US and AA Not such a sure thing it seems [US DoJ opposing Merger]

[ermen]

So US antitrust issues mean the merger may not get the go ahead... interesting... small change that USDM will remain *A!

AMR-US Airways Deal Blocked by U.S. in Antitrust Suit - Bloomberg

 

[Ansett]

Airlines to fight US suit against merger


US Airways and American Airlines say they will fight the US Justice
Department's move to block their merger, which would create the world's largest
carrier.

 

[travelislife]

re: [rumour] US to join oneworld as an affiliate before full AA merger

Mods, a bit OT, but is the any reason [rumor] is spelt with the American spelling? Just that this is an Australian based website, a bit pedantic I know but I don't really like the Americanizing of our language happening more and more.

 

[anat0l]

re: [rumour] US to join oneworld as an affiliate before full AA merger

Mods, a bit OT, but is the any reason [rumor] is spelt with the American spelling? Just that this is an Australian based website, a bit pedantic I know but I don't really like the Americanizing of our language happening more and more.

I assume whichever mod who did the thread title editing (or the person who created the thread) was not as astute and careful as you are (or possibly has an American background / education).

Although, shouldn't it be "Americanising"?


Back on topic, the latest effort to stop the merger is interesting. Not sure if people are happy or not about it, or is it just someone putting up an annoying roadblock for something that should happen.

 

[markis10]

Re: [rumour] US to join oneworld as an affiliate before full AA merger

Mods, a bit OT, but is the any reason [rumor] is spelt with the American spelling? Just that this is an Australian based website, a bit pedantic I know but I don't really like the Americanizing of our language happening more and more.

Thought it might add a bit of color without too much labor .

 

[burmans]

Re: [rumour] US to join oneworld as an affiliate before full AA merger

So US antitrust issues mean the merger may not get the go ahead... interesting... small change that USDM will remain *A!

AMR-US Airways Deal Blocked by U.S. in Antitrust Suit - Bloomberg

Well it will certainly slow it down and shows the risk of committing significant expenditure and manpower BEFORE the merger is approved as it appears AA/US have done (though its not really clear whether that is just marketing hype about their readiness to merge or they have actually spent the money/done the work).

 

[cove]

Wow tough if you have shares in either carrier today!

 

[AV8]

So would you still buy USDMiles in anticipation of a 1:1 conversion to Aaward miles? August 2013 USDMiles promo is very enticing.

 

[burmans]

So would you still buy USDMiles in anticipation of a 1:1 conversion to Aaward miles? August 2013 USDMiles promo is very enticing.

Well that question assumes you would be buying those US DM points in anticipation of conversion, i.e. you were waiting until November (or something slightly later dependant on youir opinion of when conversion would occur). This new will definitely delay that conversion, potentially by months, and possibly meaning you would be buying in vain if the merger does end up failing.

Alternately if you were buying with a view to spending on *A this would certainly seem to effectively extend the window where you can use those points, potentially indefinitely as I personally dont see US plan to join AA remaining if merger does not go ahead (though not denying this is a possibility).

 

[Storyteller]

Re: [rumour] US to join oneworld as an affiliate before full AA merger

Looks like the US Department of Justice has tossed a cat amongst the pigeons by filing the suit to block the AA / US Airways merger. ? antitrust issues?

 

[Flashback]

U.S. Justice Department Sues To Block American & US Airways Merger

Reuters Next — U.S. sues to block AMR-US Airways merger

USDOJ: Justice Department Files Antitrust Lawsuit Challenging Proposed Merger Between US Airways and American Airlines

Says it all really. The US Justice Department is trying to block the merger on the grounds that it will destroy a competitive market place.

 

[Danger]

Re: U.S. Justice Department Sues To Block American & US Airways Merger

This has thrown a real spanner in the works in my next oneworld Explorer planning. US flies to so many places in the US that AA doesn't.

The consensus on the FlyerTalk thread seems to be that the merger is now much more unlikely not to go ahead, with a similar feeling towards US entering oneworld.

 

[anat0l]

Re: U.S. Justice Department Sues To Block American & US Airways Merger

This has thrown a real spanner in the works in my next oneworld Explorer planning. US flies to so many places in the US that AA doesn't.

The consensus on the FlyerTalk thread seems to be that the merger is now much more unlikely not to go ahead, with a similar feeling towards US entering oneworld.

Sorry, pedantry but I think you mean "...much more unlikely to go ahead...", or "much more likely not to go ahead..."

I find the competition argument from the DoJ interesting at face value, but so be it.

This throws a real spanner in the works; it does mean a lot of AA and US's planning is in the toilet. Still, we have some options when it comes to redemptions. I imagine there's quite a few people who have banked up points in US DM that can still redeem them for *A awards (but maybe a bit miffed if they were saving up for a huge oneworld award).

 

[drron]

Re: U.S. Justice Department Sues To Block American & US Airways Merger

Well US news sources are less pessimistic than AFFers.The consensus seems to be it is Washington bureaucrats being upset that US/AA will have most of the slots at Reagan and so increase their prices which would mainly upset said bureaucrats.
Just another round of bargaining.EU have apparently approved the merger on condition of giving up some slots at LHR and a couple of European destinations.

 

[Major]

Re: [rumour] US to join oneworld as an affiliate before full AA merger

Thought it might add a bit of color without too much labor .

That's a good program

 

[burmans]

Re: U.S. Justice Department Sues To Block American & US Airways Merger

I find the competition argument from the DoJ interesting at face value, but so be it.

Though not in reality much different than the argument here in Australia around bank mergers and the four pillars. I dont agree with the "you allowed them to merge, its not fair to not allow me to merge argument", sure every merger knocks competitors out but the impact becomes larger with fewer competitors and the impact must be assessed in terms of todays environment.

Back to the topic though this definitely delays, hard to see a decision this side of Xmas so thats a four month delay where you can use for *A flights (and not for AA) assuming the joining AA gets put on ice too (which is my assumption). Plenty of "uninformed " commentary on the blogs and FT, would rather see legal opinions on the likihood of this proceeding than these to form an opinion on likelihood of success.

 

[serfty]

The Merger almost certainly is Dead in the Water!

Well US news sources are less pessimistic than AFFers.The consensus seems to be it is Washington bureaucrats being upset that US/AA will have most of the slots at Reagan and so increase their prices which would mainly upset said bureaucrats.
Just another round of bargaining.EU have apparently approved the merger on condition of giving up some slots at LHR and a couple of European destinations.

The DCA slot issue is just a part of the whole reasoning for wanting to prevent any merger.

Reports I have come across in reading this morning indicate this is the "Kitchen Sink" being thrown as the DoJ want the merger stopped.

Here's an interview with the USA Assistant Attorney General William J. Baer Justice official: Here

For a seemingly balanced view of the DOJ complaint, there is an antitrust attorney on a.net who posted some thoughts: (Here It Comes -- U.S. Anti Trust Suit: AMR/LCC )

I've read the complaint now, and here are a couple (brief) reactions, which should be used for discussion purposes only. These aren't legal advice (duh), I'm not involved in this matter (duh, I wouldn't be posting If I was), but I am an antitrust lawyer, so I hope my views can get the discussion a bit more focused.

1) The big shift here is the emphasis on connecting service as a discipline on prices for nonstops. In fact, the city-pair market definitions are obviously calculated as connecting, not just non-stop. See Appendix A to the Complaint. This is diametrically opposed to anything the regulators have done before.

2) The Complaint talks out of both sides of its both about B6 and WN as competitive constraints on the legacies. On one hand, the Complaint seeks to paint them as offering limited competitive discipline because they don't have the efficiencies of a true hub and spoke system, but on the other they credit B6 discipline on nonstop routes at DCA and include them in pricing comparisons. (To be fair, it seems that the parties' documents treated them about the same.)

3) Same double-speak exists about US' Advance Fares pricing on connecting routes. The Complaint claims in once place that other legacies hate this pricing and don't do it themselves, but then in another cites an example of them doing just so.

4) These parties brought this suit on themselves. I obviously can't see the documents themselves, but their executives, particularly US', wrote some monstrously stupid things in emails, at least from an antitrust perspective. This complaint practically wrote itself. In fact, the connecting competition argument is practically just stitching together emails from Parker and a couple other US folks. I'm sure there's probably context to explain them, but those quotes look awful.

5) As expected, it makes a big deal out of DCA, but DCA is by no means the only problem here. DOJ's concerns will not be assuaged only with a slot divestiture at DCA.

6) The carriers also brought upon themselves a strong argument regarding coordinated interaction post-merger. To be clear, conscious parallelism isn't illegal, but it does cost consumers money and it's a valid reason for DOJ to want to block the merger. The Complaint cites bag fees, change fees, and inflight service as examples, but also fares filed through ATPCO.

7) DOJ seems to believe post-bankruptcy AA can and will be a viable competitor.

I've seen a lot of merger injunction complaints, both of the negotiating ploy variety and the "we-mean-business" variety. This one's the latter. DOJ really threw the kitchen sink at this one and it sure looks like they really do mean to block it.

For some it may be worth setting aside an hour and reading the 56 page suit (link) to see how arrogant US management seems to have been.

Here's an article discussing some aspects: U.S. antitrust suit sheds light on US Airways business practices - latimes.com

Some of these comments are amazing. The hubris of D. Parker by telling the media how great the merger will be for customers, and maintain specifically that it won't raise airfares, then gloat in private, on the record, about all the additional revenue and service cutbacks the merger will force on those same customers. I was thinking Parker and US management were smarter than that. He hacked a huge hole in his canoe there.

 

[smit0847]

Re: The Merger almost certainly is Dead in the Water!

For my own selfish reasons, I am absolutely thrilled at this news. While I personally think this will only delay, and not stop the eventual merger I would be extremely happy if the merger does not go ahead for the simple reason that I LOVE the USDM program. I've only found out about it very late in the piece (only completed 1 trip) but I think there is SO much more value for Australians looking to fly J or F cheaply with USDM in *A than with Aa in OW. Yes OW has some more premium carriers but there are just so many options, crazy routings, buy and share promos, 'walk-over' agents who let you do whatever you want, incorrect pricing etc that it is a world of opportunity. Apart from status chasers I know of very few people who wouldn't pay an extra 20-50% to fly J instead of Y long-haul when revenue J tickets cost 200 - 300% more.

The more I investigate USDM and think 'outside the box', the more opportunities there are and I have been madly making 'last hurrah' plans for get the most out of it in what I thought were the dying days of the program. I will be watching this DoJ objection very closely because there may be many years of opportunity left - USDM is often only limited by your imagination and determination!

Either way I would be very hesitant to buy DMs now purely in the expectation they will sweep to Aa.....

 

[dk4]

Re: The Merger is not almost certainly Dead in the Water!

IMO the DoJ's assumption that non-legacy carriers wouldn't grow post a US-AA merger and that they are not "real" competition is curious.

The DoJ mindset is an anachronism. Look at how the domestic industry has changed here in Australia (with just meagre amounts of competition and one legacy airline collapse). We now have an industry generally committed to the consumer convenience of - point to point flying (on major city pairs), simplified one way pricing (with no ancient Saturday night restrictions, and allowing mix-n-match carrier round trips) and some degree of market differentiation based on customer types rather than simply by network focus cities or how many olives they serve in first class.

To judge the likes of Southwest and JetBlue based solely on their current route structure, and not their potential post merger expansion is a flaw. We can look to Europe, where the likes of easyJet and Ryanair have been most successful at - deploying new strategies to counter merged legacy airline business models and have they built massive route structures in the process.

Additionally the DoJ outlines AA's stand alone chapter 11 emergence plan as one of capacity increase, saying that legacy competitor airlines would likely have to respond by increasing their capacity too, but it fails to acknowledge that a likely (anticipated) result of such a capacity war is the collapse of the weakest legacy airline anyway. (Post 9/11 we can see the effect that overcapacity had on the US airline industry.)

And if the DoJ is going to make an argument about the potential for DCA to become a US-AA fortress hub, then it really needs to take action against all airline hubs (and more generally the hub&spoke business model) in the USA, not just at Washington Reagan. But it doesn't, in fact the whole document champions the hub and spoke legacy airline network business model, with a blinkered view to more efficient possible futures, futures which can be seen emerging in other parts of the world.

Finally the main DoJ assertion that a US-AA merger would "tend to create a monopoly" can not be substantiated by any of its arguments. Indeed it is most likely that on any single route (city pair), where the merged airline could operate as a monopoly, that route would become a prime candidate for non-legacy, non-network airline competition.

 

[samh004]

Re: The Merger is not almost certainly Dead in the Water!

The people running US sound like idiots, that said, I'd be all for blocking the merger if they also split up a few other big players who merged in the last decade (or less) and are now disproportionately larger than AA. Fair is fair, only, nothing is ever fair.

I have no idea how the DoJ could allow the merger and also impose sanctions for the stupid things said, without going too far to weaken them that they wont succeed as a viable competitor, but would imagine slots and keeping fees around a certain level (taking into account all sorts of things of course) would be appropriate. Hurt them too much and it just gives the benefit to the other two players.

Can he be charged with something personally, so he can't run a business, and thus is forced out