Originally Posted by
ksweeney
Government pushing prices down via blocking this merger only works as long as the carriers remain in business. Most of the discussions on AA emerging from bankruptcy as a viable carrier have been based on a merger. Is AA as a standalone carrier a viable long term option? Nothing in the AA business model has really been changed by the bankruptcy, other than reducing some expenses that will eventually trickle back in. If the government wishes to keep fares down by favoring UA and DL over AA and US, it might succeed for a while but what if AA and US fail? What will happen to prices when it is just UA and DL? Blocking this merger might have made more sense had they also blocked DL/NW and UA/CO.
From the DOJ press release:
The department’s complaint states that executives of both airlines have repeatedly said that they do not need the merger to succeed. The complaint states that US Airways’ CEO observed in December 2011, that “A[merican] is not going away, they will be stronger post-bankruptcy because they will have less debt and reduced labor costs.” US Airways’ executive vice president wrote in July 2012, that, “There is NO question about AMR’s ability to survive on a standalone basis.” And, as recently as January 2013, American’s management presented plans that would increase the destinations it serves in the United States and the frequency of its flights, and would position American to compete independently as a profitable airline with aggressive plans for growth.