the court they are jointly "open to settling the case" if the DOJ was **** bent on killing the merger? And, what about the timing of this notification? The brief was filed the day before Judge Lane had his last POR confirmation hearing. Could this brief contributed to Judge Lane finding AMR's POR "fairly persuasive" in light of the settlement hints?

3. It appears to me that this has become a hard sell negotiation with the threat of litigation that was anticipated by the two companies. I agree with George Hamlin. According to Reuters. "It was surprising that the Justice Department wanted a lengthy period before trial, because its suit implied it had a slam-dunk case, said George Hamlin, president of Hamlin Transportation Consulting, in Fairfax, Virginia." They had the element of surprise. The airlines weren't expecting this. Why wouldn't you want to do it sooner rather than later?"

And, Business Week reported Rich Parker, the newly hired US Airways-American Airlines’ antitrust lawyer, said that the airlines are still interested in having settlement talks with the Justice Department. “We put something on that table before we got sued and the government responded with a complaint not with a counteroffer,” he said.

I find that strange too, but not totally unexpected by AMR and US Airways' leadership teams as Hamlin indicated. According to the Dallas News, "The companies said they expect to call about six witnesses — including executives from their companies and at least one executive at a business that is a potential customer of the American, should the merger go through. It also has hired two antitrust economists who have been working for months on the case, and who will testify before Kollar-Kotelly."

Why would the two companies have hired two economists who have been working for months on the case if Tom Horton, Doug Parker, and Jim Millstein did not anticipate the DOJ's action?

I agree with Hunter Keay, one of the brightest new industry analysts at Wolfe Trahan, that there is about a 75% chance the proposed corporate combination proceeds. As Keay indicated “At the end of the (federal court) hearing, she (the judge) set a trial date for 11/25, marking the first victory for LCC/AMR in what we think will be a series of victories before this merger is consummated.”

In conclusion, I believe pragmatic minds will find a way to get the deal done without judicial intervention. There is simply too much support for the deal and neither party can afford to lose the case.

To read Keay’s bio click here: http://wolferesearch...unter-keay-cfa/​

 

[Reed Richards]

Inconsistent Policy - How can the DOJ not oppose the DAL-NWA, UAL-CAL, & Southwest-AirTran deals from proceeding and not the AMR-US Airways deal?

BECAUSE PARKER WAS LAST TO THE PARTY. TOO LATE. ONE MERGER TOO MANY.

Southwest (and JetBlue & Others) - How can the DOJ omit Southwest as a competitor from their complaint? Southwest carry's more domestic passengers than any other airline in our country.B

BECAUSE SWA IS NOT AN TRUE INTERNATIONAL HUB AND SPOKE CARRIER. THEY PRIDE THEMSELVES IN BEING DIFFERENT.

Monopoly - The DOJ asserts that the combined AA & US business enterprise would be so strong that they would dictate pricing. Whether we have 5 carriers or 4 carriers anybody who understands the industry knows if a company increases if the fare is not matched the fare increase dies?

YOU SAY 4, DOJ SAYS 5. GO FISH.

These are just a few of the major problems the DOJ will have if the case proceeds to trial. If there is a settlement I believe it is like to include Structural and Behavioral Remedies.

THE DOJ COMPLAINT SAYS THIS IS NOT ABOUT A SETTLEMENT.

The Structural Remedy will be slots at DCA around the number UAL & CAL divested at Newark.

SEE ABOVE.

The Behavioral Remedies could be an agreement to not reduce service in any market currently served by either company, to not increase ancillary fees, or lead an industry fare increase for a period of time. By not reducing service in any market (for a period of time) the New American and the DOJ would appease legislative demands to not pull out of markets like Tallahassee-D.C. and limit fare/fee increases (for a period of time) unless the increase is a reaction to an industry increase initiated by a competitor.

GOOD LUCK. PICK ONE AIRLINE AND TELL IT WHERE TO FLY AND HOW MUCH TO CHARGE, LET THE OTHERS RUN FREE. THIS IS NOT TRICK OR TREAT, THE DOJ IS NOT GOING TO ALLOW THE MERGER, NO SOLUTIONS NECESSARY.

I believe there are a number of key signals leading towards a settlement that include:

Why would the DOJ not submit a brief to the bankruptcy court objecting to AMR's POR confirmation if they wanted to kill the deal? Why not have the court do the Justice Department's work instead of preparing a time consuming and expensive trial?

WHY GET INVOLVED IN THE MECHANICS OF THE BK, MUCH LESS BK EXIT? IT IS OBVIOUS THE DOJ PREFERS YET ANOTHER CARRIER TO GO OUT OF BUSINESS, AND PARKER HAS GIVEN THEM THE EXCUSE TO ALLOW IT BY HIS PUBLIC ANTI COMPETIVIE EMAILS.

Why would the DOJ and the two companies sign a joint brief filed in federal court informing the court they are jointly "open to settling the case" if the DOJ was **** bent on killing the merger? And, what about the timing of this notification? The brief was filed the day before Judge Lane had his last POR confirmation hearing. Could this brief contributed to Judge Lane finding AMR's POR "fairly persuasive" in light of the settlement hints?

BECASUSE YOU DON'T GO TO COURT AS THE ONE UNWILLING TO SETTLE.


It appears to me that this has become a hard sell negotiation with the threat of litigation that was anticipated by the two companies. I agree with George Hamlin. According to Reuters. "It was surprising that the Justice Department wanted a lengthy period before trial, because its suit implied it had a slam-dunk case, said George Hamlin, president of Hamlin Transportation Consulting, in Fairfax, Virginia." They had the element of surprise. The airlines weren't expecting this. Why wouldn't you want to do it sooner rather than later?"

And, Business Week reported Rich Parker, the newly hired US Airways-American Airlines' antitrust lawyer, said that the airlines are still interested in having settlement talks with the Justice Department. "We put something on that table before we got sued and the government responded with a complaint not with a counteroffer," he said.

I find that strange too, but not totally unexpected by AMR and US Airways' leadership teams as Hamlin indicated. According to the Dallas News, "The companies said they expect to call about six witnesses — including executives from their companies and at least one executive at a business that is a potential customer of the American, should the merger go through. It also has hired two antitrust economists who have been working for months on the case, and who will testify before Kollar-Kotelly."

Why would the two companies have hired two economists who have been working for months on the case if Tom Horton, Doug Parker, and Jim Millstein did not anticipate the DOJ's action?

I agree with Hunter Keay, one of the brightest new industry analysts at Wolfe Trahan, that there is about a 75% chance the proposed corporate combination proceeds. As Keay indicated "At the end of the (federal court) hearing, she (the judge) set a trial date for 11/25, marking the first victory for LCC/AMR in what we think will be a series of victories before this merger is consummated."

HUNTER IS PROBABALY A GREAT GUY TO DRINK WITH, BUT HAS BEEN AT THIS SINCE WHAT, 2010? OTHER THAN SWA/AIRTRAN, WHAT IS HIS EXPERIENCE. HE IS A SELF PROCLAIMED "STOCK PICKER." HE IS PROBABLY POSITIONED TO MAKE MONEYS EITHER WAY.

In conclusion, I believe pragmatic minds will find a way to get the deal done without judicial intervention. There is simply too much support for the deal and neither party can afford to lose the case.

I HOPE YOU ARE CORRECT. I APPRECIATE YOUR LOGIC, MY PAST EXPERIENCE SAYS THIS WILL FAIL.

RR

 

[freedom]

I stand completely opposed to giving them slots at DCA , give them WHATEVER they want elsewhere but we need to give up as little as humanly possible at DCA .

I think both airlines need to start pounding the layoff drum as loud as possible ....AA needs to play up the fact that without this merger thousands of jobs will be lost and wages for current workers will be slashed ...

We need to box them in politically...

I continue to believe that this merger will provide long term job security for all the workers at this company and it has my full support even though my union and the company are making litttle to no headway in contract talks ...I feel that for now we need to put aside our differences and look at what will be best for our membership over the long term .

 

[700UW]

It doesnt matter what you think, and you will see slots in DCA will be sold.

 

[Phoenix]

With far less than 10,000 folks signing the petition at the Whitehouse site.... And less than 5,000 employees because the whole family is signing, even the family dog... I don't see any politicians feeling boxed in.

https://petitions.whitehouse.gov/petition/withdraw-department-justices-suit-block-planned-merger-between-american-airlines-and-us-airways/hqZ3gs9v

 

[freedom]

The petition might not be sucessfull in putting pressure on DC , but the threat of job losses should do the trick .

 

[700UW]

Just like Hostess right?

Just like, Eastern, Pan Am, TWA, Vanguard, ATA, National, Midway (twice), Independence Air, shall I continue?

 

[FWAAA]

The petition might not be sucessfull in putting pressure on DC , but the threat of job losses should do the trick .

Mergers accelerate job losses, they don't prevent them. Even stupid-ass Democrats in Congress know that.

 

[robbedagain]

fwaa even stupid-### democrats may know that but the same can be applied to them republicans too esp after the big banks began failing in 2008 or before.. i do agree with ya though mergers accelerate job losses.. i think in this case dca and phx are going to bear the brunt what do you think

 

[767one]

With far less than 10,000 folks signing the petition at the Whitehouse site.... And less than 5,000 employees because the whole family is signing, even the family dog... I don't see any politicians feeling boxed in.

https://petitions.wh...irways/hqZ3gs9v

 

[767one]

Mergers accelerate job losses, they don't prevent them. Even stupid-ass Democrats in Congress know that.

Airline mergers have nothing to do with making a stronger company, and they are for sure not about helping the employees, or providing better service to the customers. They are about 1 thing....making a crap load of money for a few top managers and investors.

Bob

 

[ContUNITEus]

I think both airlines need to start pounding the layoff drum as loud as possible ....AA needs to play up the fact that without this merger thousands of jobs will be lost and wages for current workers will be slashed ...

Ouuuyeaaaaahhh baby, bring out the SACRIFICIAL LAMB...... let's be reminded again who the sacrificial lamb is when things don't work out...

 

[WorldTraveler]

320pilot,
if it helps you feel better thinking the DOJ is just picking on AA/US, go ahead and keep telling yourself that.

Parker, if he hasn't realized it yet, will come to the realization that there really are differences between the AA/US mergers and the ones that did get approved.

It might make it easier for you to accept what ultimately happens if you accept that the DOJ really does have a case. Multiple people have been highlighting what is really involved since the DOJ filed suit.

Now that the "shock" of the DOJ's pronouncement has worn off, it's time to start dealing in the reality that is.... and it isn't necessarily pretty or something that can easily be swept out the door.

There also is a real good chance that the concessions might be a lot more severe than you think, either in size or in impact to the post-merger company.

 

[Dog Wonder]

Outhouse lawyers come cheap, You get what you pay for.

 

[USA320Pilot]

I believe what most people do not recognize is that the DOJ’s complaint and the company’s response is more about negotiation than litigation. During the past 9 years the DOJ has had minimum success in blocking mergers through court action. Since 2004 the Justice Department has won only one antitrust case in court when a judge blocked the H&R Block and Tax Act corporate combination. After filing a lawsuit the vast majority or almost every DOJ complaint is settled out of court without judicial intervention.

The Feds know this and Rich Parker does too, which is why I believe the regulators said in two separate announcements it would be willing to reach a settlement agreement if the companies offered antitrust concessions that the government wants. But, due to the complexity of the filing, which could be modified on September 6[sup]th[/sup], there will likely have to be behavioral remedies along with the DCA structural remedy.

Behavioral remedies could include flying in all current markets with no pull down (especially out of DCA), no additional ancillary fee increases (Baggage, FTP redemption, Choice Seats, etc.), and no fare increases for a period of time that are not initiated by the competition.

Furthermore, American and US Airways’ SMEs will focus on industry precedence in the government creating a different corporate combination standard, a resultant duopoly, the relative weakness of American and US Airways unmerged companies, and the inability of the combined airline to create a monopoly, which are all valid arguments and big risks for the DOJ if there is no settlement and the case proceeds to trial.

With the DOJ having such a poor court case track record during the last decade and the points I listed above I believe a settlement is likely. And, I believe Wolfe Research Airline Analyst Hunter Keay made a key point when he said, "Settlements in these types of cases are the usual outcome and when the judge rules that's usually bad for DOJ," which we saw twice this week.

At least that’s what has happened in the past, but the past does not equal the future…