SA7700
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U.S. Anti Trust Suit: AMR/LCC - Part 5

Tue Sep 10, 2013 8:11 pm

Dear members,

Due to the fact that part IV has become quite long, part 5 has been created. Please feel free to continue your discussion on this topic here. Part IV can be found here:

U.S. Anti Trust Suit: AMR/LCC - Part IV (by avek00 Aug 23 2013 in Civil Aviation)


Regards,

SA7700
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jetblastdubai
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Tue Sep 10, 2013 10:00 pm

++++"The problem with this is that UA wasn't forced to give up any gates at ORD as a condition of its merger with CO"++++

Did DL give up any slots or gates when they merged with NW?
Did WN give up anything when they acquired Air Tran?
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Cubsrule
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Tue Sep 10, 2013 10:07 pm

Quoting jetblastdubai (Reply 1):
Did DL give up any slots or gates when they merged with NW?

Perhaps most relevantly to this discussion, they gave up gates at both CLT and ORD.
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Tue Sep 10, 2013 10:52 pm

Quoting Cubsrule (Reply 2):
Perhaps most relevantly to this discussion, they gave up gates at both CLT and ORD.

Were they forced to or did they just not need them anymore? I'm pretty sure DL didn't want to split their ORD operation between the E gates and the L gates.
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user444555
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 2:22 am

AA and US have posted their rebuttals to the DOJ. If you want to read them you can here

http://aviationblog.dallasnews.com/2...f-its-merger-with-us-airways.html/

and here

http://aviationblog.dallasnews.com/2...erger-with-american-airlines.html/
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 2:36 am

Quoting user444555 (Reply 4):
AA and US have posted their rebuttals to the DOJ. If you want to read them you can here

Fascinating reading. I think the following is remarkably telling ...

Illustrating how little high HHIs reveal about the competitiveness of a market, most of these one-stop routes will remain very competitive after the merger:

AA’s and US’s small shares. On almost half of the routes, either AA or US flies less than 10% of the passengers on the route.
Postmerger competition. Almost 90% of the passengers on these routes will continue to be served by at least 3 airlines after the merger.
LCC competition. About 85% of passengers on these routes will continue to be served by one of the LCCs. Since LCCs fly 40% of domestic airline passengers in the US, the notion that LCC competition and potential entry are not the dominant
competitive fact in the industry is out of touch with market realities.
No barriers. Virtually none of the routes have any barriers to new entry.
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 3:06 am

Quoting commavia (Reply 5):
Illustrating how little high HHIs reveal about the competitiveness of a market, most of these one-stop routes will remain very competitive after the merger:

No, what it illustrates is how remarkably concentrated the airline industry already is. Now, there's a fair retort to that--that the airline industry is structurally different from any other industry--but to argue in an abstract way that a "big" market (CHI-WAS, NYC-SFL, LAX-SFO) is competitive with only 5 or fewer competitors is not something we'd see in most other industries.
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 3:21 am

The AA response seems a little snarky while the US response appears more civilized and professional in my opinion.
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 4:01 am

Quoting nutsaboutplanes (Reply 7):
The AA response seems a little snarky while the US response appears more civilized and professional in my opinion.

Agreed- I found both to be very fascinating and informative. As a US employee, I am very biased. That being said, I feel like the jury really isnt out in this merger and we very well may succeed. I believe this isn't an open and close case like many on both sides believe. My personal opinion is I hope we succeed as this merger would create a huge network and job stability for many of us (hopefully) that we have been longing for. This industry is tumultuous. I would like to be afforded the same opportunity as my friends at UA and DL (especially DL) have.
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 5:57 am

Quoting nwcoflyer (Reply 8):
I believe this isn't an open and close case like many on both sides believe.

Truer words have never been spoken in this thread. Well put.
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 6:02 am

AA and US also said on Tuesday that they would seek to extend the deadline for the merger beyond Dec. 17th. according to several reports in the media.

American, US Airways to Seek Extension for Merger Deadline, Defend Plans in Court Filings

"American Airlines and US Airways, whose planned merger has been delayed by the Department of Justice antitrust lawsuit that was filed last month, said on Tuesday that neither party currently plans to abandon their support for the merger. The two airlines also defended their merger in separate court filings that are a response to the DOJ suit.

The two airlines told members the creditors’ committee for American Airlines parent AMR Corp. that they plan to ask their boards of directors to extend the merger termination date beyond its current expiration,..."
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 7:29 am

Quoting Cubsrule (Reply 6):
No, what it illustrates is how remarkably concentrated the airline industry already is. Now, there's a fair retort to that--that the airline industry is structurally different from any other industry--but to argue in an abstract way that a "big" market (CHI-WAS, NYC-SFL, LAX-SFO) is competitive with only 5 or fewer competitors is not something we'd see in most other industries.

Compared to what industries? How many different overnight package delivery options do you have between these city pairs? I'd argue that the passenger transport options are far more competitive than the package delivery options. The reality is that anti-trust law has never been as trivial and simple as many cast it here. It's not as simple as just "reducing competition". Many mergers also help produce efficiencies which are beneficial to consumers which is why anti-trust law focuses more on market concentration issues. M&A activity is a part of a free market, and I'd argue a state where all such activity is banned is more akin to a centrally controlled economy that a true capitalistic free market.
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 10:56 am

Quoting michman (Reply 11):
Compared to what industries? How many different overnight package delivery options do you have between these city pairs? I'd argue that the passenger transport options are far more competitive than the package delivery options.

Other industries are far less competitive. How about cable and internet companies? In many parts of the country, you only have access to one - you have zero choice and the company has 100% of the pricing power yet the government is just fine with that. Utilities are even worse.
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 11:15 am

Quoting nutsaboutplanes (Reply 7):
The AA response seems a little snarky while the US response appears more civilized and professional in my opinion.

Funny - I actually thought just the opposite. I thought both airlines' responses were thorough and aggressive, though.

Quoting nwcoflyer (Reply 8):
That being said, I feel like the jury really isnt out in this merger and we very well may succeed. I believe this isn't an open and close case like many on both sides believe.

  

I completely agree. This appears likely headed to trial, and both sides have been posturing and positioning as such - the truth is that I doubt either side is quite as certain of its case as both sides are leading on.

Quoting PanAmPaul (Reply 10):
AA and US also said on Tuesday that they would seek to extend the deadline for the merger beyond Dec. 17th. according to several reports in the media.

So there we have it. Both sides are all in on the merger.

Quoting michman (Reply 11):
Compared to what industries?

Exactly. Having 4 national (and global) competitors, plus another 4-5 primarily regional competitors seems quite reasonable, and still plenty competitive, to me.
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 12:32 pm

I have been reading a lot about how the DOJ is only looking at the domestic impact and not the impact on US carriers flying internationally. What they make the point of...and rightly so....is that if this merger isn't allowed....AA and US are going to have their clock cleaned on lucrative international routes....which will harm both carriers long term and could lead to a situation where DL and UA are the only two carriers in many markets competing against foreign carriers...which would not be in the best interest of the US long term.

Interesting arguments to say the least...but you wonder why DOJ seems to be ignoring this aspect of the merger and only focusing on domestic stuff?
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 12:38 pm

Quoting michman (Reply 11):
Compared to what industries?

Gas stations, car dealers, car manufacturers, handymen, clothing stores, etc. I didn't say it was the only concentrated industry, but it's very concentrated.

Quoting michman (Reply 11):
Many mergers also help produce efficiencies which are beneficial to consumers which is why anti-trust law focuses more on market concentration issues.

I agree, and the HHI is the tool we use to focus on concentration. Commavia seems to be arguing--but I don't intend to put words in his mouth--that HHI is a poor measure of concentration in the airline industry.
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 12:42 pm

Quoting Cubsrule (Reply 15):
Commavia seems to be arguing--but I don't intend to put words in his mouth--that HHI is a poor measure of concentration in the airline industry.

I'm not arguing it - the airlines seem to be arguing it, or at least arguing that it is - as they put it - only a "point of departure" for analysis of market concentration and merger effects on the market, but not the end-all-be-all "final analysis" of such transactions. I tend to subscribe to the airlines' assertion, as I think there are many other dynamics at play in airline mergers that are simply not captured in a simple HHI calculation. The airlines allude to some of these dynamics in their filings.
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 1:00 pm

Quoting commavia (Reply 16):
I tend to subscribe to the airlines' assertion, as I think there are many other dynamics at play in airline mergers that are simply not captured in a simple HHI calculation.

I do too. The trouble is that competition law generally does not.
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 1:02 pm

Quoting HPRamper (Reply 12):
Utilities are even worse.

That's why they are..... wait for it...


Regulated!!!
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 1:04 pm

Quoting Cubsrule (Reply 17):
I do too. The trouble is that competition law generally does not.

The airlines and their lawyers seem to very strongly feel differently - asserting multiple times that HHI is not the only analysis factor consistent with the DOJ's merger evaluation guidelines.
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 1:18 pm

Quoting commavia (Reply 19):
The airlines and their lawyers seem to very strongly feel differently - asserting multiple times that HHI is not the only analysis factor consistent with the DOJ's merger evaluation guidelines.

They need to read the guidelines and the case law. Until there's a case that says that--and I'm not aware of one--it's more of a prayer than anything else. The statistics that IADCA posted on DOJ's winning streak in a couple of the other threads are instructive in this regard.

Again, I sympathize with their argument about what the law should be. Unfortunately, it's not what the law is.
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 3:06 pm

Very interesting responses from both airlines. Both airlines have a full paragraph about offering more choices to customers through growth and that creates competition, but under one company instead of two, which basically means customers will pay more for those choices and growth. I found the US response to be more cordial, but still aggressive. The AA response while having some very valid points was very aggressive and condescending towards the DOJ almost with a tone that they know nothing about the airline industry.

Both complaints talked about 12 years of losses of Billions, yet almost every airline has had that. I agree with the volatility of the industry but look at US the past 5 or so years, and even AA is starting to post profits in bankruptcy.

The most interesting statement I thought in both complaints was "Indeed, across the industry, the low cost carriers offer strong competitive choices built on diverse business models, and play the role of industry “maverick” in a way that no legacy airline ever has or could." I feel that this statement kind of represents the age old question in the airline industry. Should we afford legacy carriers the luxury of chapter 11 and mergers in order to avoid a significant change in market forces?

The other interesting thing is that the US complaint did not say much about the HHI evaluation and the AA complaint really bashed it and almost questioned the status quo of the use of the measure in the industry.

Overall I think both arguements focused on the merits of the merger and downplayed the concerns just like the DOJ focused on the competitive concerns of the merger and downplayed the merits.

Quoting HPRamper (Reply 12):
Utilities are even worse.

Utilities are regulated for the most part so there is no competition by design. Mainly due to the infrastructure that has to exist and be maintained. Similarly,the same can be said to some extent about cable and internet, but as technology has advanced it may be time for that to be less regulated.

Quoting commavia (Reply 16):
I tend to subscribe to the airlines' assertion, as I think there are many other dynamics at play in airline mergers that are simply not captured in a simple HHI calculation.

Some of those dynamics are hard to measure. Additionally, non-price competition can be inhibited by pricing power in markets. I would not be surprised at all if the DOJ argues in court that the larger combined carrier has less of an incentive to differentiate themselves because they have marketplace and pricing power. The HHI calculation has been a major part of many merger evaluations over the years and certainly ties into all if not most anti-competitive arguments.
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 6:48 pm

Quoting commavia (Reply 13):
This appears likely headed to trial

I wouldn't reach that conclusion just yet. The lawyers on both sides probably don't yet have enough of a grasp of the likelihood of success at trial -- and the feasibility of likely settlement options -- to make a judgment call on whether to cajole a settlement or push forward to the courtroom. That judgment call is built from interviewing potential witnesses, depositions, further examination of potential helpful and harmful evidence, research into precedent, and gentle inquiries to outside entities on whether they will play ball on proposals a party might seek to float. Remember, although the parties have been dealing with each other for months, it was through the prism of an antitrust regulatory review, not the lens of an adversarial proceeding.

Quoting commavia (Reply 16):
I tend to subscribe to the airlines' assertion

Your point gets to why I'm very eager to see if DOT wades into the case, and if so, how they posture. In major airline transactions, DOJ usually sticks to strict antitrust analysis, while DOT is empowered to weigh a broader set of considerations (while also undertaking its own competitive analysis).

DOT can weigh in with a brief embracing DOJ's antitrust analysis as a necessary evolution of competitive review in the now-highly concentrated airline marketplace, and reaffirm the real risks of further harm to the consumer in the form of poorer service and higher fares. Or, DOT can take the case out of the frying pan and into the fire by distancing itself from DOJ's analysis, and asserting that even if the merger is violative of antitrust law, the request for an injunction should be denied given longstanding US policy favoring consolidation as the best means to restructure a vital industry, and given the possibility of fashioning tailored structural and conduct remedies to specific problems raised by the merger instead of a draconian denial.


Long story short, this case hasn't even begun to get interesting yet.

[Edited 2013-09-11 11:53:50]
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 7:11 pm

jetBlue's ceo wants the combined AA/US to divest all of AA's DCA slots.

http://www.bloomberg.com/news/2013-0...gton-slots-jetblue.html?cmpid=yhoo
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 7:29 pm

Quoting Prost (Reply 23):

jetBlue's ceo wants the combined AA/US to divest all of AA's DCA slots.

Oh... that's just being snarky..

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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 7:50 pm

I wonder if this will sour the codeshare relationship out of JFK?
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 7:57 pm

Quoting Prost (Reply 23):
jetBlue's ceo wants the combined AA/US to divest all of AA's DCA slots.

And JetBlue probably wants all the slots given to them.
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 8:09 pm

Quoting Cubsrule (Reply 15):
I agree, and the HHI is the tool we use to focus on concentration. Commavia seems to be arguing--but I don't intend to put words in his mouth--that HHI is a poor measure of concentration in the airline industry.
Quoting commavia (Reply 16):
I'm not arguing it - the airlines seem to be arguing it, or at least arguing that it is - as they put it - only a "point of departure" for analysis of market concentration and merger effects on the market, but not the end-all-be-all "final analysis" of such transactions. I tend to subscribe to the airlines' assertion, as I think there are many other dynamics at play in airline mergers that are simply not captured in a simple HHI calculation. The airlines allude to some of these dynamics in their filings.

I note with great interest that the airlines had zero problems with DOJ using HHI in prior mergers when the analysis came out favorably for them. Now all of a sudden, the analysis is fatally flawed and should be thrown out in favor of a different set of rules. Got to love hypocrisy.
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 8:55 pm

Quoting aaexecplat (Reply 27):
I note with great interest that the airlines had zero problems with DOJ using HHI in prior mergers when the analysis came out favorably for them. Now all of a sudden, the analysis is fatally flawed and should be thrown out in favor of a different set of rules. Got to love hypocrisy.

I could be wrong, and if I am I am sure someone here will tell me, but in the previous mergers what I read was the DOJ looked mostly, if not entirely, at overlapping nonstops. Now they are looking at HHI changes on competing connecting flights, which would probably have raised huge objections to UA and DL and possibly WN also. The legacies compete with connecting service to almost all major to medium cities so the DOJ did not just move the goalposts, they moved the stadium. This is an enormous paradigm shift and I think the main reason why so many analysts were surprised by the suit. If this is correct I have to disagree that AA and US are being hypocritical. The rules were changed completely.

Some have pointed out the DOJ hinted at changing the the measuring stick from nonstop to connecting, but as far as I know this is the first time the DOJ actually got out the ruler and started whacking knuckles. There is a big difference between talking about whacking your knuckles and doing it, just ask UA WN and DL. So no, I do not think AA and US are being hypocritical, but I also do not think they were blindsided. I think they saw this coming from the DOJ and were not surprised like the analysts were. I would still think the same thing if AA and US already merged and the rules were changed for UA and CO (if they had not merger already.) This is a huge change. I am not a lawyer but I would assume the DOJ is mostly free to change their definition of anti-competitive, and it will be for the court and lawyers to decide if the change was warranted.

[Edited 2013-09-11 13:58:17]

[Edited 2013-09-11 14:26:57]
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 9:18 pm

Quoting user444555 (Reply 28):
So no, I do not think AA and US are being hypocritical, but I also do not think they were blindsided.

Not hypocritical but somewhat misleading. Their problem isn't with HHI per se but rather with what we are measuring with HHI. The trouble is that so much traffic is connecting that there's a pretty good argument that DOJ has it right here but had it wrong in the past--that's what forces them to make the "HHI is bad" argument.
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 11, 2013 9:34 pm

Quoting Cubsrule (Reply 29):
Not hypocritical but somewhat misleading. Their problem isn't with HHI per se but rather with what we are measuring with HHI. The trouble is that so much traffic is connecting that there's a pretty good argument that DOJ has it right here but had it wrong in the past--that's what forces them to make the "HHI is bad" argument.

I see your point, but I am not even sure I would say either is being misleading in general. They were going under the assumption that the DOJ would still be looking at nonstops, and from what I understand, AA/US had less overlap there than DL/NW in 2008. If AA and US claim to be surprised about the suit, yes I think they are misleading about that part. Reuters had at least two articles about how the negotiations grew hostile and heated toward the end. I think they knew it was coming, but with the deadline so close they had to keep pushing on like everything was going fine. I am not a lawyer but I would assume the DOJ can change its mind about what is good and bad or how much competition is too little, and the judge will decide if it gets that far. I am thinking there is at least a chance for a settlement. I would like to know what the DOJ is asking for, if anything. They might just keep telling AA and US to make an offer and then keep saying no.

[Edited 2013-09-11 14:35:42]

[Edited 2013-09-11 14:36:03]

[Edited 2013-09-11 15:17:08]
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Thu Sep 12, 2013 3:58 pm

http://www.streetinsider.com/General...udge+says+-+Bloomberg/8683447.html

Bankruptcy judge approves exit plan and merger. Now it's up to the courts in DC unless there is a settlement with the DOJ.

[Edited 2013-09-12 09:01:54]
 
ckfred
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Thu Sep 12, 2013 4:04 pm

Quoting nwcoflyer (Reply 8):
I believe this isn't an open and close case like many on both sides believe.

Well said. While the government has historically has done well in anti-trust suits, either winning at trial or reaching a settlement that achieves much of what DOJ wanted (think of the break-up of AT&T), this is one of the weaker cases I've seen the government bring in a long time.

Yet, it's not an easy win for AA and US. They still have to show that the merger will not have the effects that the government alleges or demonstrate how the merged carrier can better compete with UA, DL, and even WN.

I believe this case could settle at any time, from tomorrow until the case goes to the jury. It all comes down to what DOJ wants to achieve, and what Doug Parker and his team can live with, in order to get the merger done.

The fact that US and AA were able to retain anti-trust counsel quickly and have them ready to discuss the case with the press so soon after the suit was filed tells me that they saw this coming, probably a week or two before the suit was filed.

We don't know what the sticking point is with the negotiations. DOJ and AA/US could be far apart in the number of slots to be given up at DCA, or how a sale would be handled. They could also be very close, but neither side wants to budge off its number.

But, as both sides get closer to being ready for trial, one side or the other (or even both) may start to feel uneasy about its chances at trial.
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Thu Sep 12, 2013 4:38 pm

Quoting Prost (Reply 25):
I wonder if this will sour the codeshare relationship out of JFK?

They dont codeshare out of JFK
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Thu Sep 12, 2013 6:15 pm

I really don't know if or where AA and B6 codeshare, but according to B6's Web site there is some sort of agreement out of JFK. Maybe it is just a FF agreement.

http://www.jetblue.com/airline-partners/

"Make convenient connections between 26 domestic JetBlue markets and 15 international destinations served by American Airlines from New York's JFK and Boston's Logan airports. Customers can earn TrueBlue points (jetblue.com/aa) or American AAdvantage miles when flying on any of the JetBlue or American flights that are part of the agreement."
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Thu Sep 12, 2013 8:29 pm

US and AA can not explain how AS has thrived without BK all these years, despite everything they claim. AS flies internationally too. The reason for many BKs is self inflicted. AS proves this, as does WN and others.

It's funny to me that the legacies never blame themselves, always others and fail to mention how other competitors were able to avoid the mistakes, such as selling fuel hedges when fuel prices were very cheap, making a bad speculative bet on the direction of fuel prices. And may more.

AA's explanation reads like a meandering story of a competing view of the world, rather than thoughtful legal arguments. More like a rant that the DOJ has it all wrong. Why? I am still waiting for them to point that out. Look at this feable attempt to confuse two issues (conflate):

For instance, the Complaint focuses heavily on the existence of “more than 1,000” overlapping routes between the two airlines with high HHI numbers. But the number of nonstop and connecting overlaps in this merger is comparable to those transactions that the DOJ only recently agreed would increase competition. Of the 623 domestic nonstop routes currently flown by American and US Airways, the two airlines directly compete on only 17, and DOJ’s list includes only 14. Moreover, most of those overlaps are also served nonstop by other airlines, including Southwest ....

- However, DOJ is talking about 1,000 routes, not necessarily nonstop routes.

If this is the best they have, it's not much, IMHO.
 
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Fri Sep 13, 2013 9:39 pm

It's official for the bankruptcy judge. He approved the merger pending the resolution of the DOJ antitrust suit. Horton has asked the AMR board to remove his severance from the exit plan. I think he will get something later, just my opinion on how these things work. But I think it is an indication that it's not only Parker who wants this merger done, it's also Horton.

You can read more about it and see the official decision here

http://aviationblog.dallasnews.com/2...airlines-reorganization-plan.html/
 
ECAMActions
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Tue Sep 17, 2013 1:52 pm

Hearing rumors a settlement is being discussed but the parties want to see how the hearing in 2 weeks goes before they give in to something they think they don't have to.

Like I've been saying, this merger is going to happen one way or another.
 
GSPSPOT
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Tue Sep 17, 2013 2:01 pm

Quoting apodino (Reply 14):
Interesting arguments to say the least...but you wonder why DOJ seems to be ignoring this aspect of the merger and only focusing on domestic stuff?

True... If this merger doesn't go thru and either or both airlines end up liquidating, I blame this administration's DOJ completely and so should affected employees IMO.
Finally made it to an airline mecca!
 
ECAMActions
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Tue Sep 17, 2013 2:04 pm

Quoting GSPSPOT (Reply 38):
True... If this merger doesn't go thru and either or both airlines end up liquidating, I blame this administration's DOJ completely and so should affected employees IMO.

Dont' forget that the doj also chose to ignore jetblue and swa in therir flawed use of the HHI.

Anyone with any idea of how this industry works knows the doj is very very weak and will lose if it goes before the judge. The doj at this point is trying to figure out how to settle and save face.
 
milemaster
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 18, 2013 2:41 am

Interesting take from JP Morgan analyst:

http://www.thestreet.com/story/12039...tt_html_pla5&cm_ven=EMAIL_ttt_html

"JP Morgan analyst Jamie Baker upgraded both Delta (DAL) and US Airways to outperform, and also raised estimates for both carriers, saying that "firm revenue per available seat mile and retreating oil bode well for 3Q13 earnings." He also said that US Airways and American could form a working relationship, including the move of US Airways from the Star alliance to the Oneworld alliance, even if the Justice Department succeeds in blocking the merger.

Baker ascribed a 50-50 probability to the completion of the merger between US Airways and American. He said he doesn't expect a negotiated settlement, meaning the decision on a merger rests with U.S. District Court Judge Colleen Kollar-Kotelly, who has scheduled a hearing for Nov.25.

Why 50-50? Because while nearly every single person in the airline industry believes a merger is likely, "when it comes to antitrust experts, we have yet to find any that believe the airlines face anything but a steep, uphill battle, with most citing probabilities below 40%," Baker said. "We agree with the former, but we simply cannot ignore the latter, so let's call it 50-50."
 
nutsaboutplanes
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 18, 2013 3:10 am

Quoting tommytoyz (Reply 35):
US and AA can not explain how AS has thrived without BK all these years, despite everything they claim. AS flies internationally too. The reason for many BKs is self inflicted. AS proves this, as does WN and others.

Comparing AA to AS is not realistic. These are two vastly different business models with two completely different sized companies. AS flies to Mexico and Canada While operating one hub with about 150 daily departures out of SEA and a number of small focus cities while AA is a global network carrier with several mega hubs and numerous focus cities.

AS has a different history. They have grown much slower and have only really expanded since the late 90's and they serve a very narrow portion of the domestic US market. Due to their small size, nimbleness and lack of investment in facility infrastructure, they can move capacity very easily and very aggressively ie movement from Mexico flying to Hawaii flying.

I think you can compare B6 and WN to AS but not AA, DL , UA or US.

[Edited 2013-09-17 20:12:51]
American Airlines, US Airways, Alaska Airlines, Northwest Airlines, America West Airlines, USAFR
 
DLPMMM
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 18, 2013 6:49 am

Quoting milemaster (Reply 40):

Thanks for that post...very interesting!

I can't remember when there was such a dichotomy of views in such a situation!

The industry experts believing it is in essence a "done deal" while the lawyers (such as Cubsrule) feeling it will be a tough "up hill slog" (ill note that lawyers never say anything is ever more than "likely or unlikely").

It should be noted that while DOJ has had a strong track record in the past in litigation, they have been much more aggressive and even "radical" in the past year or so in their stances... I think in this case, they bit off more than they can legally chew....particularly with this judge and with a Federal Bankruptcy Judge in the mix as well.

I'll act like a lawyer and just say...we will see  
 
washingtonflyer
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 18, 2013 10:31 am

It's an interesting thing. Our firm had its monthly attorney luncheon this past Thursday. Owing to the interest in the DC area to the merger, the firm put on a moot court involving 1) a partner who had formerly been a deputy GC at an airline (I won't say which, but it is neither AA nor US) serving as counsel to the airlines, and 2) the head of the antitrust practice serving as counsel to the government. A three-attorney panel (including one partner who won a case at the Supreme Court recently) served as the deliberative body.

Quite lively; quite informative. But, in a 3-0 decision, the panel sided with the government.

YMMV.
 
ECAMActions
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 18, 2013 2:33 pm

Quoting milemaster (Reply 40):
Why 50-50? Because while nearly every single person in the airline industry believes a merger is likely, "when it comes to antitrust experts, we have yet to find any that believe the airlines face anything but a steep, uphill battle, with most citing probabilities below 40%," Baker said. "We agree with the former, but we simply cannot ignore the latter, so let's call it 50-50."

The "anti-trust experts" don't really understand the airline industry. They compare this merger to other mergers but they ignore how badly the hhi was used in this case.

It's way above 50% that this merger will pass. Anyone who think otherwise suffers from willful ignorance.

There isn't one piece of paper out there that shows the DOJ has a strong slam dunk case. There is nothing that doj found in their investigation that show this merger is illegal. They cherry picked data from a flawed use of the hhi and found some e-mail they used as character assassination. None of which can be used in court.

[Edited 2013-09-18 07:34:22]
 
Cubsrule
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 18, 2013 2:45 pm

Quoting ECAMActions (Reply 44):
The "anti-trust experts" don't really understand the airline industry. They compare this merger to other mergers but they ignore how badly the hhi was used in this case.

But the judge is more of an "anti-trust expert" than someone who "really understands the airline industry," right?
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ECAMActions
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 18, 2013 2:50 pm

Quoting Cubsrule (Reply 45):
But the judge is more of an "anti-trust expert" than someone who "really understands the airline industry," right?

She's a judge.
 
Cubsrule
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 18, 2013 2:56 pm

Quoting ECAMActions (Reply 46):
She's a judge.

Of course. But she almost certainly has more competition law experience than experience with the airline industry, and I think we can all agree that experience with cases involving the airline industry (e.g. Spirit v. DoT) wouldn't necessarily help a judge understand competition law in the airline industry.
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miaami
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 18, 2013 3:00 pm

AA sending charters to DC with employees on board, taking their case to Congress.

http://aviationblog.dallasnews.com/2...s-with-merger-on-their-minds.html/

[Edited 2013-09-18 08:02:31]
 
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par13del
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RE: U.S. Anti Trust Suit: AMR/LCC - Part 5

Wed Sep 18, 2013 3:43 pm

Quoting apodino (Reply 14):
What they make the point of...and rightly so....is that if this merger isn't allowed....AA and US are going to have their clock cleaned on lucrative international routes....which will harm both carriers long term and could lead to a situation where DL and UA are the only two carriers in many markets competing against foreign carriers...which would not be in the best interest of the US long term.

The US Government has already done all that is required in nation to nation access on international travel, any nation that wants access to the USA must also provide access to American carriers, how much more regulation / legislation do you want the US Government to attempt to apply to foreugn nations?

This case like it or not is all about domestic travel / conditions in the USA, where foreign travel is concerned it most likely is to include additional pax numbers but nothing to assist a US Carrier in better competing with foreign carriers.

Caveat being we do know that DL wants to get preferred financing for it's a/c purchases similar to what foreign carriers get to purchase American products, problem with that is that neither Airbus or Boeing want such financing on their own truf.
Consider all EU carriers purchasing Boeing and all American carriers purchasing Airbus  

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