Today's Proposed Merger Thoughts

[gabby]

Give up the trailer park parking at DCA. That is such a headache. Give the north parking to Delta with a smile.

 

[FrugalFlyerv2.0]

I have been told, but I don't know if it's for certain, that Doug Parker offered to relinquish 10 slots and Bill Baer wanted 28. 28 are 10% of the combined business enterprise's current allocation.

I recall that several years back when AA was attempting to get ATI with BA the regulators wanted, as a condition for approval for AA to give up all of its LHR slots (at that time AA had approx. 16 daily roundtrips @ LHR). AA-BA walked away saying the price was too steep. I don't remember whether it was US or EU regulators that were asking for this.

So it wouldn't surprise me if the DOJ would ask for all of the AA slots at DCA, not just 28 (10%) as rumored and would never accept just 10 as offerred by Parker.

 

[LD3]

This complaint is simple bullshit....Like bus said, every airline has been cutting fares in their competitors hubs for years, it's nothing new. Most everyone laughed at the DL/US slot swap, now US found another way to entrench themselves in DCA and your all crying...Does the government really think that if they nix this merger there will never be any fare increases or higher fees?

 

[USA320Pilot]

Four the past four trading US Airways' security has had a positive "gap open" with bullish sentiment, bullish technical indicators, and a percentage increase greater than DAL and UAL.
[background=transparent]
See chart: http://finance.yahoo.com/echarts?s=LCC+Interactive#symbol=lcc;range=5d;compare=dal+ual;indicator=sma+volume+stochasticfast;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;[/background]

 

[WorldTraveler]

LCC had a much larger selloff after the DOJ's filing. The sentiment, including echoed here, is that the merger will go forward.

The market won't begin to know the financial implications of any conditions that AA/US agree to in order to make the merger work even when an agreement is reached.

 

[FWAAA]

It's amazing how the DOJ seems to think that Parker invented the "Advantage Fares" concept. It's nothing new. Ever since deregulation, when airlines dropped being more point-to-point and became hub-centric networks, they have all tried skimming away customers from their competitors non-stops by offering discounted fares for the inconvenience of a stop and aircraft change.

But now, since US has a cute name for it, the DOJ sees it as the savior of low air fares for the huddled masses yearning to fly free. What a bunch of bureaucratic nitwits!

In paragraphs 48-58 of the Complaint, the government alleges that today, UA, DL and AA generally respect each others' nonstop fares by pricing their own connecting fares at approximately the same level as the other airline's nonstop fares. The allegation is that US is the only one of the four currently undercutting the nonstop fares with its own low connecting fares. Even better, most of the benefit to US comes at the expense of AA, and with the merger, the low-fares will not be continued (as new AA would not discount fares beneath its own nonstop fares the way US currently does). I have no idea whether all that is actually true, but that's the government's allegation, and they've got quotes from US and AA execs which appear to prove the allegations. While it would certainly be good for new AA (and, by extension, its employees) for those low connecting fares to go away, it wouldn't be so good for the consumers of those low connecting fares.

Maybe we can start that "lawyers at the bottom of a lake" thing with the DOJ. Sequester the entire Department, I say, starting with Holder.

If Parker has the winning argument (as many of you claim he does), there's no need to drown the Attorney General or his underlings. Simply prevail in court.

 

[FWAAA]

Does the government really think that if they nix this merger there will never be any fare increases or higher fees?

No, nobody at the Department of Justice thinks that. What they are alleging is that if the merger proceeds, then fares and fees will climb faster and higher than if the merger is blocked. Merger happens=Consumers are harmed faster and more severely than if the merger doesn't happen. That's why Section 7 was passed by Congress in 1914. Given that Parker and Kirby have said that their goal is to restrict capacity and increase fares and fees as a result of the merger, the allegations aren't all that outlandish.

 

[WorldTraveler]

AA has larger shares/less domestic competition in DFW and MIA than any of the other carriers have in their own hubs which is why US targets AA more than other carriers thru their Advantage Fares. That is also why they can't keep the Advantage Fare program because their merger partner was the target.
And DL and UA would now target those same DFW and MIA markets if new AA chose to extend the program - and they would take as much if not more revenue from new AA at those same two hubs as US once did.

 

[FWAAA]

AA has larger shares/less domestic competition in DFW and MIA than any of the other carriers have in their own hubs which is why US targets AA more than other carriers thru their Advantage Fares. That is also why they can't keep the Advantage Fare program because their merger partner was the target.
And DL and UA would now target those same DFW and MIA markets if new AA chose to extend the program - and they would take as much if not more revenue from new AA at those same two hubs as US once did.

That's exactly what the government is alleging.

 

[robbedagain]

could us end it at any time just to prove a point to the doj and if so what would the ramifications be... lost rev for sure... but itll be very interesting to see what happens btwn now and nov 25...

 

[WorldTraveler]

That's exactly what the government is alleging.

also explains why the State AGs in several states are part of the lawsuit. They stand to see fare increases even if service doesn't get reduced. Also part of why it makes it difficult to find a solution.... telling them to keep more service in place doesn't fix the problem.

could us end it at any time just to prove a point to the doj and if so what would the ramifications be... lost rev for sure... but itll be very interesting to see what happens btwn now and nov 25...

sure they could but since the court has already identified it, cutting the program isn't going to resolve the problem now. The program was in place when the merger was filed up and was there when the DOJ filed the suit.

 

[Reed Richards]

also explains why the State AGs in several states are part of the lawsuit. They stand to see fare increases even if service doesn't get reduced. Also part of why it makes it difficult to find a solution.... telling them to keep more service in place doesn't fix the problem.

sure they could but since the court has already identified it, cutting the program isn't going to resolve the problem now. The program was in place when the merger was filed up and was there when the DOJ filed the suit.

I had not considered the further complication of the various State complaints. Kind of a built in safety valve for the DOJ to claim they cannot settle. So what happens in the final showdown prior the courtroom proceedings? Does Parker have to shower the locals with gifts? Does the DOJ "settle" with a win that excludes one or more of the States? I think in the long run the States were pound foolish in joining this suit. After all, the full force of the Government is behind the suit. They either believe in the underlying concept of what the DOJ is attempting or they do not. Like I have said before, PIT and DFW had better be checking six. PIT is especially screwed merger or not. I know Parker, he will get his revenge. DFW is toast as the HQ if the merger goes on. You can bet NC will bend over backwards to lure the Corporation there. RR

 

[robbedagain]

actually phx will be the one that toast for hdqrtrs as the new aa would keep it at dfw

 

[Phoenix]

actually phx will be the one that toast for hdqrtrs as the new aa would keep it at dfw

Right now DFW is planned to be the HQ..

I think he was suggesting that DFW will no longer be Parker's choice for the HQ since Texas joined the DOJ suit.. i.e. Parker will be looking to punish the states that put a kink in the merger and reward a state that didn't.

 

[USA320Pilot]

The DOJ, American Airlines, and US Airways were unable to reach an agreement on scheduling the Department's lawsuit trial and a judge had to pick the date. However, the parties seem to be cooperating better when they agreed on the pre-trial schedule and the Med/Arb to act as the case's special master.

See Story: http://aviationblog....deadlines.html/

Regards,

Chip