American & Northwest Merger
Jul 2, 2000, 7:38 am
#1
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American & Northwest Merger
It was reported this morning on NBC Channel 5 TV Chicago that a merger between American & Northwest is very close to happening and the whole deal should be completed by mid July.
Jul 2, 2000, 10:05 am
#3
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This one is a possibility, but only if they don't let the UA/US merger go through. My estimation is that they can only let one of these mergers go through with the current levels of concentration. Both UA/US and AA/NW are possibilities, because of the limited amount of overlap of their systems. However, I think once they let one more big merger go through for the airlines, that will be it, and they can't let any others go through. About 50/50 that ONE of them will be allowed to go through.
And remember, I called the Worldcom/Sprint thing early on--that DOJ would never let it go through.
Djlawman
And remember, I called the Worldcom/Sprint thing early on--that DOJ would never let it go through.
Djlawman
Jul 2, 2000, 10:12 am
#4
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I suspect that in principle you are correct, djlawman, but I have a few genuine questions. If they only let one merger through, which one is likely? Will it be the first one to be tabled, the smaller, or what? If, hypothetically, UA/US are allowed to go ahead but AA/NW aren't, isn't that likely to result in years in the courts?
Jul 2, 2000, 10:14 am
#5
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Am I still dreaming.
NW w/ AA
BA w/ KL & maybe DL thrown in as a ff partner
Well that's the nice thing about dreaming while awake sometimes it's better than the memories of what could have been.
NW w/ AA
BA w/ KL & maybe DL thrown in as a ff partner
Well that's the nice thing about dreaming while awake sometimes it's better than the memories of what could have been.
Jul 2, 2000, 6:27 pm
#7
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Derek--I beg to differ with you, but based upon my six years with the DOJ Antitrust Division (1981-87), I do not believe that it is an all or none deal with them. They are not subject to lawsuits contending that they were unfair because they let some other merger go through--the only thing that matters in a Sherman Act case is the potential effect upon competition. Case in point--the phone industry. The last two decades since we broke up ATT has seen first growth of new companies, then consolidation. It was not an all or none thing. DOJ let the MCI/Worldcom merger go through, for example, and let several of the Baby Bells merge (Bell Atlantic/NYNEX) but that didn't mean that it then had to let the Worldcom/Sprint deal fly. And they haven't. I believe that the existing levels of concentration will allow one more merger to go through. But I agree with those who suggest that part of the reason for some of the other merger talks is to try to scare the feds into rejecting all of them.
In terms of which one they will allow to happen, the requirements are that it be formally announced (DOJ won't give advisory opinions on whether it will allow proposed combinations to go through that the parties haven't committed to--that would consume too much of their time and manpower). Next is that it reach approval stage first. It is possible that the 2d deal announced could actually be the first approved, IF the 2d players come up with an acceptable plan to give up gates, hubs, etc. to satisfy the feds, and the 1st (UA/US) can't come up with a plan to satisfy the feds.
Don't know your basis for stating that DOJ can't just let one merger go through, Derek, but I have given you mine, based upon my DOJ experience.
Djlawman
In terms of which one they will allow to happen, the requirements are that it be formally announced (DOJ won't give advisory opinions on whether it will allow proposed combinations to go through that the parties haven't committed to--that would consume too much of their time and manpower). Next is that it reach approval stage first. It is possible that the 2d deal announced could actually be the first approved, IF the 2d players come up with an acceptable plan to give up gates, hubs, etc. to satisfy the feds, and the 1st (UA/US) can't come up with a plan to satisfy the feds.
Don't know your basis for stating that DOJ can't just let one merger go through, Derek, but I have given you mine, based upon my DOJ experience.
Djlawman
Jul 2, 2000, 9:28 pm
#8
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djlawman, years ago I did some merger review work in banking. What's the name of the index based on market share that is used as a rough guideline to concentration. Somthing like "Hirschfeld Index"? I recall that a poor index score probably doomed merger prospects, or so we advised the client.
Jul 3, 2000, 7:52 pm
#10
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Three equal "high-fare" products but no equal low-fare competiton!!!
Currently, Southwest is a large enough carrier to compete on a viable basis with several of the other majors. AirTran can presently give DL a run for its money in some markets to/from ATL. Sun Country can do the same to NW in MSP. But NOBODY is strong enough or large enough to go up against the combined networks of even two of the proposed/hypothesized/fantasized megacarriers.
Thus, the consumer WILL lose out if these mergers go through, despite any wishful thinking to the contrary, since there will not be a carrier powerful enough to give travelers the low-fare relief that helps to keep air travel at least barely palatable in the U.S.
Currently, Southwest is a large enough carrier to compete on a viable basis with several of the other majors. AirTran can presently give DL a run for its money in some markets to/from ATL. Sun Country can do the same to NW in MSP. But NOBODY is strong enough or large enough to go up against the combined networks of even two of the proposed/hypothesized/fantasized megacarriers.
Thus, the consumer WILL lose out if these mergers go through, despite any wishful thinking to the contrary, since there will not be a carrier powerful enough to give travelers the low-fare relief that helps to keep air travel at least barely palatable in the U.S.
Jul 3, 2000, 10:27 pm
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Aren't low-cost carriers like Southwest trying to attract as their bread-and-butter passengers folks who wouldn't fly otherwise and are not likely to care about whereelse they can fly on a particular airline so long as the airline can get them to that day's destination?
In which case I'm not sure that further consolidation would directly pull passengers away from Southwest et al. although it could put the new behemouths into even more monopolistic positions at their hubs.
In which case I'm not sure that further consolidation would directly pull passengers away from Southwest et al. although it could put the new behemouths into even more monopolistic positions at their hubs.
Jul 3, 2000, 11:20 pm
#12
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Not necessarily. While low-fare carriers often target leisure customers, the more robust and successful "lowfies" have significant loyalty among frequent business travelers as well.
Jul 4, 2000, 9:33 am
#13
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Within Texas, SWA functions as a shuttle for business passengers, as well as the low-cost airline for the vacationers. The disparity between the "Suits" and the family on vacation is pretty interesting to watch.