CF: AA Isn't as Weak in Asia As You Might Think

[WorldTraveler]

no DL decided it would trade 7 slots as part of the slot deal... the DOT didn't dictate the terms of the slot deal between DL and US. They only dictated that there be divestitures.

It is a given that AA/US will gain some.... and UA's frequencies will become available for someone to use if they choose unless UA uses them which seems unlikely.

 

[eolesen]

no DL decided it would trade 7 slots as part of the slot deal... the DOT didn't dictate the terms of the slot deal between DL and US. They only dictated that there be divestitures.

You're correct that DOT didn't dictate the terms -- DL and US negotiated those as a commercial agreement.

That technicality doesn't change the fact that DOT's approval of the slot swap was based on the combination of conditions DL agreed to, including transferring slot pairs at GRU. It's an enforceable provision, both commercially as well as administratively. Worst case, DOT could revoke their approval and force some slots to revert back to their original holder.

 

[WorldTraveler]

The DOT did not care one iota the terms that DL and US agreed to; it wasn't and isn't their job to assess the commercial value of slots. Please provide documentation from the DOT or DOJ's decision where they said that the GRU slots were a necessary part of the transaction.

Remember that the original deal involved NRT slots but Open Skies in Japan eliminated the need for that clause.

Along with the DOJ, the concern was to ensure competition was met.

It doesn't change that there is a provision to transfer slots but the terms of the frequency lease between UA and US will be examined by the DOT; and it still doesn't change that the GRU route awards will indeed consider AA and US' merger application. There are not going to pretend that the two issues are separate when both transactions are under approval by the same department.

The slot deal is done; US gave away enormously valuable resources which will make it extraordinarily difficult for AA to regain a leadership position in the NYC market.

Given how badly US has been pursuing AA for so many years, it is all the more incredible that the deal moved forward given that there was certain to have been opportunities for US to have walked away from the deal.

Unless there were terms in the agreement that would have required either party to pay penalties if they walked away...

The deal is done and the challenge, just like in Asia, is to make the new AA competitive given the market position it now has.

 

[eolesen]

DOT didn't determine that it was a necessary part of the transaction -- DL and US did:

In the petition before us, the carriers seek a waiver from the buy-sell prohibition in the LGA
Order for the purpose of exchanging slot interests at both LGA and DCA airports. We are not
"bound by legal formalisms" in discharging its duty but instead will "take account of the
economics of the transaction under investigation." See Reves v. Ernst & Young, 494 U.S. 56, 61
(1990); The Shoshone Indian Tribe of the Wind River Reservation, Wyoming v. United States,
58 Fed. CI. 77, 86 (2003) ("must examine the underlying economic reality" of the transaction).

The fact that the slot swap concerns two airports does not compel us to segregate the
transactions; rather, it is clear that the transactions are contingent on each other. The joint
application of US Airways and Delta, filed August 24, 2009, before the U.S. Department of
Transportation for approval of the transfer of U.S.-Brazil frequencies is expressly termed
"contingent joint application," made dependent on completion of the Mutual Asset Purchase and
Sale Agreement, which involves the slot interest transfer at issue here. As stated in the joint
application:

The Joint Applicants are submitting this application on a strictly contingent basis. The
proposed transfer of the Joint Applicants' U.S.-Brazil frequencies is part of the larger
transaction described herein. The Joint Applicants will proceed with the larger
transaction only if all transaction components ... occur. (Joint application, fn. 2).
​

DOT approved on the application as proposed. DL simply can't make a unilateral change to a contingency, especially when the transaction was already concluded. It's breach of contract, and it's also breach of the conditions by which both parties agreed to comply with when seeking DOT's approval.

 

[WorldTraveler]

There is no debate that it is a contractual issue between DL and US - but the DOT has nothing to do with approving the terms of the transaction. They didn't and won't dictate the commercial terms of transfer of assets. They are concerned about the competitive implications of the transaction.

I'm not sure what your point is. DL hasn't said it is trying to get out of the transaction with US but it has asked that the terms of the UA slot lease be known and if UA has any plans to add GRU service.
I personally am not sure if it really matters, though. It is highly unlikely that UA will add any more GRU flights and if they don't their frequencies will be returned to the pool.

DL is going to get frequencies regardless of whether they would have given away their DTW frequencies or not. AA is merging with US and AA, US, and DL are the only carriers that are expressing interest in the slots. It is ludicrous to think that the DOT would award the whole lot to the carrier who has as many slots/freq as every other US carrier combined to GRU but even more so when they are going to gain add'l slots from US whether thru a route award or via the slots DL agreed to provide.

 

[robbedagain]

WT you said DL US AA are the only 3 airlines vying for the slots what are the odds that it would be split btwn all 3 carriers and if that is done.. then what happens after the merger would the new AA keep it and use it for clt run or phl as US has proposed in additon to AA ORD LAX DFW MIA JFK

 

[WorldTraveler]

except that there are 4 sets of frequencies for a daily flight... they won't be divided evenly between 3 carriers.

it also doesn't change that US government has long promoted a strategy of increased competition. There is no public benefit to giving AA/US 2/3 of the available frequencies so they end up having 2/3 of all frequencies when combined w/ their current holdings plus JJ.

 

[FA Mikey]

Wish what you like wt. The government like the rest of this board knows you opinion doesnt matter, except they dont have to scroll past your bs. Face it no matter how hard you wish it wont come true.

 

[WorldTraveler]

they don't care about any of our opinions.... I'm not sure what you think won't come true.

There really isn't an excess of demand for flights about the supply.... the DOT will thus decide between all the competing claims about what DL promised to US, the alliance decision which came after the route case was opened, and the merger which was known when the route case began but is following a process of liberalization between US and Brazil that began years ago.

What is a fact is that with 4 frequencies available over 2 years, no one won't get them all and no one will be completely shut out.

I'm not afraid of competition and neither should you be.