Word is AA/US have settled with the DOJ

[USFlyer]

USFLYER  does that mean dl and ua cannot bid for the slots?

According to the DOJ, no, each can bid.  However, based on the tone of the conference call, it seemed highly unlikely the DOJ would let the other two mega carriers acquire any more slots at DCA or LGA.  The whole point of this exercise was to increase competition and provide new entrants access to slot controlled or heavily controlled airports.  My two cents ... I bet B6 gets the majority of the slots at DCA, with a few more to WN.

 

[WorldTraveler]

Maybe it's just me, but it appears the DOJ caved.  These don't seem like many divestitures in the grand scheme of things.  Combined AA/US can easily absorb these divestitures by upgauging, eliminating duplicate routes, downgauging/deemphasizing the Shuttle (who doesn't take Amtrak NY-DC and NY-BOS these days anyway?), etc.  To me this is a pretty good deal to get the deal closed and avoid the uncertainty of a court decision.  It's a lot less than I thought would be required.

given that the divestitures are far larger than anything every required of any other US airline, I'm not too many who would agree with you that the DOJ caved.

If AA/US can absorb all of these divestitures by upgauging, then the slots most certainly should be given to other airlines who can use the limited national real estate to expand service, not squat on slots and gates which the DOJ said are necessary to ensure meaningful competition.

 

[IORFA]

Anything stopping AA from trading DCA slots for more JFK slots with B6? Or selling to, then buying from B6?

 

[WorldTraveler]

the deal is done now... and AA lost the ability to rework the deal after it announced the merger....

Who says B6 would have swapped away any slots anyway..... they want MORE and MORE.

 

[robbedagain]

the forbes article on anthr thread is quite interesting    it titled   note to delta and united... need not apply bec they wont get any..
 
in that article  federal regulators say dl and ua need not apply bec they wont get any...     that sure is pretty clear to me that they do not want dl or ua to get any more slots

 

[WorldTraveler]

yeah, we've discussed that over there, robbed.

You seem to think that AA/US will be in a better position having 4 dozen new low fare carrier flights/day in what is supposed to be their highest margin hub. I think even Doug Parker is not stupid enough to agree to that.

Keep in mind that the AA/US have also agreed to maintain its service levels at all of their current hubs.. .which means that AA/US will be forced to operate money losing flights for a real long time while those low fare carriers - and a network carrier named DL which has lower CASMs than AA and US - put more and more pressure on new AA.

This settlement could be your worst nightmare as a US employee looking for a pay raise.

 

[eolesen]

Keep in mind that the AA/US have also agreed to maintain its service levels at all of their current hubs.. .which means that AA/US will be forced to operate money losing flights for a real long time while those low fare carriers - and a network carrier named DL which has lower CASMs than AA and US - put more and more pressure on new AA.

You won't find those terms in the DOJ settlement, and that's the only document that really matters.

AA's commitments to the states are relatively toothless as far as the enforceability goes. If AA's losing money in a hub, they're still going to reduce flights, plain & simple.

"Consistent with historic levels" is a generality.

Plus, three years isn't all that long. I suspect it will take half that long just to settle the labor issues and get all the software issues worked out for integrating the operating certificates.


The slots? I suspect there's a higher chance you'll see AA set up a new MEM hub than there is of seeing them sold off to DL or UA.

 

[robbedagain]

wt  we have been having a good debat about it in anthr thread   i will tell you this   i do think wn and b6 are ripe to explode in both cities     on the other hand  i dont think dl will get much  more if any more slots at dca      wn is not always the low fare airline  and if they start chargin for bag fees   see how much higher or lower the fares be then    them renevatin dl 717 for them has to hurt them in the pocket a lit bit but not much      i have not been for the  merger  but i think the bottom line is  you wont see too much of an expansion for dl at dca and addtl slots for them

 

[WorldTraveler]

and again, if AA and WN divest 5 dozen flights to low fare carriers in DCA and LGA plus what is going to happen at Love Field, the economics of this merger simply will not work.

US' average aircraft size at DCA is 76 seats; for WN it is 148. B6 is slightly smaller at 122.

If 15% of the current AA/US slot portfolio end up in low fare carrier hands, it will equate to 25-30% of the seats that AA/US offers. There is no way that the DCA hub can remain at the current fare levels that AA/US have which means the profitability of AA/US is greatly compromised.

Of course E wants to refuse to admit that WN will have any effect on AA at DFW despite the fact that AA/US is not the dominant carrier at any city that WN also can serve from DAL now. Yet, there is no doubt that the combined effect of the WA and the divestitures will put enormous downward pressure on AA/US yields in its top cities.

Again, let's see how the slot divestitures turn out.

I'm not sure if I want to see new AA end up with more than 5 dozen new LFC flights just in DCA or LGA or for DL to get a chance to add some small cities. I think at this point I would rather see AA/US face an onslaught of new flights.

And it doesn't change that DL is continuing to add flights in key AA markets and will continue to do so, including at DFW.

I don't know what is in the official legal documents but if AA/US turn the whole legal process into a farce, then you will see DL make another merger play and do the same thing.

But then we have known for years that there have been people here who have thought that the bleeding at AA would stop but AA is still a distant number 3 at NYC and now has direct DL competition in a number of AA's top revenue markets with DL have strong shares at comparable or better average fares to AA.
You do realize that DL's average fare in LGA-ORD is higher than AAs?

 

[JFK Fleet Service]

I have a question,when St.Richard urinates do you shake it for him?

 

[eolesen]

First, you might want to rethink the average seat comparisons at DCA: the letter to employees is implying moving some connection flying out of DCA as a result of the divestiture. Upgauging from the 76 seaters to A319's and larger is going to limit the 15% of the slot portfolio to 15% of the traffic.

The other factor you're glossing over... the Southwest effect ain't what it used to be. Maybe you don't live where they fly (are they serving South America yet?), but in almost all cases I've looked at when traveling this year, WN's fares are the same as AA's, almost without exception.

They're not undercutting as they used to because they can't afford to. Their costs are close enough to where everyone else's have fallen, and many of the other advantages they held thru the 90's have been negated by workrule changes the other carriers won in bankruptcy.

They still have a powerful brand, certainly, but it's not the same competitor they were when they were growing by 15-20% a year.

Your ORD-LGA analogy is also an interesting choice. When you compare a few surgical frequencies on e-Jets against carrier with hourly frequencies & larger capacities, the guy with the fewer frequencies will typically show a higher yield.

But you left out an important other half of that situation: the carrier with the most frequencies almost always winds up with a disproportionate amount of the revenue, especially higher yielding pax who want the flexibility to miss a flight and catch the next one.

With AA finally getting back into the NYC-DCA shuttle business, they'll have hourly service to ORD, DCA, BOS, and LAX.

With that, it's hard to see AA remaining "a distant 3rd" as you've put it, especially if the Jetblue partnership remains untouched.

There are lots of sports teams who won titles after sucking wind at the start of the season, and WW-II didn't start out too well for the allies.

To try and claim victory in NYC is probably a bit premature right now. It's a marathon, not a sprint.

 

[lpbrian]

Who says the slots have to go to low fare carriers? Define " low fare carrier"

 

[IORFA]

Also, did anyone see any language preventing AA from code sharing on the flights/slots that they divest? I.E. I could see Jetblue, Porter and/or Westjet getting some flights/slots with an AA code share. Even more unlikely, maybe Suncountry to and from MSP-LGA/DCA.

 

[eolesen]

@LPB, there's nothing specifically which says LFC's or LCC's have to get the slots. The Acquirer has to be acceptable to the USDOJ, which says to me they won't be approving UA or DL (as already indicated on the call today), and history says they'll favor new entrants or low-fare carriers. Conventional wisdom is that it will go to the two with the deepest pockets -- B6 and WN -- and possibly a few thrown out to guys like Westjet. Doubtful that Virgin America would qualify since they are a west coast carrier and I don't think any perimeter exemptions are being divested.

@IOR, codesharing isn't specifically prohibited, but there is language which says they can't grow beyond the percentage they currently hold during the ten years the decree is in place. Codesharing would likely push that a bit too far, and get them a smack upside the head.

But AA and B6 really don't need to codeshare at DCA if they have AAdvantage/TrueBlue reciprocity in place like AA and AS have, or DL and AS have. Better yet, get Jetblue into oneworld, and all bets are off.

 

[WorldTraveler]

Who says the slots have to go to low fare carriers? Define " low fare carrier"

 precisely..... there are indeed rules about controlling the carriers that gain the low fare carrier slots...so the only option is codesharing
and then we still have people who believe that a partnership with B6 is supposed to help AA despite the fact that B6 has pushed AA out of more markets in NYC, only to watch DL begin service in many of those markets.... but again, somehow, we are supposed to believe it will be different this time around?
 

First, you might want to rethink the average seat comparisons at DCA: the letter to employees is implying moving some connection flying out of DCA as a result of the divestiture. Upgauging from the 76 seaters to A319's and larger is going to limit the 15% of the slot portfolio to 15% of the traffic.

The other factor you're glossing over... the Southwest effect ain't what it used to be. Maybe you don't live where they fly (are they serving South America yet?), but in almost all cases I've looked at when traveling this year, WN's fares are the same as AA's, almost without exception.

They're not undercutting as they used to because they can't afford to. Their costs are close enough to where everyone else's have fallen, and many of the other advantages they held thru the 90's have been negated by workrule changes the other carriers won in bankruptcy.

They still have a powerful brand, certainly, but it's not the same competitor they were when they were growing by 15-20% a year.

Your ORD-LGA analogy is also an interesting choice. When you compare a few surgical frequencies on e-Jets against carrier with hourly frequencies & larger capacities, the guy with the fewer frequencies will typically show a higher yield.

But you left out an important other half of that situation: the carrier with the most frequencies almost always winds up with a disproportionate amount of the revenue, especially higher yielding pax who want the flexibility to miss a flight and catch the next one.

With AA finally getting back into the NYC-DCA shuttle business, they'll have hourly service to ORD, DCA, BOS, and LAX.

With that, it's hard to see AA remaining "a distant 3rd" as you've put it, especially if the Jetblue partnership remains untouched.

There are lots of sports teams who won titles after sucking wind at the start of the season, and WW-II didn't start out too well for the allies.

To try and claim victory in NYC is probably a bit premature right now. It's a marathon, not a sprint.

it doesn't matter that if 44 slot pairs are divested and they all go to low fare carriers, AA/US' combined operation will be much smaller as a percentage of the airport than it was before while low fare carriers will be much larger.

The average seat size is taken from schedule data TODAY. US has the smallest average aircraft size at DCA of any hub and the smallest average aircraft size of any carrier at DCA. They use small aircraft because they don't want to put more seats in the market.

If low fare competitors - who don't use RJs - gain all 44 slot pairs - AA-US will see a significant increase in the amount of low fare competition. They will have to respond with larger aircraft which will push down their yields at the very time that their costs will be going up as part of the merger integration process.

And then we have the whole question of service to small and medium sized cities which AA/US are presumably going to be able to walk away from even though that was a key part of the discussions by many of the states and communities when the case was first filed.
We are supposed to believe now that AA/US is going to be able to dramatically reduce the number of flights it operates to small/medium cities so it can flood the market with mainline jets in order to fend off the 44 new low fare carrier flights?

Methinks either the DOJ screwed the entire rest of the country in favor of getting a lot more low fare competition in DCA or you don't have the full story.

I'm going with the latter.

As for NYC, you still want to believe that AA can become something significAAnt in NYC with a focus-city strategy to multiple hubs/other focus cities despite the fact that DL and UA serve all of those cities PLUS have service to many more cities.
AA has a lower fare in LGA-ORD because they are dumping capacity into the market in order to maintain their market share, the same thing they are doing in LAX, even though some people think that flying to Asia from LAX is good for their brand. There is nothing about this merger that is going to improve AA's presence in the local LGA-ORD market. AA has more seats but do you realize that DL with its Ejets (the same ones that you and others seem to think is going to save AA's operation at ORD from UA's competitive pressures but are insignificant if DL uses them) has more frequencies in LGA-ORD than UA?

You still want to believe that AA/US will be able to effective compete against DL and UA yet DL has lower costs than AA/US now and DL's are getting lower while AA/US' costs will increase. AA/US hasn't solved its strategic problems in Asia or NYC as much as you think that combining two focus city operations against two other carriers with full-sized hubs is going to fix that. It also doesn't change that DCA and DFW, AA and US' highest margin hubs are going to be significantly degraded in terms of profitability because of low fare competition, even though AA and US have done a very poor job of defending their hubs from low fare competition for years.... but somehow we're supposed to believe that it all changes today?

Your right, E. It's a marathon, not a sprint. But AA and US and your and others' support of them hasn't been based on competitive logic but wishful hope for years - and that isn't changing one iota with this merger.