DCann

It sounds as if both sides are using the "s" (settlement) word but that could be jockeying for position and posturing too.

DOJ, American, US Air Open to Settling Merger Antitrust Suit

Indelaware

Well, the answer to this is largely is it certain that the government will cave, allow the merger to go through (which really only benefits lawyers and investment bankers) with a minor settlement, likely only effecting DCA slots?

The underlying question is - should the merger be blocked permanently (as, IMO, it should) would US leave *A? Such a move would hurt UA, but I'm not sure it would help US except vis-à-vis UA.

AA_EXP09

I doubt that the public is paying as much attention to this.
(Syria, Russia, NSA, army shootings, etc. aren't more important?)

Superguy

I see it as more jockeying.

DoJ has already said they weren't that interested in a settlement, though they'd be listen if US and AA proposed something. I think the preferred outcome is that the suit is settled somehow. Now whether that's with merger dying, or serious concessions is an open question.

US and AA are going to have to show DoJ how any concessions will maintain the competitiveness of the market if they're allowed to merge. I still think that's an uphill battle. Dougie can't just walk in and say he was just kidding with those emails. He also has to go against the previous airlines lying thru their teeth when it came to promises of competition.

FWAAA

Agreed. It's a complete non-story; Wednesday must have been a slow news day.

All parties mentioned two weeks ago when the complaint was filed that they were open to settlement talks, and it was widely reported then.

This week, all parties filed motions/briefs to argue when they believe the trial should be set and once again, they all said they were open to settlement talks. It's boilerplate.

And what happened? Dozens of media outlets picked up on that and ran new stories highlighting the possibility of settlement talks. Most of the media desperately wants the merger to occur, as they've pinned a fair amount of their own credibility on the "fact" that the merger would be good for the airlines, employees and society in general.

To DCann's and jspira's credit, their publication is one of the few which openly questions whether the merger should be allowed to proceed.

On other websites, employees (primarily US employees) are giddy at the news and are openly speculating that it's proof that the DOJ has what they repeatedly refer to as "a weak case." Hope springs eternal.

jspira

It's August. August is a slow news month in general (with the exception of major items such as the filing of the antitrust suit).


First, thanks for noticing and the compliment. Second, while I'm the editorial director of Frequent Business Traveler, DCann is not a staff member but apparently a regular (and hopefully loyal) reader. We do appreciate the fact that he shared the piece here of course.

ellinj

I assume concessions at DCA would probably result in a cut in regional service, probably not a great thing for DC area travelers as I would doubt another airline would pick up those routes. Although it would probably drive down routes that another airline does choose to fly.

dcpatti

Not sure how much of a hardship it would be to the average DC-area traveler to lose frequent service to some of the small regional airports. I genuinely don't predict anyone jumping in to pick up DCA-Bangor, ME three times a day. The reality is that small cities like that aren't huge tourism or business destinations for most DC area residents. Unless you've got a specialized line of business or family in the area, you're not going there very often, and having to connect somewhere once or twice a year isn't going to be a big hardship. but it's going to be a very big deal to the congresspeople who hail from those small regions. They're not going to want to connect on their weekly commutes to/from DC, but they won't admit that. They'll spin it as a loss for their constituents.

I'd like to think that Congress won't have an undue influence on the DOJ, and that the DOJ puts forth their argument based on the good of the average consumer and not what's easiest for Congress, but with the current political atmosphere, nothing is going to surprise me. But I would definitely assume that IF the merger is allowed to proceed, with divestiture at DCA a concession, those small airports will only keep their service long enough for the ink to dry on all the government forms. Even if DOJ requires divestiture and some form of guarantee of service to some of those small markets, they can't require a "forever" guarantee, and those routes will be dropped as soon as legally possible (maybe even sooner).

PWMTrav

I know BGR gets beat on a lot, but I think there are smaller outposts that would see the axe before Bangor did. I think they carry almost 100,000 pax a year for US Airways. That's not huge, but it's not Huntington WV flying 40k people to CLT a year. BGR isn't an all-CRJ airport or anything - just mostly

PWMTrav

There is no realistic way to show that competition won't take a hit with this merger. They can run the market analysis any way they wish, but hundreds of years of oligopoly behavior suggests that they'll just play follow the leader with fee and fare hikes. If AA has a plan to emerge from bankruptcy on its own and not go out of business, I don't see how any market analysis allows this merger to happen.

dcpatti

Yup just picking on BGR as the first small airport that popped into my head.
State College, PA, almost anywhere in West VA, Richmond, etc might be other examples I could have used. There's lots of places you can fly from DCA that kind of make me wonder why that route is even around. I've always thought that at least some of these small destinations are kept just for the purpose of camping out on the slot, and that the first chance something "better" comes along, they'll be gone.

PWMTrav

That's ok, I live in Maine and make fun of BGR plenty. It is a good example of a small airport being cited by one Congressperson as being a reason she doesn't like this merger, though. Should that matter? I'd say not.

A lot of the smaller airports - one of them in WV is an example - were pork projects. Then, one airline in each gets a subsidy under the Essential Air Service program.

http://en.wikipedia.org/wiki/Essential_Air_Service

You can see the list here. There are 3 in Maine, but BGR isn't one of them. Shockingly, US/USX are only on the list once - at Plattsburgh.

That doesn't mean they aren't getting local subsidies, though. BGR, as an example, I'm not sure. But Maine is a huge state and if BGR wasn't there, it'd be an additional 2 hrs to PWM for a lot folks. If you're coming from The County, 4 hrs to get to the airport is awful. At some point, YUL and YQB become closer, but more expensive.

Kootur

You say that as if the poor old AA employees are being strong armed into this. You fail to realize that EVERYONE except horton a year ago was for this merger.

Did you know that AA is sending a 757 to DC next month filled with employees to help lobby? An idea by horton I might add.

Kootur

I have to hand it to Dougie, he's made it so that if by some slim chance this merger doesn't happen. He will have caused so much chaos and disorder at AA that it will take lots of time and money to fix things. That was part of his plan with delta, drive up their costs in chpt 11. so it would make them not as competitive as they exited.

ie. loss of managers, gate swaps and network planning.

hillrider

I believe the facts show that they're being bribed, quite expensively, not strong-armed. Pilots get to cash in an estimated $100k in new-AA shares each (with plans to immediately dispose of them--so much for loyalty), flight attendants are getting immediate raises, and so on. And union management get to have bigger workforces to extract dues from.