Originally Posted by
Global_Hi_Flyer
This could, of course, be part of a two-step strategy by NW. Get DOJ clearance now when the risk is limited (and the politicos are favorable to consolidation), then step up later and buy the whole thing. NW does have a bunch of DC9s that need to be retired. And, if nothing else, it wards off any competitors from making a bid.
I agree with most of what you said;however, it is not so clear that the politicos
are in fact favorable to consolidation.. Perhaps its just that there are so many complex anti-competitive and political issue surrounding the acquisition of YX by NW/TPG. The fact that DOJ is taking its time tells me that they are doing a thorough analysis.
On the economic side there is market share and market concentration, competitive pricing practices and that NW may be the price leader in MKE market and YX has little pricing power. The issues are many and require analysis of a lot of data.
One interesting idea I had is to compare fares at MKE (presumably an uncompetitive market)- with a similar demographic market that is competive (say Baltimore). The purpose is to establish a reference model of the status quo. Once the reference is established you can move forward to figure the effects of the merger.
On the political side is the fact that Midwest and NW serve so many small, disadvantaged communities. What is the effect of the YX acqusition on the small communities and fares?
Far from being clear-cut as some have implied or stated, there are many issues for the Justice lawyers and economists on retainer to sort out. It's no surprise to me that is taking some time.