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US/AA merger- MASTER DISCUSSION THREAD/incl 'when will US leave STAR'

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US/AA merger- MASTER DISCUSSION THREAD/incl 'when will US leave STAR'

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Old Dec 8, 13, 9:45 am   -   Wikipost
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There is an existing thread in the AA forum that may be useful to US and AA Flyertalkers:
US-AA Merger: Just the Facts thread

As facts become posted, that should be the place to look.

Merger discussion, speculation, and other questions can be directed here, or the similar thread in the AA forum:
MERGER: US and AA 9 Dec 2013 and implications for AA flyers (new)

AA - US Merger Agreement / Announcement / DOJ Action Discussion (consolidated, and now closed to new posts)
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Old Sep 4, 13, 12:36 pm
  #1696  
 
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Originally Posted by Fanjet View Post
But this isn't 4 oligopolists merging into 3. The notion of US currently being an oligopic carrier is a stretch by any means. And WN is very much an equal player in this game. The DOJ likes to exclude them at every turn, like saying "3 Mega carriers plus WN". But WN sells tickets and transports people just as much as the Big 3. The number of large airports where WN is the dominant carrier, if not the majority carrier, is quite long.
I would argue that US definitely shows oligopic tendencies. The DOJ cited their CEO emailing a competitors CEO to get them to stop running a certain miles promotion.

I do agree that WN is a major player. They aren't as a direct competitor as the legacies but they all fly planes from point A to point B. But no matter what you call WN, the merger removes yet another competitor and makes it even easier to collude (directly and indirectly) on prices and fees.
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Old Sep 4, 13, 1:44 pm
  #1697  
 
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Originally Posted by Fanjet View Post
And? I've noticed lots of things being more than 5-6% expensive than they were a few years ago. Are airfares never expected to rise while everything else does?
In theory this is possible yes, but I will spare you all these types of models. Cause it is very complicated economics stuff.

An easy explanation to this is basically supply and demand + cost reductions. However there are way more forces involved in determining air fares.
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Old Sep 4, 13, 2:29 pm
  #1698  
 
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Originally Posted by PWMTrav View Post
We're not making a different argument, really. I'm just saying that keeping AA and US separate will keep more seats open on the market than consolidation would.

In any industry, there's pretty much nothing in it for the consumer to allow 4 oligopolists to consolidate into 3. In this particular industry, it's even worse because the barriers to entry are so high. To ease fares, we're essentially pulling for airlines like AS, B6 and WN to add capacity by competing on busy routes. Even if that happens, it does little for hub captives and next to nothing for people way outside of a major city.
First, I've been grateful to read the thoughtful, substantive posts in this thread (excluding, of course, those of the recent troll, now gone). I've found the arguments against the merger especially potent, as is the DOJ's complaint with its list of one thousand pairs of affected cities.

The question for those of us who are "way outside of a major city" is whether a blocked merger will in some way put an end to the increasingly poor connections through the hubs, in my case PHL. Or will things get worse one way or the other, since they were getting worse before the merger was announced?
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Old Sep 4, 13, 9:39 pm
  #1699  
 
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Originally Posted by Joanna2360 View Post
First, I've been grateful to read the thoughtful, substantive posts in this thread (excluding, of course, those of the recent troll, now gone). I've found the arguments against the merger especially potent, as is the DOJ's complaint with its list of one thousand pairs of affected cities.

The question for those of us who are "way outside of a major city" is whether a blocked merger will in some way put an end to the increasingly poor connections through the hubs, in my case PHL. Or will things get worse one way or the other, since they were getting worse before the merger was announced?
Given your location in your profile and the example of PHL as your connecting hub, I'd venture a guess that you'll see minimal degradation in domestic service but you probably won't see an improvement. Assuming you fly out of ITH, your only connection point is PHL and that's not really going away as a domestic hub, but it's probably not adding capacity either. What you have now is what you'll probably continue to receive. Worst case, it's not like AA competes on that PHL jump at all, so some longer flights might involve a hub-hub like PHL-DFW or the like. My bigger concern would be for the PHX hub and whether that continues to exist with LAX, and also smaller northeast markets to DCA - see below.

My most local airport, PWM, connects to PHL, DCA and CLT. I expect service to DCA to degrade if US/AA have to shed slots. Right now, I think we have something like 4 PWM-DCA RTs daily, two on CRJ200 and the others on E170/175. I'd expect that to go down to 2-3, if we're lucky with one of them up-gauging. I'd guess the same might happen to MHT as well. US/AA can tell us to drive to BOS if we want more frequent service, and they'd be safe doing it. Airfares are already pretty stupid from here since WN stopped MHT-PHL and MHT-WAS service, while only picking up PWM-BWI from Airtran. Just a couple of examples here, but I think it illustrates where things will go from small/mid-markets connecting to DCA. I wouldn't anticipate PHL being affected domestically, or CLT for that matter.

This merger is good for US CP's in the mid-atlantic/southeast who want breakfast on a 90 minute flight. That's pretty much it.
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Old Sep 4, 13, 11:11 pm
  #1700  
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Originally Posted by Azzuristar View Post
The one thing that will get to everyone is when WN eventually acquires F9 or B6. That is when it will hit the fan.

(I feel so cool using all the IATA names)
WN isn't even sellable on the GDS...
(That is why I don't use it very often.)
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Old Sep 4, 13, 11:39 pm
  #1701  
 
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Originally Posted by dcpatti View Post
That 5-6% isn't bad, but look at a city pair like DCA-MCO which has gone up a consistent 40% since Air Tran left the route. US, DL, and B6 all remain on this route, yet what used to be a consistent $170-or-less round trip is now rarely below $210 and usually closer to $240.
Probably not a great example. A $210 ticket doesn't come close to covering costs (after taxes are deducted, you'd be looking at ~11.6 per mile, well below US' CASM), and it's a route with precious few business travelers to pick up the slack. WN/FL has enough lower costs that they can still force pricing if they want to -- but with them out of the picture, there's no reason for the remaining entrants to keep losing their shirts.

I love a good deal as much as anyone, but I have a hard time decrying an environment where tickets are still regularly available well below their underlying cost.
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Old Sep 5, 13, 12:17 am
  #1702  
 
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Traveling in November 2013; should I purchase within Star Alliance or One World?

Hello,

I am trying to retain my US Airways chairman status for 2014 so I want to make sure I accrue miles for a personal trip I plan to take in November.

With so many potential dates being thrown around for US to leave Star Alliance, I am having trouble figuring out if I should purchase a ticket on a Star Alliance airline or one from One World.

I heard a rumor that if (Star Alliance) travel is booked prior to the official departure date, it still counts towards your US mileage but I haven't read anything else verifying that.

Please advise!
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Old Sep 5, 13, 12:32 am
  #1703  
 
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Book *A. The trial is set to start November 25th so expect US to be in *A well into 2014.

http://www.usatoday.com/story/money/...tment/2742397/
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Old Sep 5, 13, 1:01 am
  #1704  
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Originally Posted by dtremit View Post
Probably not a great example. A $210 ticket doesn't come close to covering costs (after taxes are deducted, you'd be looking at ~11.6 per mile, well below US' CASM), and it's a route with precious few business travelers to pick up the slack. WN/FL has enough lower costs that they can still force pricing if they want to -- but with them out of the picture, there's no reason for the remaining entrants to keep losing their shirts.

I love a good deal as much as anyone, but I have a hard time decrying an environment where tickets are still regularly available well below their underlying cost.
I had to look something up from a WashPo edition from back in 1981. There was a "fare war" advert in it from DL. The sale fare being offered from DCA to MCO and a couple of other FL cities was $138 IIRC. Which meant that DL was keeping just over $125 of it, because tickets back then only had a 10% federal tax calculated into it. Over 30 years later, that fare is $210. With probably $40 of that not going to the airline.
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Old Sep 7, 13, 1:32 pm
  #1705  
 
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Originally Posted by Michael El View Post
Book *A. The trial is set to start November 25th so expect US to be in *A well into 2014.

http://www.usatoday.com/story/money/...tment/2742397/
While a recognize it's all speculation, what's everyone's best guess for a *A departure for OW should all go as US/AA hopes?

Is Summer being too hopeful to hope we are still with *A?
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Old Sep 7, 13, 10:40 pm
  #1706  
 
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Another article on the lack of understanding by the DOJ and the risk of destroying 2 legacy carriers if this vendetta is accepted by the courts.

http://www.reuters.com/article/2013/...98602520130907
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Old Sep 7, 13, 11:04 pm
  #1707  
 
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Originally Posted by perseus11 View Post
Another article on the lack of understanding by the DOJ and the risk of destroying 2 legacy carriers if this vendetta is accepted by the courts.

http://www.reuters.com/article/2013/...98602520130907
The article doesn't really begin to suggest anything about "destroying 2 legacy carriers" nor would the lack of a merger do so. I'm not sure why you are referring to a DOJ-filed antitrust suit as a "vendetta" (at least that is what I think you may be referring to) but the DOJ is charged with ensuring that certain laws are met and this is what will be determined in the trial. There is, of course, no vendetta.
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Old Sep 8, 13, 1:13 pm
  #1708  
 
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So let me get this straight ....

In the domestic sphere, we don't have to worry that a US/AA merger will decrease competition, shrink service, and raise prices because there are other carriers that can and will step up to fill in?

In the international sphere, there won't be enough competition unless US and AA merge, because each is too small on its own to have any influence on the UA and DL duopoly?
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Old Sep 8, 13, 3:30 pm
  #1709  
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Originally Posted by Biggie Fries View Post
So let me get this straight ....

In the domestic sphere, we don't have to worry that a US/AA merger will decrease competition, shrink service, and raise prices because there are other carriers that can and will step up to fill in?

In the international sphere, there won't be enough competition unless US and AA merge, because each is too small on its own to have any influence on the UA and DL duopoly?
I don't think that is what the article is about. It is about AA and US (as separate carriers) being unable to effectively compete with UA and DL internationally. And compared to the larger two's networks, that is the case. The money to be made is in the international sector. Especially in the premium cabins. The smaller international markets of AA and US each make it more difficult for them to capture those very large corporate contracts as opposed to UA and DL.

In fact, since most of the ancillary fees come from the domestic side. It would be interesting to see what domestic revenue margins would be without them. Before the merger-mania, it was commented that NW lost money on its domestic network, but made up for it through the revenue margins on its international one, for example.
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Old Sep 8, 13, 4:33 pm
  #1710  
 
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Originally Posted by Biggie Fries View Post
So let me get this straight ....

In the domestic sphere, we don't have to worry that a US/AA merger will decrease competition, shrink service, and raise prices because there are other carriers that can and will step up to fill in?

In the international sphere, there won't be enough competition unless US and AA merge, because each is too small on its own to have any influence on the UA and DL duopoly?
Originally Posted by Fanjet View Post
I don't think that is what the article is about. It is about AA and US (as separate carriers) being unable to effectively compete with UA and DL internationally. And compared to the larger two's networks, that is the case. The money to be made is in the international sector. Especially in the premium cabins. The smaller international markets of AA and US each make it more difficult for them to capture those very large corporate contracts as opposed to UA and DL.

In fact, since most of the ancillary fees come from the domestic side. It would be interesting to see what domestic revenue margins would be without them. Before the merger-mania, it was commented that NW lost money on its domestic network, but made up for it through the revenue margins on its international one, for example.
I think we agree that the article is about the second part of my post ("In the international sphere ...")

The argument alluded to in the first part ("In the domestic sphere ...") is one I have seen others make in this thread.
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