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MohawkWeekend
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 1:31 pm

Midwestindy wrote:
ContinentalEWR wrote:
MohawkWeekend wrote:
Biden's Administration is pro-union and is in the mood to trust bust like Teddy Roosevelt. Younger people may not know this but until the 1980's or so, mergers and JV just didn't happen like they do now. The DOJ turned most down. Look at the consolidation in the airline, tech and especially the banking industry. Google, Amazon, Bank of America. Back in the day, there were very very few companies that were "too big to fail". Who won? Wall Street and the Officers of those companies with stock options (see airline CEO's). Who lost - the employees and cities who had facilities "right-sized".

It's about time.


This.


We aren't talking about Tech or Banking, we are talking about the airline industry.

Without consolidation, the airline industry wouldn't have survived this crisis, and if they did there would have been a heck of a lot more "right-sizing" of employee counts.....I can tell you that much....

Yeah that SW destruction of Air Tran was absolutely needed to save the industry. Or NW wiping out Midwest Express. We have allowed 3 airlines to get so big and have so many employees that we can't let them fail. None of the airlines would have survived COVID without the massive govt aid not consolidation.

I respect your opinion but the airline industry would have survived. And new airlines would have filled the void. And it appears that the Department of Justice agrees.
 
tphuang
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 1:56 pm

I'm not sure why we are back to discussing mergers. There is no merger going on here. This is just 2 medium sized players partnering up to challenge two larger players in the largest market in the country. I'd be very shocked if DL hasn't been whispering to every politician it can get its hand on to dissolve this and use NK complaint as the cover.

At the end of the day, NK wants slots divestiture at LGA, not for the deal to be "blocked".

DOJ arguments show they conveniently ignore all the additional competition that's already been added out of NYC/Boston from NEA The examples they used of JFK-SAN is a joke since AA has flown that route for 2 weeks since April of 2019. If they care passionately about promoting competition, then make provision to not allow schedule coordination/code share on a couple of routes like BOS-DCA/PHL that are overwhelmingly dominant by AA/B6.
 
sxf24
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 2:16 pm

tphuang wrote:
I'm not sure why we are back to discussing mergers. There is no merger going on here. This is just 2 medium sized players partnering up to challenge two larger players in the largest market in the country. I'd be very shocked if DL hasn't been whispering to every politician it can get its hand on to dissolve this and use NK complaint as the cover.

At the end of the day, NK wants slots divestiture at LGA, not for the deal to be "blocked".

DOJ arguments show they conveniently ignore all the additional competition that's already been added out of NYC/Boston from NEA The examples they used of JFK-SAN is a joke since AA has flown that route for 2 weeks since April of 2019. If they care passionately about promoting competition, then make provision to not allow schedule coordination/code share on a couple of routes like BOS-DCA/PHL that are overwhelmingly dominant by AA/B6.


The DOJ's argument, which is not without merit, is that the NEA is effectively a merger since AA can control pricing, network and a good chunk of slots for 2/3rds of B6's network.
 
N757ST
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 2:24 pm

How can this team up which has enhanced competition in NYC be bad, but the JV ATIs between the big 3 in the states and the big 3 in Europe are deemed a-ok. Almost the entirety of the transatlantic market is consolidated yet the justice department is up in arms about this?
 
tphuang
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 2:31 pm

sxf24 wrote:
tphuang wrote:
I'm not sure why we are back to discussing mergers. There is no merger going on here. This is just 2 medium sized players partnering up to challenge two larger players in the largest market in the country. I'd be very shocked if DL hasn't been whispering to every politician it can get its hand on to dissolve this and use NK complaint as the cover.

At the end of the day, NK wants slots divestiture at LGA, not for the deal to be "blocked".

DOJ arguments show they conveniently ignore all the additional competition that's already been added out of NYC/Boston from NEA The examples they used of JFK-SAN is a joke since AA has flown that route for 2 weeks since April of 2019. If they care passionately about promoting competition, then make provision to not allow schedule coordination/code share on a couple of routes like BOS-DCA/PHL that are overwhelmingly dominant by AA/B6.


The DOJ's argument, which is not without merit, is that the NEA is effectively a merger since AA can control pricing, network and a good chunk of slots for 2/3rds of B6's network.


That's other part that's quite funny. The DOJ argument is that B6 is so weak that it will be a pawn for AA. Yet, B6 has added a bunch of routes to MIA and London since this all started. If they want to prove that, then they need to show that the routes B6 has announced so far are not also logical routes for them to add if they just got leased those slots from AA outside of this partnership. It'd be very hard to argue that they would not be adding more to BOS and Florida from LGA if they got additional slots.

If DOJ is really up to investigating unfair competition, they should take a look at all of DL's JVs, especially the one with VS/AF/KL.
 
MohawkWeekend
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 3:02 pm

Biden signed the Executive Order in June so they are only looking at JV's and mergers since then. Perhaps they will look at past aviation deals to see if they were anti-competitive. Breaking up companies might occur although that IMO won't happen in the airline industry.

Now wouldn't that be wild if they went after Frequent Flier plans too? :duck:
 
sagechan
Posts: 413
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 3:16 pm

sxf24 wrote:
tphuang wrote:
I'm not sure why we are back to discussing mergers. There is no merger going on here. This is just 2 medium sized players partnering up to challenge two larger players in the largest market in the country. I'd be very shocked if DL hasn't been whispering to every politician it can get its hand on to dissolve this and use NK complaint as the cover.

At the end of the day, NK wants slots divestiture at LGA, not for the deal to be "blocked".

DOJ arguments show they conveniently ignore all the additional competition that's already been added out of NYC/Boston from NEA The examples they used of JFK-SAN is a joke since AA has flown that route for 2 weeks since April of 2019. If they care passionately about promoting competition, then make provision to not allow schedule coordination/code share on a couple of routes like BOS-DCA/PHL that are overwhelmingly dominant by AA/B6.


The DOJ's argument, which is not without merit, is that the NEA is effectively a merger since AA can control pricing, network and a good chunk of slots for 2/3rds of B6's network.


Except AA can't. AA and B6 can talk network and timing and slots needed to make it happen, they can't talk pricing and AA certainly can't dictate to B6 to do something, it's through mutual agreement.
 
ScottB
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 3:57 pm

ContinentalEWR wrote:
UA has an outsized footprint at EWR.


UA gained that dominance at EWR entirely through legal means. Back in the early 1980s, EWR was considered to be the most undesirable NYC-area airport, and most airlines only offered token service. PeoplExpress made EWR relevant by offering cheap, bare-bones service and more importantly they committed to turning the then-unfinished Terminal C into a facility which could host a hub. When Continental's parent company bought PE, the EWR hub was kept and CO developed EWR into a powerhouse hub through two decades of growth and persistent marketing. At the time when PE was merged into CO, EWR had plenty of room for other carriers and CO's presence at the airport was minimal. Slots were only reintroduced at EWR (they had been imposed in 1968 and later removed) once CO's growth at the airport made them necessary. When UA and CO merged, legacy UA's slots and facilities at EWR were sold to WN -- a new entrant.

Similarly, B6's growth at BOS to become the largest carrier has been entirely legal -- they have deftly taken advantage of other carriers' decisions to abandon markets from BOS and have grown organically to their current position. Although BOS is not slot-restricted, the terminal facilities are fairly constrained by the available real estate. Allowing a virtual merger to produce an entity that would control over half of leased gates at BOS is extremely problematic.

tphuang wrote:
There is no merger going on here. This is just 2 medium sized players partnering up to challenge two larger players in the largest market in the country.


This is a virtual merger. They're cooperating on schedules and marketing, and they're even sharing revenue! The fact that both AA and B6 were medium-sized players in NYC meant that both had to compete more aggressively to win passengers. B6 had to be disruptive to win passengers over to Mint. Consolidating the two largest carriers at BOS with over 50% market share is horrible for competition.

tphuang wrote:
Here are the number of markets added by AA/B6 since NEA got announced. Brand new markets where neither operated pre-COVID


The thing is that adding competition to maybe a half-dozen small markets from BOS (and adding another half-dozen monopoly markets) is beneficial to far fewer passengers than eliminating the largest competitor in pretty much every AA hub market from BOS save ORD. BOS-PHL and BOS-DCA are two of the largest O&D markets from BOS and they will return to being near-monopoly markets. Many (IND, CMH, CVG, STL, MCI, SAT, MKE) would have almost certainly been added by B6 from BOS as a standalone operation. Adding seasonal sub-daily flights to leisure markets does not compensate for the reduced competition in many of the largest markets from BOS.
 
Jshank83
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 4:05 pm

ScottB wrote:

The thing is that adding competition to maybe a half-dozen small markets from BOS (and adding another half-dozen monopoly markets) is beneficial to far fewer passengers than eliminating the largest competitor in pretty much every AA hub market from BOS save ORD. BOS-PHL and BOS-DCA are two of the largest O&D markets from BOS and they will return to being near-monopoly markets. Many (IND, CMH, CVG, STL, MCI, SAT, MKE) would have almost certainly been added by B6 from BOS as a standalone operation. Adding seasonal sub-daily flights to leisure markets does not compensate for the reduced competition in many of the largest markets from BOS.


As someone from a smaller market... I feel no sympathy for the larger markets because you might have one less player (kind of, because it is till 2 different products). You have plenty of competition, frequency, and route options on many airlines. If something helps us out at the minor expense of a larger market pair.. oh well. DL will still run against AA/B6 on BOS-PHL/DCA so there are options. If this got me a 2nd option (or possibly going from zero to 1 option in some cases) instead of having a one airline monopoly and crazy high prices, I think larger markets will be just fine with one less.
 
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LAXintl
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 4:16 pm

AA-B6 launched a website defending their JV

https://neaflies.com/
 
MLIAA
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 4:30 pm

The argument to overturn this JV based on New York is very weak. AA+B6 have reached parity with DL and UA in the region, there is ZERO reason for New Yorkers to be against the JV.

As for Boston, I would need to see the JV compared side by side to DL. Yes the JV has added a lot of new markets, but it might be true that a lot of competition has been eliminated from BOS.

But worst case scenario, BOS is excluded from the JV and AA and B6 keep their NY agreement, which is the crown jewel anyway.
 
splitterz
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 4:50 pm

I really hope the DOJ is successful. AA has been strategic with its alliances on both coasts with B6 and AS. IMO there's no reason why the largest carrier in the US needs a soft or virtual merger to make NYC/BOS work. They cannot coordinate pricing sure, but really how hard is it for a given carrier to pull up the appropriate data to see what each is pricing for a given market?

I'm hopeful the DOJ is successful. Mergers, even this alliance, do not typically benefit the consumer in the long run.
 
Abeam79
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 5:02 pm

splitterz wrote:
I really hope the DOJ is successful. AA has been strategic with its alliances on both coasts with B6 and AS. IMO there's no reason why the largest carrier in the US needs a soft or virtual merger to make NYC/BOS work. They cannot coordinate pricing sure, but really how hard is it for a given carrier to pull up the appropriate data to see what each is pricing for a given market?

I'm hopeful the DOJ is successful. Mergers, even this alliance, do not typically benefit the consumer in the long run.


By this logic you should be against almost all the DL JV’s they have with VA/AM/Latam/Korean or UA with avianca and Lufthansa etc.
Cause those are on-going without the same scrutiny.
 
tphuang
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 5:02 pm

ScottB wrote:
tphuang wrote:
There is no merger going on here. This is just 2 medium sized players partnering up to challenge two larger players in the largest market in the country.


This is a virtual merger. They're cooperating on schedules and marketing, and they're even sharing revenue! The fact that both AA and B6 were medium-sized players in NYC meant that both had to compete more aggressively to win passengers. B6 had to be disruptive to win passengers over to Mint. Consolidating the two largest carriers at BOS with over 50% market share is horrible for competition.

There is no revenue sharing in the traditional JV sense. They are not allowed too coordinate on pricing. They can't share fare data until after the flights, when a lot of this stuff is available from other channels.

tphuang wrote:
Here are the number of markets added by AA/B6 since NEA got announced. Brand new markets where neither operated pre-COVID


The thing is that adding competition to maybe a half-dozen small markets from BOS (and adding another half-dozen monopoly markets) is beneficial to far fewer passengers than eliminating the largest competitor in pretty much every AA hub market from BOS save ORD. BOS-PHL and BOS-DCA are two of the largest O&D markets from BOS and they will return to being near-monopoly markets. Many (IND, CMH, CVG, STL, MCI, SAT, MKE) would have almost certainly been added by B6 from BOS as a standalone operation. Adding seasonal sub-daily flights to leisure markets does not compensate for the reduced competition in many of the largest markets from BOS.


Then make it part of the condition to exclude BOS-DCA/PHL and let them have their DCA slots back. It would be tough to argue that BOS-LAX/NYC/ORD don't have enough competition from other airlines.

BOS-IND/CMH/STL/MCI/MKE/CVG/YYZ all suffered through astronomical fares due to lack of competition. BOS-YVR/SAT lacked year round service. The consumer benefits from additional competition in these market would certainly make up for possible fare increase from less competition on BOS-NYC/LAX/ORD. Saying that B6 would have added them is nonsensical. In how many years? Have you seen how quickly they added new middle of country markets prior to the NEA? They were adding at most once a year. Should Boston customers have to suffer DL charging astronomical prices in these monopoly markets?

At worst case, if they are really hung up on BOS, then limit the schedule/capacity coordination to just NYC airports. NYC is the meat of this deal. AA needs it to have a competitive inernational gateway to places like DEL and TLV.

Again, DOJ is actually arguing JFK-SAN is evidence that NEA is causing price to go up when AA has operated that route for 2 weeks since April of 2019. How ridiculous is that?
 
Boof02671
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 5:09 pm

Interview with Doug and he addresses the issue.

https://www.washingtonpost.com/washingt ... chair-ceo/
 
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Midwestindy
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 5:14 pm

ScottB wrote:

This is a virtual merger. They're cooperating on schedules and marketing, and they're even sharing revenue! The fact that both AA and B6 were medium-sized players in NYC meant that both had to compete more aggressively to win passengers. B6 had to be disruptive to win passengers over to Mint. Consolidating the two largest carriers at BOS with over 50% market share is horrible for competition.

The thing is that adding competition to maybe a half-dozen small markets from BOS (and adding another half-dozen monopoly markets) is beneficial to far fewer passengers than eliminating the largest competitor in pretty much every AA hub market from BOS save ORD. BOS-PHL and BOS-DCA are two of the largest O&D markets from BOS and they will return to being near-monopoly markets. Many (IND, CMH, CVG, STL, MCI, SAT, MKE) would have almost certainly been added by B6 from BOS as a standalone operation. Adding seasonal sub-daily flights to leisure markets does not compensate for the reduced competition in many of the largest markets from BOS.


It's not eliminating competition in any of those markets. B6+AA can only really coordinate schedules, so are you arguing that B6+AA are coordinating to drastically shrink capacity in the "monopoly" routes they operate in, (which is obviously not the case) that's the only way they can really impact fares. AA+B6 aren't stupid, if they do things like that the alliance would be shut down quick:

With respect to the hub routes you mention:
BOS-CLT/DFW/PHL/PHX aren't codeshare routes, so not sure what your argument is there. And AA was forced to give up slots at DCA, and BOS-LAX/ORD have plenty of competition.

I think the revenue sharing piece is also getting misconstrued, in large part because B6 & AA haven't been talking much about the Mutual Growth Incentive payment agreement, which is where this revenue-sharing thing is coming from.

From my understanding of this document, payments will only be made between carriers for additional growth or new routes. Which incentivizes both carriers to grow their networks, which is a plus and not a negative in my eyes.
https://www.sec.gov/Archives/edgar/data ... thince.htm
 
Dieuwer
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 5:34 pm

Midwestindy wrote:
For the DL or UA employees cheering this lawsuit, I'd be careful, the DOJ specially called out JVs as well.


Then the DL-VS JV will be next on the chopping block. JetBlue will make sure about that. Not to mention burry LHR in slot related lawsuits with the DOJ and DOT on their side.
 
sxf24
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 6:46 pm

tphuang wrote:
sxf24 wrote:
tphuang wrote:
I'm not sure why we are back to discussing mergers. There is no merger going on here. This is just 2 medium sized players partnering up to challenge two larger players in the largest market in the country. I'd be very shocked if DL hasn't been whispering to every politician it can get its hand on to dissolve this and use NK complaint as the cover.

At the end of the day, NK wants slots divestiture at LGA, not for the deal to be "blocked".

DOJ arguments show they conveniently ignore all the additional competition that's already been added out of NYC/Boston from NEA The examples they used of JFK-SAN is a joke since AA has flown that route for 2 weeks since April of 2019. If they care passionately about promoting competition, then make provision to not allow schedule coordination/code share on a couple of routes like BOS-DCA/PHL that are overwhelmingly dominant by AA/B6.


The DOJ's argument, which is not without merit, is that the NEA is effectively a merger since AA can control pricing, network and a good chunk of slots for 2/3rds of B6's network.


That's other part that's quite funny. The DOJ argument is that B6 is so weak that it will be a pawn for AA. Yet, B6 has added a bunch of routes to MIA and London since this all started. If they want to prove that, then they need to show that the routes B6 has announced so far are not also logical routes for them to add if they just got leased those slots from AA outside of this partnership. It'd be very hard to argue that they would not be adding more to BOS and Florida from LGA if they got additional slots.

If DOJ is really up to investigating unfair competition, they should take a look at all of DL's JVs, especially the one with VS/AF/KL.


The fact that you think the DOJ is saying B6 is weak speaks volumes about your bias. The complaint is actually quite complimentary of B6 and its ability to disrupt the industry through lower pricing and product innovation. The DOJ alleges that NEA eliminates or reduces the motivation to compete on pricing, reducing the benefit to consumers if B6 was (in my words) a standalone airline.
 
tphuang
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 7:40 pm

sxf24 wrote:
tphuang wrote:
sxf24 wrote:

The DOJ's argument, which is not without merit, is that the NEA is effectively a merger since AA can control pricing, network and a good chunk of slots for 2/3rds of B6's network.


That's other part that's quite funny. The DOJ argument is that B6 is so weak that it will be a pawn for AA. Yet, B6 has added a bunch of routes to MIA and London since this all started. If they want to prove that, then they need to show that the routes B6 has announced so far are not also logical routes for them to add if they just got leased those slots from AA outside of this partnership. It'd be very hard to argue that they would not be adding more to BOS and Florida from LGA if they got additional slots.

If DOJ is really up to investigating unfair competition, they should take a look at all of DL's JVs, especially the one with VS/AF/KL.


The fact that you think the DOJ is saying B6 is weak speaks volumes about your bias. The complaint is actually quite complimentary of B6 and its ability to disrupt the industry through lower pricing and product innovation. The DOJ alleges that NEA eliminates or reduces the motivation to compete on pricing, reducing the benefit to consumers if B6 was (in my words) a standalone airline.


not my thought.

https://twitter.com/WandrMe/status/1440420491299209218

DOJ needs to actually prove their point. If more markets are seeing B6 presence due to the NEA (and they have launched many new routes), then I don't see how you make the argument that they are not lowering fares and products in those markets.

Again, all of DL's JVs should be investigated.
 
LCDFlight
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 7:47 pm

Oh gosh, it seems like "Antitrust immunity" is no longer a thing! Laws, who knew.

Agreed that DL's JVs are also "antitrust immunity" silly things. Ridiculous, imo.
 
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Midwestindy
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 8:42 pm

MohawkWeekend wrote:
Midwestindy wrote:
ContinentalEWR wrote:

This.


We aren't talking about Tech or Banking, we are talking about the airline industry.

Without consolidation, the airline industry wouldn't have survived this crisis, and if they did there would have been a heck of a lot more "right-sizing" of employee counts.....I can tell you that much....

Yeah that SW destruction of Air Tran was absolutely needed to save the industry. Or NW wiping out Midwest Express. We have allowed 3 airlines to get so big and have so many employees that we can't let them fail. None of the airlines would have survived COVID without the massive govt aid not consolidation.

I respect your opinion but the airline industry would have survived. And new airlines would have filled the void. And it appears that the Department of Justice agrees.


New airlines would have filled the void? After how long? You can't pop major US airlines out overnight.

Airlines of 15-30+ years ago would have been toast in a crisis like this. The US3 were each losing upwards of $100M PER DAY in March & April 2020, the razor thin margins of airlines of the past would have lead to much more destruction to the airline industry, than what we saw. If it were not for the financial cushion airlines were able to build leading into the crisis (thanks in part to consolidation), we wouldn't be talking about 2019 capacity levels for a long long time.
 
Dieuwer
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 8:46 pm

Airliners would have had a much bigger "cushion" had they not doled out cash to investors by buying back boatloads of equities.
 
MohawkWeekend
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 9:01 pm

Dieuwer wrote:
Airliners would have had a much bigger "cushion" had they not doled out cash to investors by buying back boatloads of equities.

:bigthumbsup:


US Airlines Spent 96% of Free Cash Flow on Buybacks: Charth
ttps://www.bloomberg.com/news/articles/ ... acks-chart
The airlines in 2019 had it great - most of their competition was bought out. Don't really have to be super efficient or business savvy then.

But then things changed.
Last edited by MohawkWeekend on Wed Sep 22, 2021 9:11 pm, edited 1 time in total.
 
ScottB
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 9:02 pm

tphuang wrote:
Again, all of DL's JVs should be investigated.


As should AA's, as should UA's.

tphuang wrote:
If more markets are seeing B6 presence due to the NEA (and they have launched many new routes), then I don't see how you make the argument that they are not lowering fares and products in those markets.


The concern is not about recent moves made to try to sell an anticompetitive business arrangement. It is about preventing future anti-consumer behavior once the alliance is entrenched.

We can't make any reasonable statements about the direction of fares at present -- pricing is lower in pretty much all markets due to the airlines scrambling to fill seats in the wake of demand that was devastated by the pandemic response. The average CLT-DFW fare fell by nearly a third between Q1 of 2019 and Q1 of 2021. Does that mean AA is less dominant in the market or more eager to offer lower prices? No, it just indicates drastically reduced demand.

AA and B6 aren't engaging in this agreement for the benefit of consumers, as much as they'd like to sell that narrative.
 
tphuang
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 9:25 pm

ScottB wrote:
tphuang wrote:
Again, all of DL's JVs should be investigated.


As should AA's, as should UA's.


DL has more JVs than anyone else and have 2 pending ones looking to be approved. It would be quite ridiculous to accept those new DL JVs with minimal conditions and have a problem with NEA.

tphuang wrote:
If more markets are seeing B6 presence due to the NEA (and they have launched many new routes), then I don't see how you make the argument that they are not lowering fares and products in those markets.


The concern is not about recent moves made to try to sell an anticompetitive business arrangement. It is about preventing future anti-consumer behavior once the alliance is entrenched.

We can't make any reasonable statements about the direction of fares at present -- pricing is lower in pretty much all markets due to the airlines scrambling to fill seats in the wake of demand that was devastated by the pandemic response. The average CLT-DFW fare fell by nearly a third between Q1 of 2019 and Q1 of 2021. Does that mean AA is less dominant in the market or more eager to offer lower prices? No, it just indicates drastically reduced demand.

AA and B6 aren't engaging in this agreement for the benefit of consumers, as much as they'd like to sell that narrative.


Except that AA partnership is what allows B6 to launch these new routes. So we have 2 cases here.

NYC - slot constrained and AA/B6 have fewer combined slots than DL at JFK/LGA. Pre-COVID, AA was extremely under utilizing its slots by putting 44/50 seaters to really small secondary markets and not competing against DL on a lot large markets like DEN and IAH. Now, if some of those slots go to B6, it will be operating them to more competitive markets on mainline aircraft that are more competitive like DEN/IAH/BNA/MSY/JAX and a bunch of other ones it has already added. Remember, there is not a overlap between AA & B6 out of LGA (just BOS) and not a lot of overlap between the 2 out of JFK that's beyond perimeter (basically just LAX, SFO, AUS, LAS and PHX as major ones). You can argue all the JFK ones already have plenty of competition.

So, I'm really scratching my head trying to figure out where AA & B6 can even reduce supply. It seems like B6 can only add a lot of low cost competition and capacity to vrious markets. It's an overwhelmingly pro-consumer move to create a 3rd competitor to DL/UA out of NYC. If you are uncomfortable with B6/AA having that more flights than competition on JFK-LAX, then you can stipulate to not allow schedule/capacity coordination on that route.

Boston - You would have a better case for Boston, but there are only 2 routes BOS-DCA/PHL that were overwhelmingly dominated by AA/B6 pre-COVID. AA/B6 have already made concessions on BOS-DCA with the 6 slot pair divestiture. The remaining routes either have a long competition already like NYC, LAX, ORD, south Florida and AUS or were always dominated by AA like DFW, CLT and PHX. I suppose you can get around that by saying no schedule/capacity coordination on BOS-DCA/PHL/DFW/CLT/PHX and keeping everything else in tact. On the flip side of that, there are a lot of new markets that will now have added competition + new LCC competition that were monopolies before. And B6 is only able to add this many markets quickly due to having AA customers also flying with them.
 
sxf24
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Wed Sep 22, 2021 10:02 pm

tphuang wrote:
sxf24 wrote:
tphuang wrote:

That's other part that's quite funny. The DOJ argument is that B6 is so weak that it will be a pawn for AA. Yet, B6 has added a bunch of routes to MIA and London since this all started. If they want to prove that, then they need to show that the routes B6 has announced so far are not also logical routes for them to add if they just got leased those slots from AA outside of this partnership. It'd be very hard to argue that they would not be adding more to BOS and Florida from LGA if they got additional slots.

If DOJ is really up to investigating unfair competition, they should take a look at all of DL's JVs, especially the one with VS/AF/KL.


The fact that you think the DOJ is saying B6 is weak speaks volumes about your bias. The complaint is actually quite complimentary of B6 and its ability to disrupt the industry through lower pricing and product innovation. The DOJ alleges that NEA eliminates or reduces the motivation to compete on pricing, reducing the benefit to consumers if B6 was (in my words) a standalone airline.


not my thought.

https://twitter.com/WandrMe/status/1440420491299209218

DOJ needs to actually prove their point. If more markets are seeing B6 presence due to the NEA (and they have launched many new routes), then I don't see how you make the argument that they are not lowering fares and products in those markets.

Again, all of DL's JVs should be investigated.


You took great liberties in drawing an inference from an editorial comment made by someone else. From reading your posts, it's hard to to conclude that you're taking this as a personal affront and feel the need to defend B6...

The only criticism of B6 in the DOJ complaint is that they're hypocritical having previously opposed any type of consolidation. Otherwise, the DOJ is pretty much a B6 fanboy and repeatedly compliments all of the consumer benefits they've provided in the past as a disruptive competitor. The DOJ's point is that vigorous competition provides this consumer benefit.

The DOJ does recognize that more efficiently using the slot portfolio is beneficial, but the structure of NEA is anticompetitive and that AA could sell or lease its underutilized slots to B6 as a more acceptable structure.
 
CRJ200flyer
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Thu Sep 23, 2021 12:30 am

I just spent the last hour reading JetBlue’s email to employees defending the northeast alliance as well as the DOJ’s 42-page briefing. Here are some thoughts/highlights I noted:

- There’s a particular focus in the B6 email trying to upsell the benefits to employees over the detailed legal concerns of the DOJ

-The idea of fighting their way into airports mentioned is odd - none of those listed are slot controlled, and of course the competition is going to fight a new entrant. Moreover, two of those hubs they “fought into” are AA’s, ironically.

-I do agree with the idea in the email of JetBlue’s network lacking breadth/depth to some sections of the country, though some of that is by its own choice. It’s odd to see JetBlue arguing it’s not as appealing in Boston when it chose to focus on certain leisure markets heavily (and the DOJ points out it had even more expansion plans before covid regardless of the alliance)

-The DOJ spends a lot of time praising JetBlue’s innovation and how it drives low fares; paints American as a dangerous predator

-The DOJ doc goes into extensive detail about how much power and control AA gains over JetBlue’s decisions - paragraph 12 of the DOJ report is particularly alarming - as well as the consolidation of the entire industry.

-Quote from JetBlue CEO in 2019: “There’s been a lot of consolidation in the US, and we don’t have a competitive industry.”

-Quote from AA Manager of Sales in 2019: American’s operations in Boston do “not perform well from a profitability perspective… largely due to the fare destruction JetBlue has wrought.”

-Both carriers had publicly announced significant growth in BOS just before the pandemic - they were not limited. Additionally, draft schedules have shown new combined AA/B6 operations reducing capacity on multiple markets and AA withdrawing from a few markets entirely.

-DOJ spends time discussing damage to AA’s PHL hub operation and therefore competition as it has stated it would be “de-prioritized”

-DOJ lays out that American had already planned to increase capacity and reduce regional jets in the markets stated in the JetBlue email PRIOR to the alliance. Further, American had even discussed selling or leasing JetBlue it’s unneeded NYC slots, making the alliance unnecessary despite its claims.
 
StinkyPinky
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Thu Sep 23, 2021 1:10 am

CRJ200flyer wrote:
-The idea of fighting their way into airports mentioned is odd - none of those listed are slot controlled, and of course the competition is going to fight a new entrant. Moreover, two of those hubs they “fought into” are AA’s, ironically.


I believe it's not just slots, but gate availability at these busier airports like LAX and ATL
 
MohawkWeekend
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Thu Sep 23, 2021 1:26 am

Quote from JetBlue CEO in 2019: “There’s been a lot of consolidation in the US, and we don’t have a competitive industry.”

It's always the last guy to throw a punch in a football game who gets the penalty flag.

Next step is to let Wall Street know mergers and JV's are off the table.
 
JRL3289
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Thu Sep 23, 2021 2:17 am

MohawkWeekend wrote:
Midwestindy wrote:
ContinentalEWR wrote:

This.


We aren't talking about Tech or Banking, we are talking about the airline industry.

Without consolidation, the airline industry wouldn't have survived this crisis, and if they did there would have been a heck of a lot more "right-sizing" of employee counts.....I can tell you that much....

Yeah that SW destruction of Air Tran was absolutely needed to save the industry. Or NW wiping out Midwest Express. We have allowed 3 airlines to get so big and have so many employees that we can't let them fail. None of the airlines would have survived COVID without the massive govt aid not consolidation.

I respect your opinion but the airline industry would have survived. And new airlines would have filled the void. And it appears that the Department of Justice agrees.


It's... the exact... same... thing. "Too big to fail" originated in banking because of the loosely regulated mergers and acquisitions which precipitated that situation. The fact that the phrase can be applied to other sectors of the economy just demonstrates how interconnected and dependent banking is with air travel.

Case in point: DL/NW happened first precisely because the individual carriers were able to take advantage of laws and emerge a megacarrier. UA/CO followed suit less than two years later, and AA/UA another 36 months later.

The airline industry is more than anything a semi-regulated/subsidized utility. There's a reason why many countries have flag carriers which are at least partially state-owned. It is an invaluable economical asset to provide air transportation for purposes of commerce.
 
MohawkWeekend
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Thu Sep 23, 2021 1:19 pm

It's... the exact... same... thing. "Too big to fail" originated in banking because of the loosely regulated mergers and acquisitions which precipitated that situation. The fact that the phrase can be applied to other sectors of the economy just demonstrates how interconnected and dependent banking is with air travel.

Case in point: DL/NW happened first precisely because the individual carriers were able to take advantage of laws and emerge a megacarrier. UA/CO followed suit less than two years later, and AA/UA another 36 months later.

The airline industry is more than anything a semi-regulated/subsidized utility. There's a reason why many countries have flag carriers which are at least partially state-owned. It is an invaluable economical asset to provide air transportation for purposes of commerce.[/quote]


Then we should regulate them like Utilities. Ooops we had that before and bought the line that competition would be good and the MARKET would pick winners and losers. But we let them get so big that the failure of even one would cause massive job losses. Being an oligopoly allows you to become a complacent and inefficient firm. The proof is in airfares pre-COVID. If a major had a monopoly on a route, the fares were outrageous.

Why can't we let the likes of B6/F9/NK and yes even SW replace companies that are poorly run?
 
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Polot
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Thu Sep 23, 2021 1:24 pm

MohawkWeekend wrote:

Why can't we let the likes of B6/F9/NK and yes even SW replace companies that are poorly run?

How do you define “poorly run”? In some cases the legacies were performing better than the companies you mentioned pre covid. By your own comments F9 should be dead because they were in terrible shape until Indigo Partners bought them from Republic (who bought them out of Chapter 11 bankruptcy!).

During covid you can’t compare them with the legacies. All the companies you mentioned are primarily domestic with only regional international flights (Mexico, Central America) while the legacies have large intercontinental networks that are naturally going to be effected more by Covid.
 
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Midwestindy
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Thu Sep 23, 2021 1:53 pm

Polot wrote:
MohawkWeekend wrote:

Why can't we let the likes of B6/F9/NK and yes even SW replace companies that are poorly run?

How do you define “poorly run”? In some cases the legacies were performing better than the companies you mentioned pre covid. By your own comments F9 should be dead because they were in terrible shape until Indigo Partners bought them from Republic (who bought them out of Chapter 11 bankruptcy!).

During covid you can’t compare them with the legacies. All the companies you mentioned are primarily domestic with only regional international flights (Mexico, Central America) while the legacies have large intercontinental networks that are naturally going to be effected more by Covid.


lol.....they are using NK as a model of how airlines should be run.....that's honestly funny.

I truly hope that is sarcasm.....

"Spirit canceled more than 2,800 flights between July 30 and Aug. 9"
https://www.cnbc.com/2021/08/16/spirit- ... edule.html
 
LCDFlight
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Thu Sep 23, 2021 1:59 pm

MohawkWeekend wrote:
Dieuwer wrote:
Airliners would have had a much bigger "cushion" had they not doled out cash to investors by buying back boatloads of equities.

:bigthumbsup:


US Airlines Spent 96% of Free Cash Flow on Buybacks: Charth
ttps://www.bloomberg.com/news/articles/ ... acks-chart
The airlines in 2019 had it great - most of their competition was bought out. Don't really have to be super efficient or business savvy then.

But then things changed.


Airlines have little choice but to do that. If they keep a bunch of money around, the pilots will take it, 100% guaranteed.

Plus? The government is awarding these handsome slush fund cash payments to airlines who can claim a need or a desire to have more money. So it would be foolish to simply retain more earnings. You would have to be a chump to do that.
 
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Polot
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Thu Sep 23, 2021 2:02 pm

Midwestindy wrote:
Polot wrote:
MohawkWeekend wrote:

Why can't we let the likes of B6/F9/NK and yes even SW replace companies that are poorly run?

How do you define “poorly run”? In some cases the legacies were performing better than the companies you mentioned pre covid. By your own comments F9 should be dead because they were in terrible shape until Indigo Partners bought them from Republic (who bought them out of Chapter 11 bankruptcy!).

During covid you can’t compare them with the legacies. All the companies you mentioned are primarily domestic with only regional international flights (Mexico, Central America) while the legacies have large intercontinental networks that are naturally going to be effected more by Covid.


lol.....they are using NK as a model of how airlines should be run.....that's honestly funny.

I truly hope that is sarcasm.....

"Spirit canceled more than 2,800 flights between July 30 and Aug. 9"
https://www.cnbc.com/2021/08/16/spirit- ... edule.html

Also want to point out Spirit is 30 years old, but they were limping along for ~20 years in rough shape and questionable management until they decided to become a ULCC (after being purchased by Indigo Partners!) and actually became successful.
 
splitterz
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Thu Sep 23, 2021 2:44 pm

Abeam79 wrote:
splitterz wrote:
I really hope the DOJ is successful. AA has been strategic with its alliances on both coasts with B6 and AS. IMO there's no reason why the largest carrier in the US needs a soft or virtual merger to make NYC/BOS work. They cannot coordinate pricing sure, but really how hard is it for a given carrier to pull up the appropriate data to see what each is pricing for a given market?

I'm hopeful the DOJ is successful. Mergers, even this alliance, do not typically benefit the consumer in the long run.


By this logic you should be against almost all the DL JV’s they have with VA/AM/Latam/Korean or UA with avianca and Lufthansa etc.
Cause those are on-going without the same scrutiny.


I'm not opposed to it. However, I do think it's an apple to oranges comparison since its two domestic carriers linking up in this alliance.
 
MohawkWeekend
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Thu Sep 23, 2021 3:42 pm

Midwestindy wrote:
Polot wrote:
MohawkWeekend wrote:

Why can't we let the likes of B6/F9/NK and yes even SW replace companies that are poorly run?

How do you define “poorly run”? In some cases the legacies were performing better than the companies you mentioned pre covid. By your own comments F9 should be dead because they were in terrible shape until Indigo Partners bought them from Republic (who bought them out of Chapter 11 bankruptcy!).

During covid you can’t compare them with the legacies. All the companies you mentioned are primarily domestic with only regional international flights (Mexico, Central America) while the legacies have large intercontinental networks that are naturally going to be effected more by Covid.


lol.....they are using NK as a model of how airlines should be run.....that's honestly funny.

I truly hope that is sarcasm.....

"Spirit canceled more than 2,800 flights between July 30 and Aug. 9"
https://www.cnbc.com/2021/08/16/spirit- ... edule.html


It's pretty obvious you and I disagree on this. As I mentioned before, I respect your input on these threads.
But shouldn't the market decide? The examples posters list actually IMO prove my point. If NK is so bad, shouldn't they be allowed to fail? But they haven't. Why? Maybe there is a market for their product.
F9's purchase by Indigo is exactly how the market is supposed to work. New management comes in cleans shop and succeeds. IMO the same will happen for one or two of the majors when they file CH 11.
But guess what - they'll still operate in CH 11 and the US will have International carriers be it a US company or foreign.

Jet Fuel continues its march higher. Payroll support ends in 7 days. Debt payments are coming due. We will see soon enough.
 
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diverdave
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Thu Sep 23, 2021 7:27 pm

sxf24 wrote:
The DOJ does recognize that more efficiently using the slot portfolio is beneficial, but the structure of NEA is anticompetitive and that AA could sell or lease its underutilized slots to B6 as a more acceptable structure.


I was very surprised when the world's largest airline was allowed to enter into close relationships with the top carriers at SEA, BOS, and JFK without the government batting an eye. I don't think any of the big 4 US airlines should be partnering with any other domestic airline except perhaps service to/from Hawaii and Alaska. The four big US carriers are just too powerful to be allowed further mergers or domestic partnerships.

AA and B6 have a combined share of just over 50% at BOS and right at 48% at JFK. I'm on the DoJ's side this time.

For the haters that want to bring up the DL trans Atlantic joint venture, please keep in mind that AA and UA have their own JVs. You could argue that AA has the most powerful JV with British Airways, Iberia, Finnair, and Aer Lingus. It is possible that the DoJ is fretting that AA next will petition to admit B6 to their partnership and wants to nip that in the bud.
 
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jfklganyc
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Fri Sep 24, 2021 11:43 am

diverdave wrote:
sxf24 wrote:
The DOJ does recognize that more efficiently using the slot portfolio is beneficial, but the structure of NEA is anticompetitive and that AA could sell or lease its underutilized slots to B6 as a more acceptable structure.


I was very surprised when the world's largest airline was allowed to enter into close relationships with the top carriers at SEA, BOS, and JFK without the government batting an eye. I don't think any of the big 4 US airlines should be partnering with any other domestic airline except perhaps service to/from Hawaii and Alaska. The four big US carriers are just too powerful to be allowed further mergers or domestic partnerships.

AA and B6 have a combined share of just over 50% at BOS and right at 48% at JFK. I'm on the DoJ's side this time.

For the haters that want to bring up the DL trans Atlantic joint venture, please keep in mind that AA and UA have their own JVs. You could argue that AA has the most powerful JV with British Airways, Iberia, Finnair, and Aer Lingus. It is possible that the DoJ is fretting that AA next will petition to admit B6 to their partnership and wants to nip that in the bud.


Then lets break up United at EWR right?

Because they are well over 60 percent.

If you’re using for percentages to justify DOJ action, the DOJ must break up UA at EWR as well.

How can you allow percentages like that’s to stand, have no slots for airlines to grow, and not allow other airlines to combine ops.

How else is B6 supposed to compete with DL and UA in NY?

Why should they be permanently relegated to a much smaller LCC in the market? Because you say so? Because the DOJ says so?

Doesn’t work like that. Needs to be a level playing field and this makes it more level
 
kavok
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Fri Sep 24, 2021 12:18 pm

If you read between the lines, this was never really about preserving competition in New York. I mean, sure maybe for NK and a few of the ULCCs it was about New York and getting some more slots, but even a B6/AA merger would not significantly impact the overall competition to NYC as a whole.

For the DOJ and the senators in the Northeast… this is about preserving flights and competition to northeastern airports OTHER than NYC. And more specifically, I am referring to non NYC airports northeast of the Mason/Dixon line (ie not BWI/DCA/IAD). Mainly BOS and PHL, and to a lesser extent the other regional airports in the region.

People don’t want to hear it, but in a quasi B6/AA merger, PHL doesn’t need to exist other than for OD. And if AA draws down PHL…, neither DL, UA, or WN have an incentive to move in. BOS on the otherhand would develop into a sort-of fortress hub, with AA/B6 dominating market share there. So bad for pax in both BOS and PHL. Then finally you have the regional NE airports who are seeing the ongoing consolidation of flying into just the major cities, and the legacy carriers slowly drawing down service there. AA relying on B6 feed and not Eagle reduces that service further (although I will agree that last part is an industry wide trend, but AA+B6 just exacerbates it further).

That is what is really driving this. We can argue all day about NYC competition, but that is not what is driving this. It is the impacts outside of NYC that are the real reason some are concerned.
 
sxf24
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Fri Sep 24, 2021 1:13 pm

jfklganyc wrote:
diverdave wrote:
sxf24 wrote:
The DOJ does recognize that more efficiently using the slot portfolio is beneficial, but the structure of NEA is anticompetitive and that AA could sell or lease its underutilized slots to B6 as a more acceptable structure.


I was very surprised when the world's largest airline was allowed to enter into close relationships with the top carriers at SEA, BOS, and JFK without the government batting an eye. I don't think any of the big 4 US airlines should be partnering with any other domestic airline except perhaps service to/from Hawaii and Alaska. The four big US carriers are just too powerful to be allowed further mergers or domestic partnerships.

AA and B6 have a combined share of just over 50% at BOS and right at 48% at JFK. I'm on the DoJ's side this time.

For the haters that want to bring up the DL trans Atlantic joint venture, please keep in mind that AA and UA have their own JVs. You could argue that AA has the most powerful JV with British Airways, Iberia, Finnair, and Aer Lingus. It is possible that the DoJ is fretting that AA next will petition to admit B6 to their partnership and wants to nip that in the bud.


Then lets break up United at EWR right?

Because they are well over 60 percent.

If you’re using for percentages to justify DOJ action, the DOJ must break up UA at EWR as well.

How can you allow percentages like that’s to stand, have no slots for airlines to grow, and not allow other airlines to combine ops.

How else is B6 supposed to compete with DL and UA in NY?

Why should they be permanently relegated to a much smaller LCC in the market? Because you say so? Because the DOJ says so?

Doesn’t work like that. Needs to be a level playing field and this makes it more level


I think the DOJ’s point is that if B6 wants to grow, it could buy or lease slots from AA (or others). The DOJ argues NEA is a de-facto merger that will raise prices for consumers by removing incentive for two large airlines to compete against each other.

What’s really messed up in online arguments is the perspective that B6 is entitled to more access so it can expand. It’s had one of the largest slot portfolios at JFK since it was founded and could have built a more diverse network from day 1. It choose not to. Helping B6 grow its network, which does provide some consumer benefit, is not a great justification for trying to (allegedly) circumvent laws.
 
MohawkWeekend
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Fri Sep 24, 2021 3:59 pm

The DOJ should look at airline concentration at airports - I agree with jfklganyc.

Companies can get too big and really lose their way -

American Airlines pilots want managers replaced over flight disruptions. https://www.cnbc.com/2021/09/24/america ... tions.html
 
phluser
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Fri Sep 24, 2021 6:43 pm

kavok wrote:
If you read between the lines, this was never really about preserving competition in New York. I mean, sure maybe for NK and a few of the ULCCs it was about New York and getting some more slots, but even a B6/AA merger would not significantly impact the overall competition to NYC as a whole.

For the DOJ and the senators in the Northeast… this is about preserving flights and competition to northeastern airports OTHER than NYC. And more specifically, I am referring to non NYC airports northeast of the Mason/Dixon line (ie not BWI/DCA/IAD). Mainly BOS and PHL, and to a lesser extent the other regional airports in the region.

People don’t want to hear it, but in a quasi B6/AA merger, PHL doesn’t need to exist other than for OD. And if AA draws down PHL…, neither DL, UA, or WN have an incentive to move in. BOS on the otherhand would develop into a sort-of fortress hub, with AA/B6 dominating market share there. So bad for pax in both BOS and PHL. Then finally you have the regional NE airports who are seeing the ongoing consolidation of flying into just the major cities, and the legacy carriers slowly drawing down service there. AA relying on B6 feed and not Eagle reduces that service further (although I will agree that last part is an industry wide trend, but AA+B6 just exacerbates it further).

That is what is really driving this. We can argue all day about NYC competition, but that is not what is driving this. It is the impacts outside of NYC that are the real reason some are concerned.


Philadelphia is point 70. Not a top-most point but at least acknowledged.

However, I don't think
a. the DOJ cares that much about PHL. If it cared about PHL and these smaller NE airports, it wouldn't have permitted Southwest-AirTran, where both carriers served some duplicate airports or nearby ones, and where AirTran offered lowered fares via ATL.

Focus has always been more on NYC, DC, slot/constrained airports. VX was permitted LGA/DCA slots which ultimately coincided with deletion of PHL to fund DAL-LGA/DCA with its limited aircraft.

b. If AA were to draw down PHL, other carriers would pick up routes. Some carrier will fly a route like PHL-CLE if AA decided not. There won't be a PHL-CAK but there would be a PHL-CLE.

Is a PHL to small airport necessary when these Northeast Senators have a concern of climate change and other hubs can connect small markets to other destinations.

I'm against the partnership but not because of what it entails for PHL, but primarily that it is a merger in a facade.
 
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Midwestindy
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Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Fri Sep 24, 2021 8:41 pm

phluser wrote:
kavok wrote:
If you read between the lines, this was never really about preserving competition in New York. I mean, sure maybe for NK and a few of the ULCCs it was about New York and getting some more slots, but even a B6/AA merger would not significantly impact the overall competition to NYC as a whole.

For the DOJ and the senators in the Northeast… this is about preserving flights and competition to northeastern airports OTHER than NYC. And more specifically, I am referring to non NYC airports northeast of the Mason/Dixon line (ie not BWI/DCA/IAD). Mainly BOS and PHL, and to a lesser extent the other regional airports in the region.

People don’t want to hear it, but in a quasi B6/AA merger, PHL doesn’t need to exist other than for OD. And if AA draws down PHL…, neither DL, UA, or WN have an incentive to move in. BOS on the otherhand would develop into a sort-of fortress hub, with AA/B6 dominating market share there. So bad for pax in both BOS and PHL. Then finally you have the regional NE airports who are seeing the ongoing consolidation of flying into just the major cities, and the legacy carriers slowly drawing down service there. AA relying on B6 feed and not Eagle reduces that service further (although I will agree that last part is an industry wide trend, but AA+B6 just exacerbates it further).

That is what is really driving this. We can argue all day about NYC competition, but that is not what is driving this. It is the impacts outside of NYC that are the real reason some are concerned.


Philadelphia is point 70. Not a top-most point but at least acknowledged.

However, I don't think
a. the DOJ cares that much about PHL. If it cared about PHL and these smaller NE airports, it wouldn't have permitted Southwest-AirTran, where both carriers served some duplicate airports or nearby ones, and where AirTran offered lowered fares via ATL.

Focus has always been more on NYC, DC, slot/constrained airports. VX was permitted LGA/DCA slots which ultimately coincided with deletion of PHL to fund DAL-LGA/DCA with its limited aircraft.

b. If AA were to draw down PHL, other carriers would pick up routes. Some carrier will fly a route like PHL-CLE if AA decided not. There won't be a PHL-CAK but there would be a PHL-CLE.

Is a PHL to small airport necessary when these Northeast Senators have a concern of climate change and other hubs can connect small markets to other destinations.

I'm against the partnership but not because of what it entails for PHL, but primarily that it is a merger in a facade.


Not really following the PHL argument either.

a) Remember, for TATL (and domestic for that matter) AA has no incentive to want to connect passengers using B6 flights. They'd want these passengers to fly AA the whole way so they can collect the entirety of the revenue since AA+B6 aren't in a BA+AA type deal.

In fact, AA has been adding eagle routes from NYC + BOS, not dropping them as you suggest.

So unless AA comes across a massive pool of unused slots, PHL will remain the key connector from the US-Europe while JFK focuses on O&D, feed from B6s passenger base, plus some AA connections especially to unique destinations like DEL, MXP, GIG, e.t.c. which PHL doesn't have the O&D base to serve.

b) You can't play both sides, you can't say AA gaining market share in BOS is bad, but then say AA hypothetically shrinking PHL where they control 70% of the market is also bad. In the hypothetical scenario you laid out, what's to stop F9, NK, UA, DL, or WN from entering markets that AA has cut back? AA loosening its grip on PHL would be good since it would most likely lower average fares, arguing for keeping AA at 70% market share is hypocritical in this scenario.

c) PHL will always be needed for more than O&D, since it's the only way AA can really connect many of the smaller (High yielding) cities to Europe & to some extent for many of these cities, the rest of the overall network. B6 doesn't have the network depth to serve those sorts of cities and serve that multi-layered function.
 
tphuang
Posts: 6637
Joined: Tue Mar 14, 2017 2:04 pm

Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Sat Sep 25, 2021 1:00 am

sxf24 wrote:
jfklganyc wrote:
diverdave wrote:

I was very surprised when the world's largest airline was allowed to enter into close relationships with the top carriers at SEA, BOS, and JFK without the government batting an eye. I don't think any of the big 4 US airlines should be partnering with any other domestic airline except perhaps service to/from Hawaii and Alaska. The four big US carriers are just too powerful to be allowed further mergers or domestic partnerships.

AA and B6 have a combined share of just over 50% at BOS and right at 48% at JFK. I'm on the DoJ's side this time.

For the haters that want to bring up the DL trans Atlantic joint venture, please keep in mind that AA and UA have their own JVs. You could argue that AA has the most powerful JV with British Airways, Iberia, Finnair, and Aer Lingus. It is possible that the DoJ is fretting that AA next will petition to admit B6 to their partnership and wants to nip that in the bud.


Then lets break up United at EWR right?

Because they are well over 60 percent.

If you’re using for percentages to justify DOJ action, the DOJ must break up UA at EWR as well.

How can you allow percentages like that’s to stand, have no slots for airlines to grow, and not allow other airlines to combine ops.

How else is B6 supposed to compete with DL and UA in NY?

Why should they be permanently relegated to a much smaller LCC in the market? Because you say so? Because the DOJ says so?

Doesn’t work like that. Needs to be a level playing field and this makes it more level


I think the DOJ’s point is that if B6 wants to grow, it could buy or lease slots from AA (or others). The DOJ argues NEA is a de-facto merger that will raise prices for consumers by removing incentive for two large airlines to compete against each other.

What’s really messed up in online arguments is the perspective that B6 is entitled to more access so it can expand. It’s had one of the largest slot portfolios at JFK since it was founded and could have built a more diverse network from day 1. It choose not to. Helping B6 grow its network, which does provide some consumer benefit, is not a great justification for trying to (allegedly) circumvent laws.


That's quite naiive point to make. If they are not in a partnership, AA would have no incentive to lease B6 that many slots. Maybe 20 slot pairs combined. Certainly not the 40 at LGA + however many it ends up in JFK they will end up doing

What do you mean B6 could have built a more diverse network from day 1? Have you taken a look at its network out of JFK with 170 flights? It has a huge network for the # of slots it has serving basically every market that makes sense from JFK. The fact is you cannot compete for NYC corporate contracts with just JFK slots. You need LGA network also. AA lacked enough JFK slots and B6 had almost no LGA slots. That's why the 2 of them need to have a partnership to offer # of flights necessary to be competitive with DL.

Do you think B6 offering 15 flights a day on JFK-ORD can compete against a rival carrier offering 15 flights a day on LGA-ORD?

This is about providing real competition in NYC to DL and UA rather than having 2 airlines with clear holes in their network.

On top of that, this is not just about the slots for B6. It's about access to AA customers and AA's network.
 
sxf24
Posts: 1286
Joined: Wed Aug 15, 2007 12:22 pm

Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Sat Sep 25, 2021 3:06 am

tphuang wrote:
sxf24 wrote:
jfklganyc wrote:

Then lets break up United at EWR right?

Because they are well over 60 percent.

If you’re using for percentages to justify DOJ action, the DOJ must break up UA at EWR as well.

How can you allow percentages like that’s to stand, have no slots for airlines to grow, and not allow other airlines to combine ops.

How else is B6 supposed to compete with DL and UA in NY?

Why should they be permanently relegated to a much smaller LCC in the market? Because you say so? Because the DOJ says so?

Doesn’t work like that. Needs to be a level playing field and this makes it more level


I think the DOJ’s point is that if B6 wants to grow, it could buy or lease slots from AA (or others). The DOJ argues NEA is a de-facto merger that will raise prices for consumers by removing incentive for two large airlines to compete against each other.

What’s really messed up in online arguments is the perspective that B6 is entitled to more access so it can expand. It’s had one of the largest slot portfolios at JFK since it was founded and could have built a more diverse network from day 1. It choose not to. Helping B6 grow its network, which does provide some consumer benefit, is not a great justification for trying to (allegedly) circumvent laws.


That's quite naiive point to make. If they are not in a partnership, AA would have no incentive to lease B6 that many slots. Maybe 20 slot pairs combined. Certainly not the 40 at LGA + however many it ends up in JFK they will end up doing

What do you mean B6 could have built a more diverse network from day 1? Have you taken a look at its network out of JFK with 170 flights? It has a huge network for the # of slots it has serving basically every market that makes sense from JFK. The fact is you cannot compete for NYC corporate contracts with just JFK slots. You need LGA network also. AA lacked enough JFK slots and B6 had almost no LGA slots. That's why the 2 of them need to have a partnership to offer # of flights necessary to be competitive with DL.

Do you think B6 offering 15 flights a day on JFK-ORD can compete against a rival carrier offering 15 flights a day on LGA-ORD?

This is about providing real competition in NYC to DL and UA rather than having 2 airlines with clear holes in their network.

On top of that, this is not just about the slots for B6. It's about access to AA customers and AA's network.


Your complaints seem to be about the development and competitiveness of B6’s network, not the benefit to consumers. The DOJ’s argument is that more competitors = lower prices and the data backs that up. While increasing B6’s network breadth also helps - acknowledged by the DOJ in their discussion of the “JetBlue effect” - the cooperation between AA and B6 could raise prices since they are less motivated to compete on city pairs from NYC and BOS.

I think the two perspectives are consumers benefit from more airlines competing or consumers should be grateful to fly B6 at a higher price.
 
User avatar
EA CO AS
Posts: 15866
Joined: Wed Nov 14, 2001 8:54 am

Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Sat Sep 25, 2021 3:11 am

MohawkWeekend wrote:
Dieuwer wrote:
Airliners would have had a much bigger "cushion" had they not doled out cash to investors by buying back boatloads of equities.

:bigthumbsup:


US Airlines Spent 96% of Free Cash Flow on Buybacks: Charth
ttps://www.bloomberg.com/news/articles/ ... acks-chart
The airlines in 2019 had it great - most of their competition was bought out. Don't really have to be super efficient or business savvy then.

But then things changed.


By this argument, you’d tsk-tsk anyone who found themselves with low savings in April 2020 because they’d been paying additional principal on their mortgage until then.

In other words, the stock buyback argument is hogwash.
 
tphuang
Posts: 6637
Joined: Tue Mar 14, 2017 2:04 pm

Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Sat Sep 25, 2021 12:44 pm

sxf24 wrote:
tphuang wrote:
sxf24 wrote:

I think the DOJ’s point is that if B6 wants to grow, it could buy or lease slots from AA (or others). The DOJ argues NEA is a de-facto merger that will raise prices for consumers by removing incentive for two large airlines to compete against each other.

What’s really messed up in online arguments is the perspective that B6 is entitled to more access so it can expand. It’s had one of the largest slot portfolios at JFK since it was founded and could have built a more diverse network from day 1. It choose not to. Helping B6 grow its network, which does provide some consumer benefit, is not a great justification for trying to (allegedly) circumvent laws.


That's quite naiive point to make. If they are not in a partnership, AA would have no incentive to lease B6 that many slots. Maybe 20 slot pairs combined. Certainly not the 40 at LGA + however many it ends up in JFK they will end up doing

What do you mean B6 could have built a more diverse network from day 1? Have you taken a look at its network out of JFK with 170 flights? It has a huge network for the # of slots it has serving basically every market that makes sense from JFK. The fact is you cannot compete for NYC corporate contracts with just JFK slots. You need LGA network also. AA lacked enough JFK slots and B6 had almost no LGA slots. That's why the 2 of them need to have a partnership to offer # of flights necessary to be competitive with DL.

Do you think B6 offering 15 flights a day on JFK-ORD can compete against a rival carrier offering 15 flights a day on LGA-ORD?

This is about providing real competition in NYC to DL and UA rather than having 2 airlines with clear holes in their network.

On top of that, this is not just about the slots for B6. It's about access to AA customers and AA's network.


Your complaints seem to be about the development and competitiveness of B6’s network, not the benefit to consumers. The DOJ’s argument is that more competitors = lower prices and the data backs that up. While increasing B6’s network breadth also helps - acknowledged by the DOJ in their discussion of the “JetBlue effect” - the cooperation between AA and B6 could raise prices since they are less motivated to compete on city pairs from NYC and BOS.

I think the two perspectives are consumers benefit from more airlines competing or consumers should be grateful to fly B6 at a higher price.


Not really, you made the accusation that B6 didn't chose to build a more diverse network at JFK, when the reality is that it a has very diverse network. As diverse as you can get from JFK for 170 slots. Now, you are changing the argument.

Also, you have to actually show this merger is producing fewer competitors. Again, they were only competitors to each on LGA-BOS, JFK-LAX/SFO/PHX/AUS/LAS pre-COVID. Even if you go by the argument that those routes are seeing 1 fewer competitor (which is a hard one to make given lack of coordination on pricing on these routes). And if you take a look at JFK-LAX, they don't codeshare all their flights, since they have a lot of duplicating times n their flight. Even if you accept that premise, the 2 airlines have now added LGA-DEN/CHS/IAH/MCI/MSY/JAX/SAV/SRQ/PWM and JFK-DEL/TLV/SCL/MDE/CLO/MCI/MKE/PVR/YVR + about 8 or 9 EWR routes that neither served pre-COVID. On top of that, B6 has added service to AA's MIA hub and LHR as further competition that goes against this theory "virtual merger". The J prices on JFK-LHR market has already seen dramatic downward affect.

The benefits of all these new markets far outweights from additional competition far outweighs the few routes that might see 1 less competition. Again, we haven't seen any abnormal capacity reduction on those JFK transcon markets from either airline.

If you want to make the argument that NEA is leading to less competition, you have to prove it. It's hard to prove because we are actually seeing far more competition.
 
MohawkWeekend
Posts: 987
Joined: Tue Jan 08, 2019 2:06 pm

Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Sat Sep 25, 2021 12:58 pm

Thanks - your example shows why buy backs are a poor allocation of capital and illegal for most of the 20th century. In your example, the house mortgage is airline debt not stock outstanding. Airlines should have paid down debt and issued dividends instead of removing stock from the market. Why is a buy back sometimes stupid? What is American's stock selling for today vs what they paid for it ? See below. If you would have paid down your mortgage, you could borrow against it. AA is running out of things to borrow against and they will need to again very soon.
Year Close Price
2017 52
2018 32
2019 28
2020 15
 
superjeff
Posts: 1441
Joined: Fri Feb 05, 2010 2:14 am

Re: Updated: DOJ sues to block AA - B6 Northeast partnership

Sat Sep 25, 2021 2:10 pm

MohawkWeekend wrote:
Biden's Administration is pro-union and is in the mood to trust bust like Teddy Roosevelt. Younger people may not know this but until the 1980's or so, mergers and JV just didn't happen like they do now. The DOJ turned most down. Look at the consolidation in the airline, tech and especially the banking industry. Google, Amazon, Bank of America. Back in the day, there were very very few companies that were "too big to fail". Who won? Wall Street and the Officers of those companies with stock options (see airline CEO's). Who lost - the employees and cities who had facilities "right-sized".

It's about time.



I partially agree, but not fully. Pre-deregulation, airline mergers in the U.S. tended to happen when one of the airlines was on the verge of failure (i.e., Capital into United; Mohawk into Allegheny, Northeast into Delta, etc.) or if there was a situation where one's regulated route network was not going to allow it to succeed long term (Bonanza, Pacific and West Coast joining to become Air West - later Hughes Airwest). After deregulation, things changed and the government was much less willing to permit combinations - look at Braniff trying to sell its South American operation to Pan Am in 1982, for example). The idea behind deregulation was that the airlines should be able to run their own operations, free and clear of government interference, provided they operated safely. That's why the CAB went away, not the FAA.

Of what were 11 "trunk" airlines pre deregulation in the U.S., this is what happened:

1972 - Northeast merged with Delta ( yes, pre-dereg, but there was an attempt to merge Northeast and Northwest which didn't work out).
1980? Pan Am and National - bad timing and too expensive, Pan Am did not survive its 1991 bankruptcy (yes there were other reasons too, including Lockerbie, but. . . .)
1982 - Braniff failed. three iterations, 3 bankruptcies
1983 - Continental's first bankruptcy
1985 - TWA bought Ozark - TWA later filed bankruptcy 3 times, the last, in 2001 resulted in its assets being acquired by American.
1987 - Western merged into Delta, also Allegheny - now US Air - bought Piedmont and PSA

And don't forget America West (2 bankruptcies itself) acquiring the remnants of US Air out of that carrier's second bankruptcy

In the 2000's, you have every one of the legacies filing bankruptcy - EVERY one. And, please understand, a Chapter 11 bankruptcy actually usually totally wipes out the shareholders of these publicly held companies. They are not something you dive into willy nilly.

As a result of U.S. deregulation, we have an industry in the U.S. which is quite different (and, arguably less stable) than before. Yes, fares, adjusted for inflation, may appear lower, but I think that's only partially true, because ( a) pre-deregulation, fares were always refundable, (b) you had interlining agreements, (c) fares included such things as seat selection and baggage, as well as other amenities many people buy today. If you look at, say, an ULLC carrier on a given route, you may well find that when you add up the amenities most people want, like assigned seating, a cup of coffee, one suitcase, etc., they are really not much cheaper, if at all, than the legacies. Largely because the government continues to regulate in some ways.

I agree with you that many people have been hurt by the effects of deregulation. All of the U.S. carriers, except Delta, are highly unionized; some (i.e., Southwest), while unionized, have excellent employee relations and have been successful. But others, not so much. And I'm not talking about Frank Lorenzo and his labor relations with first Texas International, then Continental and Eastern.

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