JUSTICE DEPT SUES TO BLOCK US/AA MERGER

[jimntx]

Oh you said it all right, I don't know many thousands of nauseating posts back but its there. No back tracking now big boy. Just the same as you said the AA creditors would never go for a merger with US. But here we are now.

No, he didn't. IIRC, when there was talk that AMR might not emerge from BK, and the assets put out on the front lawn in a yard sale, what WT DID say was that DL would bid whatever it took to acquire AA's Central and South American routes, MIA facilities, etc. That is not the same thing at all as buying the whole company.

 

[PullUp]

...

Bottom line is that domestically there are no barriers for entry into any city pairing (except for slot controlled airports).
Anyone willing to lose money can start an airline today, n'est pas?
All the bluster and analysis I've read seems to ignore this fact.
The marketplace will ultimately decide who the winners and losers are.
New entrant airlines will be created if and when the current players overprice themselves in the market.
And the public will flock to the lowest priced carrier - that much has been proven time and again.
Cheers.

 

[Bob Owens]

FWAAA, yes management would do that. Matter fact I would guess that they will go after more concessions if this merger is not allowed to go forward. AA was putting everything on this merger. If they have to go back and nego another plan to come out of BK as stand alone, then yes, I see the concessions growing as they will not have the revenue and profits as large as they would have had if they were to come out of BK and merged with US. Plus, it will take them longer to start reaping the rewards they need to compete with the DL and UAL, and let's not forget SWA. Once the W/A amendment goes away (Oct 2014) then AA and SWA will be even larger rivals for the DFW market even though we are at separate airports. And if SWA decides to open up some gates at DFW then you will see even more head to head competition upon AA and they will feel it a lot more than if they were able to merge. I completely agree with the annalist out there that AA will not survive the "long" run against UAL, DL and SWA. The same could very well be said for US, I just couldn't guess on a timeline.

AA and/or US will no doubt seek more concessions, and thats with or without a merger.

As long as the workers of these two carriers make taking concessions from their workers painless for the company why wouldn't they seek concessions? Sure they always come up with an excuse about how they don't want to do this, but they must for our own good, and not to worry one day will all share in the success that our sacrifices will enable, but the fact is they will continue to take from us as long as we allow them to take from us with no penalty and the day we will all eat "pie in the sky" will never come. The only thing at this point that will slow them down is the fact that mechanics are becoming scarce and as we leave, our replacements either will be hard to find or hard to retain with the absolute crap they are offering. But with no threats on the Horizon for a strike, job action or any other form of resistance to concessions by the elderly workers they still have, who aren't going anywhere except maybe the grave, you can be sure that the promises made will not be kept for one reason or another (once again what penalty have they suffered for the broken promises of the past?). Now they will blame it on the DOJ, how convenient, if that didn't happen it would have been something else. I for one will not be made a fool of by calling or writing to anyone to help this merger go through, a deal that will do nothing for us but put us through another seniority integration nightmare and subject us to a split union managed by the two worst performing unions for mechanics in the industry. people have short memories, think back to 2001, when the same Union officials were telling us how we needed to contact our elected officials and push for bail out money for the airlines, which we did, after they got their money they slashed headcount across the industry, we asked the Airlines to support extended unemployment benefits, their response "F -YOU". So here we are 12 years later once again being told to write letters so the people who screwed us out of our wages, benefits and pensions can consummate a deal that will make them all that much richer and make our lives that much worse.

As far as the "analysts" who really cares what they think? They are about as reliable as weathermen, employed by an industry thats looking for quick big gains. If they knew what they were talking about then why aren't they running businesses instead? Of course they are going to make dire predictions if the merger does not go through, the merger presents opportunities for gains for them and the people they work for.

 

[WorldTraveler]

Bottom line is that domestically there are no barriers for entry into any city pairing (except for slot controlled airports).
Anyone willing to lose money can start an airline today, n'est pas?
All the bluster and analysis I've read seems to ignore this fact.
The marketplace will ultimately decide who the winners and losers are.
New entrant airlines will be created if and when the current players overprice themselves in the market.
And the public will flock to the lowest priced carrier - that much has been proven time and again.
Cheers.

Problem for that theory is that the DOJ doesn’t operate US antitrust laws or practice on the basis of POTENTIAL but rather ACTUAL competition. Just because there is a market and assets (gates/slots) available that would allow a competitor to enter the market doesn’t mean allowing one company to corner the market will be allowed, regardless of the industry.
The DOJ’s case is built on the notion that there are indeed fairly high barriers to entry in the airline industry and the current level of consolidation has only compounded the ability of a handful of carriers to prevent meaningful competition. Even if a new carrier comes along, when 90% of the market is controlled by four carriers, there will be no meaningful competition.
Add in that there were emails and internal communications (that got sent to competitors) saying that the purpose of the AA/US merger was to eliminate competition, and the DOJ’s ability to seek deep concessions of block the deal altogether is a whole lot bigger than a lot of people on here want to admit.

AA and/or US will no doubt seek more concessions, and thats with or without a merger.

As long as the workers of these two carriers make taking concessions from their workers painless for the company why wouldn't they seek concessions? Sure they always come up with an excuse about how they don't want to do this, but they must for our own good, and not to worry one day will all share in the success that our sacrifices will enable, but the fact is they will continue to take from us as long as we allow them to take from us with no penalty and the day we will all eat "pie in the sky" will never come. The only thing at this point that will slow them down is the fact that mechanics are becoming scarce and as we leave, our replacements either will be hard to find or hard to retain with the absolute crap they are offering. But with no threats on the Horizon for a strike, job action or any other form of resistance to concessions by the elderly workers they still have, who aren't going anywhere except maybe the grave, you can be sure that the promises made will not be kept for one reason or another (once again what penalty have they suffered for the broken promises of the past?). Now they will blame it on the DOJ, how convenient, if that didn't happen it would have been something else. I for one will not be made a fool of by calling or writing to anyone to help this merger go through, a deal that will do nothing for us but put us through another seniority integration nightmare and subject us to a split union managed by the two worst performing unions for mechanics in the industry. people have short memories, think back to 2001, when the same Union officials were telling us how we needed to contact our elected officials and push for bail out money for the airlines, which we did, after they got their money they slashed headcount across the industry, we asked the Airlines to support extended unemployment benefits, their response "F -YOU". So here we are 12 years later once again being told to write letters so the people who screwed us out of our wages, benefits and pensions can consummate a deal that will make them all that much richer and make our lives that much worse.

The chances that AA and US will honor their previous labor commitments went down dramatically when the DOJ filed its suit to block the merger. The chances that AA/US will be allowed to merge without any concessions is extraordinarily low.
While you would like to think that AA and/or US people would say “enough is enough” and just walk off the job, the chances of that happening are also very low in part because AA and US’ financial situations will grow increasingly perilous the longer this whole thing plays and the deeper the concessions that are asked. The competitive environment in the industry is intense and AA and US are highly vulnerable; given that there is a lengthy and costly process to merge two airlines anyway, the road ahead of both is not at all easy and there are a number of factors that make it all the more difficult:
Interest rates are increasing which makes the debt both have taken on more costly. US has significant debt payments due in the next year or so.
The US dollar is strengthening relative to the currencies of a number of emerging market countries; the Brazil Real has lost 15% of its value relative to the US dollar – an adjustment not much different from what has happened to the Japanese Yen. Both Japan and Brazil are major sources of tourists inbound to the US; AA happens to be the largest carrier from Brazil to the US and is starting two new routes in the midst of that environment.
We’ve already talked about the fall of the Wright Amendment.
Competitors are intensifying their strategies in key AA and US markets. Do you realize that AA did not win the US government contract for DFW-ICN despite the large amount of US govt/military traffic being one of the primary justifications for AA to start that route?

Increased salaries can only come from companies that demonstrate stable and growing earnings. AA and US have enormous financial and strategic risks ahead of them that will continue to be hindrances to labor’s ability to win and sustain pay raises.

 

[Bob Owens]

Increased salaries can only come from companies that demonstrate stable and growing earnings. AA and US have enormous financial and strategic risks ahead of them that will continue to be hindrances to labor’s ability to win and sustain pay raises.

Wrong.
Increased wages come about the same way as increased fuel costs, increased landing fees etc. We do not negotiate based upon AA's bottom line, we negotiate based upon what similarly situated mechanics make.You are confusing shareholder dividends with workers wages. Workers have the right to sell their product just like everyone else. Should we end up in front of a PEB they will not repeat the same BS you just put out, in fact prior PEBs have ruled that the employees are not a piggybank for inefficient management.


The fact is people are leaving, leaving faster than the work is. In a month we are likely to see a change in the TWU that will hopefully be the end of the "special relationship" that the company has had with the TWU, a relationship that included A-5 passes for appointed Union officials who had the authority to change the contract without a membership vote. If that does not happen then its also likely that the TWU will face a challenge by another Union, and if all the TWU is offering is more of the same then it will be the end of the TWU for mechanics at AA. AA was able to squeeze a deal through thanks to that special relationship and the efforts of the hired "experts" but today you cant find anyone that works under this deal who will say that we did the right thing. Should AA come back for more those "experts" lose all credibility with the membership because they told us to accept this deal. There will be no repeat and if a Judge should abrogate and allow the company to impose more concessions then he should also be prepared to see a strike, court order be damned.

So I would not be so sure that there will be labor peace at AA should the company break any promises or come back for more. With Tulsa shrinking power is shifting to workers who more than likely have worked at several carriers, workers who know there is life without AA, your threats of what may happen are falling on deaf ears, we know that should AA fail that in the cities where we live capacity will be maintained, the equipment and passengers will be utilized and maintained, maintained by us because there is no surplus of mechanics out there, especially in high cost areas where even carriers like UA and DL are losing mechanics to competing industries. The situation now with mechanics is more critical than ever before, more critical than back in the 80s when in real terms the job paid 50% more yet even back then AA and other carriers scooped up mechanics well into their 60s from Pan Am and EAL. So don't go preaching your management BS that our wages are tied to AA's profits, wages, like fuel, landing fees etc are tied to the market, not the profits of the carrier.

 

[MCI transplant]

Why is this whole scenario looking more, and more, like that of TWA?------ Yes, the particulars are different! But will history repeat itself?----- Only time well tell??

 

[robbedagain]

mci was that how it was at tw just prior to their final chapt 11 and the take over by aa that followed? it will be interesting to see what happens come the 30th of aug if the judge rules in favor of the airlines for a nov 12 trial and to see if it will actually go to trial or otherwise

 

[traderjake]

Add in that there were emails and internal communications (that got sent to competitors) saying that the purpose of the AA/US merger was to eliminate competition, and the DOJ’s ability to seek deep concessions of block the deal altogether is a whole lot bigger than a lot of people on here want to admit.

This is going to be decided by a judge who has a history of being more objective than the Fast and Furious DOJ.

 

[767one]

AA and/or US will no doubt seek more concessions, and thats with or without a merger.

As long as the workers of these two carriers make taking concessions from their workers painless for the company why wouldn't they seek concessions? Sure they always come up with an excuse about how they don't want to do this, but they must for our own good, and not to worry one day will all share in the success that our sacrifices will enable, but the fact is they will continue to take from us as long as we allow them to take from us with no penalty and the day we will all eat "pie in the sky" will never come. The only thing at this point that will slow them down is the fact that mechanics are becoming scarce and as we leave, our replacements either will be hard to find or hard to retain with the absolute crap they are offering. But with no threats on the Horizon for a strike, job action or any other form of resistance to concessions by the elderly workers they still have, who aren't going anywhere except maybe the grave, you can be sure that the promises made will not be kept for one reason or another (once again what penalty have they suffered for the broken promises of the past?). Now they will blame it on the DOJ, how convenient, if that didn't happen it would have been something else. I for one will not be made a fool of by calling or writing to anyone to help this merger go through, a deal that will do nothing for us but put us through another seniority integration nightmare and subject us to a split union managed by the two worst performing unions for mechanics in the industry. people have short memories, think back to 2001, when the same Union officials were telling us how we needed to contact our elected officials and push for bail out money for the airlines, which we did, after they got their money they slashed headcount across the industry, we asked the Airlines to support extended unemployment benefits, their response "F -YOU". So here we are 12 years later once again being told to write letters so the people who screwed us out of our wages, benefits and pensions can consummate a deal that will make them all that much richer and make our lives that much worse.

As far as the "analysts" who really cares what they think? They are about as reliable as weathermen, employed by an industry thats looking for quick big gains. If they knew what they were talking about then why aren't they running businesses instead? Of course they are going to make dire predictions if the merger does not go through, the merger presents opportunities for gains for them and the people they work for.

When airline analysts fail at their jobs they become weather forecasters and when weather forecasters fail at their jobs they become....airline analysts!!

 

[WorldTraveler]

Bob,
You decry what I say and call it company BS but it is exactly the economic forces that you say should force up AA wages, yet haven’t.
Here’s why:
There have always been companies within an industry who have paid below average wages – that’s why average is, well, average.
A number of failing airlines had wage stagnation relative to their peers for years before their demise.
AA has been overstaffed for years across the company esp. in the aftermath of 2003 when AA believed it could grow as other carriers failed, yet they didn’t. AA has had the chance in BK once again to dramatically cut staff but they haven’t in part because of strong resistance from labor. AA is either handing off the problem to Parker and the merged AA/US to resolve or is trying to grow into its current number of employees.
When there is an excess of bodies, wages will fall within the company.
You have prided yourself that AA has retained a lot of maintenance in-house that other carriers have outsourced; yet the market comparison for that work is foreign or lower cost domestic labor. Economics are working exactly as they are supposed to.
AA has added a lot of capacity, esp. longhaul int’l that is not producing acceptable financial returns (RASM in those regions is dropping as fast as the capacity that is being added or IOW, AA is not growing revenues sufficient to cover the increased costs of the new flights).
Specific to maintenance, AA has made it clear that it wants to reduce its maintenance expenses using the maintenance holiday of new aircraft and yet AA is not reducing maintenance headcount near as fast as the rate of reduced maintenance on older aircraft that are being retired or new aircraft that won’t need heavy maintenance for several years. Wages fall in maintenance as AA tries to use market forces to force employees out the door.
AA could reverse the decline at some point by raising wages again but they are not anywhere near the place where they need to do that and doing so earlier than necessary will only delay the headcount reductions that AA needs. Market forces are working, Bob.
AA’s pay rates do reflect the market and AA’s individual situation which is considerably different from other carriers.

 

[robbedagain]

itll be interesting to see what people's reaction be on this board if the judge rules in favor of say a nov 12 trial and or settlement and or if the judge rules in favor of the merger etc also itll be interestin to see the response if its the opposite but if the doj gets its way then aa may end up down the road in anther situation like us is in or could be in but only time will tell

 

[jimntx]

Why is this whole scenario looking more, and more, like that of TWA?------ Yes, the particulars are different! But will history repeat itself?----- Only time well tell??

I have several friends who are former Pan Am, Eastern, and/or TWA flight attendants. They ALL are humming that tune..."It seems that I have heard that song before. It's from an old familiar score. I know it well that melody."

 

[Jacobin777]

What else could they do with the billions they took from their workers? Buying airplanes is an easy way of routing some of those funds to the banks bottom line while still crying poverty.

Maybe the workers were overpaid to begin with? After all, unless there is some kind of artificial barrier, the market does dictate what a person's (especially a group of people) salary should be.

Not only that, other carriers around the world have neither filed for BK nor have they "taken from the workers"-yet they are still ordering thousands of planes.

Nice try, but you're off.

The DOJ has some 'splaining to do but that is why there will be a trial and I expect their objections will become very clear.



The DOT also has ample fare data that can show how closely fares correlate with the level of competition in the market and whether LFCs influence network carrier fares.

The fact that so much of US' network at DCA involves small cites (and capitals that have Wal-Marts) means that divestitures will either have to be such that the slots the DCA-hub portions of AA's operation (ie DCA to DFW, MIA, ORD etc) or it will involve the slots involving small cities, which means the slots can realistically only be handed over to network carriers.

I do believe the DOJ's objections in due time will be clear. Also, due to AA's record earnings, the carreirs themselves are helping the DOJ's case.

There is no way using the slot divestures would help the combined carriers-especially at DCA. At some point, its no longer worth merging and I do believe divesting slots at DCA would be one of the more critical aspects of it.

The chances that AA and US will honor their previous labor commitments went down dramatically when the DOJ filed its suit to block the merger.

AA already has multi-year contracts with the various unions put in place. At the rate AA is earning money now, they will be well positioned in the future.

Do you realize that AA did not win the US government contract for DFW-ICN despite the large amount of US govt/military traffic being one of the primary justifications for AA to start that route?

1-I would like to know your source of this (i.e.-proof)
2-It might not have been financially worth for AA to get this semi-subsidy (govt. contract) if AA feels they can get better premiums from other sources.

So I would not be so sure that there will be labor peace at AA should the company break any promises or come back for more.

As I mentioned above, I don't really seeing AA needing to redo contracts.

 

[WorldTraveler]

1-I would like to know your source of this (i.e.-proof)
2-It might not have been financially worth for AA to get this semi-subsidy (govt. contract) if AA feels they can get better premiums from other sources.

As I mentioned above, I don't really seeing AA needing to redo contracts.

http://apps.fas.gsa.gov/citypairs/search/index.cfm?departing_from1=DFW&departing_from=dfw&arriving_to1=SEL&arriving_to=icn&search2014.x=Search+FY14

You can look up NYC to LON and see this fare is still 3X higher than what AA bid for that route and almost 2X higher than AA bid for LAX to TYO.

The winning bid for DFW-SEL is slightly above what AA bid to win DFW-TYO.

AA might have 6 year contracts in the bag but if labor continues to see pay well below their peers while the company racks up very strong profits, the wheels will fall off the bus very quickly.
The biggest change in AA's costs was for labor. Revenue went up nicely for this month but they didn't have to go into BK to do that.

 

[Bob Owens]

Maybe the workers were overpaid to begin with? After all, unless there is some kind of artificial barrier, the market does dictate what a person's (especially a group of people) salary should be.

Not only that, other carriers around the world have neither filed for BK nor have they "taken from the workers"-yet they are still ordering thousands of planes.

Nice try, but you're off.

AA already has multi-year contracts with the various unions put in place. At the rate AA is earning money now, they will be well positioned in the future.

As I mentioned above, I don't really seeing AA needing to redo contracts.

Overpaid? The only ones that were overpaid were those at the top. If not for all the games played with the RLA workers would likely have been able to get even higher wages. Funny you should bring up foreign carriers, they pay their workers better than AA does, in fact AA pays their mechanics in Europe around $10/hr more than they pay their American mechanics, and thats not even factoring in what AA takes back from their mechanics for medical, vacation, Holidays and sick time.

I would not be surprised if the more successful AA gets the more labor strife they will face. Just because you got your crappy deals in place that does not mean you will have labor peace.