- Apr 16, 2012
- 7
- 10
Interesting Article to Ponder:
President Obama is about to receive another round of bad news. Instead of the monthly jobs report, a constant reminder of his disappointing economic policies, he'll have to decide if USAirways and American Airlines can merge to create the largest airline in the world.
At first glance, this merger doesn't appear to be a political issue. After all, airlines have undergone rapid consolidation during the last decade: USAirways merged with America West; Delta merged with Northwest; Southwest purchased AirTran; and most recently, United merged with Continental.
But a look inside the numbers and the history of recent mergers reveals this acquisition will insert itself squarely into election-year politics.
Recall that the administration and FCC scuttled the proposed $39 billion AT&T/T-Mobile merger. The chief rationale for rejecting that deal was market concentration, even though it was a route to much-needed wireless spectrum. The Communications Workers of America (CWA), an administration ally, suffered a loss, while progressive groups like Public Knowledge and the Free Press celebrated.
If the administration uses the same monopoly-spotting algorithm it advertised during the AT&T/T-Mobile debate, the USAirways merger is in trouble. The DoJ's "Horizontal Merger Guidelines" use a formula (the Hirschman-Herfindahl Index (HHI)) for determining the degree of competition. An HHI of 10,000 represents a complete monopoly, while a value of zero indicates infinite competition.
Right now the market is "moderately concentrated" — an HHI of 1,517 — and the proposed USAirways-American merger would raise it to 1,791, an increase of 274. In a moderately concentrated market, any "increase in the HHI of more than 100 points potentially raises significant competitive concerns and often warrants scrutiny." A 274-point increase, in theory, should warrant plenty of scrutiny from the White House.
Importantly, during an election year the outcome of that scrutiny will matter to unions, corporations, progressives and moderate voters wary of overregulation.
This really is the administration's "Kobayashi Maru" — the famed Star Trek no-win scenario. Consider: If the president approves the merger, he'll snub progressives who helped him decide the fate of AT&T/T-Mobile. The CWA, who saw their desired merger nixed last year — even though the competitive environment was numerically similar — will also be left scratching their hard hats.
If, on the other hand, the president denies this merger, he'll frustrate pilot and flight attendant unions seeking to avoid cutbacks. To the unions, a successful merger increases the chances that they'll still have a job next year. In this economy, who can blame them?
http://news.investor...ident-obama.htm
President Obama is about to receive another round of bad news. Instead of the monthly jobs report, a constant reminder of his disappointing economic policies, he'll have to decide if USAirways and American Airlines can merge to create the largest airline in the world.
At first glance, this merger doesn't appear to be a political issue. After all, airlines have undergone rapid consolidation during the last decade: USAirways merged with America West; Delta merged with Northwest; Southwest purchased AirTran; and most recently, United merged with Continental.
But a look inside the numbers and the history of recent mergers reveals this acquisition will insert itself squarely into election-year politics.
Recall that the administration and FCC scuttled the proposed $39 billion AT&T/T-Mobile merger. The chief rationale for rejecting that deal was market concentration, even though it was a route to much-needed wireless spectrum. The Communications Workers of America (CWA), an administration ally, suffered a loss, while progressive groups like Public Knowledge and the Free Press celebrated.
If the administration uses the same monopoly-spotting algorithm it advertised during the AT&T/T-Mobile debate, the USAirways merger is in trouble. The DoJ's "Horizontal Merger Guidelines" use a formula (the Hirschman-Herfindahl Index (HHI)) for determining the degree of competition. An HHI of 10,000 represents a complete monopoly, while a value of zero indicates infinite competition.
Right now the market is "moderately concentrated" — an HHI of 1,517 — and the proposed USAirways-American merger would raise it to 1,791, an increase of 274. In a moderately concentrated market, any "increase in the HHI of more than 100 points potentially raises significant competitive concerns and often warrants scrutiny." A 274-point increase, in theory, should warrant plenty of scrutiny from the White House.
Importantly, during an election year the outcome of that scrutiny will matter to unions, corporations, progressives and moderate voters wary of overregulation.
This really is the administration's "Kobayashi Maru" — the famed Star Trek no-win scenario. Consider: If the president approves the merger, he'll snub progressives who helped him decide the fate of AT&T/T-Mobile. The CWA, who saw their desired merger nixed last year — even though the competitive environment was numerically similar — will also be left scratching their hard hats.
If, on the other hand, the president denies this merger, he'll frustrate pilot and flight attendant unions seeking to avoid cutbacks. To the unions, a successful merger increases the chances that they'll still have a job next year. In this economy, who can blame them?
http://news.investor...ident-obama.htm
