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AA - US Merger Agreement / Announcement / DOJ Action Discussion (consolidated)

View Poll Results: My opinion of the announced AA - US merger is:
This is the best of all possible worlds; great idea!
33
3.93%
This portends a stronger airline, with some changes for all
192
22.88%
I am neutral - pros and cons for all
199
23.72%
I think this is a somewhat bad idea with some real challenges
226
26.94%
I am completely opposed to this merger; terrible idea!
189
22.53%
Voters: 839. You may not vote on this poll

AA - US Merger Agreement / Announcement / DOJ Action Discussion (consolidated)

 
Old Aug 13, 13, 11:16 am
  #1501  
dll
 
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I can't imagine that AA execs are unhappy about this. I have to wonder if they might have even, ahem, played along with DOJ to coax it into taking this position.

In other news, AA is set to have a bankruptcy exit meeting with their judge this week. Interesting timing.
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Old Aug 13, 13, 11:18 am
  #1502  
ffI
 
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Originally Posted by ksweeney View Post
Government pushing prices down via blocking this merger only works as long as the carriers remain in business. .....
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? ......
Blocking this merger might have made more sense had they also blocked DL/NW and UA/CO.
+1
See the "SW effect" after they knocked the competition out
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Old Aug 13, 13, 11:26 am
  #1503  
 
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Originally Posted by ksweeney View Post
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.
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Old Aug 13, 13, 11:29 am
  #1504  
 
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The full DOJ complaint is here. Definitely worth a read.

Of particular interest to those who focus on award redemptions, DOJ complaint paragraph 79 claims:

"US Airways also plans to institute its fees ($40 on average) for the redemption of frequent flyer tickets on American's existing frequent fliers, who currently are not charged for mileage redemption."

This is clearly based on internal US/AA emails and other documents the DOJ has viewed.

Last edited by bedelman; Aug 13, 13 at 11:47 am Reason: fix link that was not working for some users
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Old Aug 13, 13, 11:31 am
  #1505  
 
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If Horton can pull off this merger now, they need to double his $20MM incentive / bonus...
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Old Aug 13, 13, 11:31 am
  #1506  
 
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Originally Posted by lhl12 View Post
The Advantage Fares are a USAir program, not an AA program. The reference to American in this quote must refer to New (i.e. merged) American.
I disagree. It is perfectly plausible that current American staff have an opinion on whether the New (merged) American would find it rational to continue the Advantage Fares program.

Also, daru1 commented "this would be huge information to give the public (read AAdvantage members), if at all true". Indeed! Litigation reveals information to the public. And that's as it should be. Taxpayers pay for the courts, taxpayers pay for the DOJ, and taxpayers have a right to know what is being done in our name and for our benefit.
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Old Aug 13, 13, 11:35 am
  #1507  
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Originally Posted by bedelman View Post
The full DOJ complaint is here. Definitely worth a read.
I get a 403 Forbidden page. Would you have a link to a copy of the complaint that does not require a login?
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Old Aug 13, 13, 11:39 am
  #1508  
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I think it is nonsense that the UA/CO and DL/NW mergers are allowed, but DOJ goes after this merger. I would like to understand why this one is more damaging to the flying public than the other two.

Seems to me like AA/US have an Equal Protection Clause argument to make when they move to dismiss the lawsuit.
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Old Aug 13, 13, 11:40 am
  #1509  
 
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Originally Posted by richarddd View Post
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.
DOJ is now quoting spin from Parker and Horton. US only remains viable due to integration issues with the US/HP merger sustaining the lowest labor costs in the industry. At some point in the near future, if the merger does not go through, US will be forced to raise employee pay taking away the current business model. If AA remains in Horton's hands you will see an end to the current truce between management and labor along with the end to the current profitability. The DOJ's assumption of aggressive plans for AA growth are not achievable with the fleet size that AA has planned for the next 5 years. I do think AA and US will survive for a few years, but within 10 years both will go the way of Pan Am, Eastern, and Braniff.
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Old Aug 13, 13, 11:44 am
  #1510  
 
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Originally Posted by PresRDC View Post
I think it is nonsense that the UA/CO and DL/NW mergers are allowed, but DOJ goes after this merger. I would like to understand why this one is more damaging to the flying public than the other two.

Seems to me like AA/US have an Equal Protection Clause argument to make when they move to dismiss the lawsuit.
I'm not saying that I disagree, but the DOJ wants to draw a line in the sand somewhere. If this merger sailed through, then the next two attempting would scream bloody murder if they were denied.
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Old Aug 13, 13, 11:48 am
  #1511  
 
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Originally Posted by ksweeney View Post
The DOJ's assumption of aggressive plans for AA growth are not achievable with the fleet size that AA has planned for the next 5 years. I do think AA and US will survive for a few years, but within 10 years both will go the way of Pan Am, Eastern, and Braniff.
AA has lot of airplanes on order. True, they will mostly replace older aircraft, but if AA decides to grow they could delay airplane retirements. US is profitable, so it should be in good shape. We'll see about AA once it exits bankruptcy.
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Old Aug 13, 13, 11:49 am
  #1512  
 
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I think Mr. Horton must be very happy today: he is still has a chance of getting his $ 20m bonus+ keeping a CEO title for a huge compnay for years to come if this merger called a quit

Last edited by NA-Flyer; Aug 13, 13 at 12:00 pm
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Old Aug 13, 13, 11:50 am
  #1513  
 
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Originally Posted by Zomba View Post
I'm not saying that I disagree, but the DOJ wants to draw a line in the sand somewhere. If this merger sailed through, then the next two attempting would scream bloody murder if they were denied.
They also let Southwest merge with Air Tran. I suppose the next two that you are referring to might be Allegiant and Frontier - DOJ would probably shut that pair down was well. The reality is that DOJ has just set the stage for the demise of AA and US leaving UA, DL, and WN as the remaining players. Had they drawn the line earlier, with the UA/CO and DL/NW mergers then they might have a better case for blocking AA/US.
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Old Aug 13, 13, 11:51 am
  #1514  
 
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Originally Posted by ksweeney View Post
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.
I could not agree more! I don't understand why people are so happy that competition between airlines make them undercut each other's prices to below actual cost? It is all very good as long as you can buy those fares and fly, but what if some/all of them fail? Businesses can't survive without making profits. Yields per passengers are minuscule - it is not as if airlines were ripping off passengers.
At the end of the day there will be as many airlines as the market can support with fares that the airlines can actually make money with, so it does not matter whether that'll happen though mergers or though unfortunate demise of some airlines but routes/fares will come to the level where they are sustainable.
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Old Aug 13, 13, 11:55 am
  #1515  
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Can someone skilled in anti-trust give some insight as to next steps.

Does bankruptcy judge hear this case of a federal court judge?

What is AA and US's burden? In previous mergers has DOJ tried to block only to be overruled? To the carriers need to make some agreements to get around DOJ objection?

If court overrules. how much time is usually added for process?
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