US DOJ Suing to Block Meger of AMR and US Airways

[cbrown1]

American Airlines counsel: There's no Plan B
http://www.bizjournals.com/dallas/blog/morning_call/2013/08/american-airlines-counsel-theres-no.html

Looks like it's do or die for AA.

 

[Noserider76]

American Airlines counsel: There's no Plan B
http://www.bizjournals.com/dallas/blog/morning_call/2013/08/american-airlines-counsel-theres-no.html

Looks like it's do or die for AA.

Believe me there's a Plan B. American will be fine without the merger now that the industry has pricing power mostly due to the previous 3 mergers.

 

[LearLove]

The Diane Rehm Show had a program about the merger a few days ago.

http://thedianerehmshow.org/shows/2013-08-14/economic-impact-airline-mergers

Where the hell is she broadcasting from, her deathbed? She sounds like she's on life support.

 

[DorkProp]

Where the hell is she broadcasting from, her deathbed? She sounds like she's on life support.

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

She's come a long way with this disorder.

 

[LearLove]

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

She's come a long way with this disorder.

O well then I'll take my foot out of my mouth.

 

[ImbracableCrunk]

Where the hell is she broadcasting from, her deathbed? She sounds like she's on life support.

Her voice takes a lot to get used to, but in this very show, she stopped one of the guests and told him, "You're not answering the question. What is your answer to. . ."

That's why she's worth listening to.

 

[SAABaroowski]

Did I hear that right, Ben Matzahball?, lol

 

[Dornier 335]

Michael Boyd (sigh) comment ...

link

In The Lead - Monday Flash - August 19, 2013


It's Official!
Captain Louis Renault Joins The Dept. Of Justice
"American! US Airways! We're shocked! shocked! to find mergers going on in this business! ... Staff ! Round up the usual-suspect attorneys to file a suit!..."
- Captain Louis Renault Holder, Commandant, DOJ.

Get ready for some hilarious reporting this week.
The DOJ's suit to stop the AA/US merger is embarrassing. Embarrassing in regard to the arguments used. Embarrassing in regard to the timing - no, Virginia (literally, the state) it doesn't take six months to produce what the DOT came up with. Embarrassing because the situation which the DOJ complaint decries is exactly the environment that the DOJ itself has created.
Get Ready... The "Media Bubble" Is Fixin' To Expand. But even more embarrassing will be some of the oh-so-serious media stories that we can expect in the next several days. Great stuff. We call it the "media circus bubble" - sort of like a financial bubble that expands based not on facts, but on a self-feeding from one media source to another - with zero actual reliance on facts. Eventually, the whole thing collapses under the weight of reality and truth, and the media types involved slink away. But for the next few weeks, be very circumspect about what's reported.
We will certainly see a lot of incisive, factual reporting on this merger, but still plan on the squirrels coming out...

• We'll see the flood of stories on how past mergers created new fees and single-handedly let airlines get into the anti-consumer position of being able to make money...
• We'll see stories on how "low cost" and "point-to-point" carriers like Southwest (?) are so much more efficient.
• Journalists (term is used loosely) who two days ago thought "runway" as something at a fashion show, will be expressing lots of lore about how fares have gone up due solely to past mergers - most of which they couldn't name on a bet...
• 'Course, some of the most fun are the stories done by shallow-end financial gurus, earnestly "explaining" to their readers the sound reasons for the DOJ actions - by simply repeating the stuff in the complaint without one shred of thought that the DOJ's data, assumptions and narratives might be inaccurate.
• "Economists" will emerge from the mushroom gardens of academia to opine on concepts of how deregulation has failed, and how the hub system is so, well, yesterday.
• There's even been at least one report that's proclaimed the US airline system can be "fixed" and expanded by letting foreign carriers operate domestically. Sure, they can make a bundle here.
• Or what's real fun - if inaccurate - is the stuff that recent past mergers have been the direct cause of hub pull-downs at MEM, CVG, and PIT - issues of actual fact, chronology, and aircraft economics notwithstanding. It's just being repeated from what the writer has heard in "all those other hundreds of articles," which is essentially the main research tool.

It's the media bubble. Everybody's reporting it, so don't dig too deep - besides, you don't want to look like you're not "with it."
Some Facts. Let's try to put this in context...
Fact: the DOJ has never before turned down a live merger in the last 30 years. (The exception was the US/UA deal a decade ago. The DOJ "rejected" it only months after United made it clear that they were out of the deal. The DOJ's rejection was the equivalent of shooting a cadaver.)
But otherwise, the DOJ never saw an airline merger it didn't like. Loved every one, apparently, going back to TWA/Ozark, NW/Republic and US/Piedmont. Those actually did wipe out competitive hub operations, but DOJ said that made no difference. Fast forward three decades: This current AA/US deal will readjust flows, but there is no indication that it will close a current connecting hub operation. They need PHX and they need CLT. It's an issue of revenue access.
Sorry, But That Airline Competition Egg Has Already Been Scrambled. But, in fairness, Ozark, Republic and Piedmont are ancient history... and so is that paradise we supposedly had with a wildly-competitive airline industry. While it is lamentable - and it certainly is - that entire business is gone. Right to Do-Do city. Mort. Dead.
A combination of past mergers (all DOJ-approved, by the way), new economics driven by $100 oil, and near total changes in the mission-scope that airliners can accomplish, have resulted in air transportation reality that has no bearing or relationship with the Econ-101 stuff that a lot of the media latches onto without question.
So, whether we want to admit it or not, this is no longer an air transportation system that can just follow the tenets of freshman-level economics. Yup, it is true that mergers always end up in less of something. (Been on the record on that, by the way). But the reality is that today there are just six network carriers (assuming no US/AA merger) - and, wake up and smell the minimum connect time, that includes Southwest.
The New Metric of Air Service Value - Mr. Zhou & His Global Colleagues. Because of raw, naked economics - some parts of which are the results of the DOJ's own past actions - it's now a pipe-dream to assume that low fares and lots of new air service are the future. Quite the contrary.

And here's the kicker. The airline structure - the one that the DOJ has helped shape - has new consumer metrics. It's not the claptrap political hot air about a need for "affordable" air fares. It's not whether consumers undergo the indignity of having to drive two hours to get a "low fare" at a bigger city airport. It's not fees. It's not even fares. It's not whether small communities can universally gain additional network access. All that stuff is the nonsense that politicians and ethically-challenged consultants try to push like wooden nickels at a country carnival.
The real measure of air service quality and value is access. Access from the rest of the nation. Access from the rest of the world.
Meet Mr. Zhou Jiping. He's CEO of Petro China. A powerful company in a powerful nation. He and his distinguished colleagues at other companies across the globe and in North America increasingly do business in the US. If they can get to your community reasonably easily, you're in the game. If not, you're not. Simple as that.
Whether or not we want to admit to this new air service environment, communities can ignore it only at their economic peril. And that is precisely what the DOJ is ignoring - again, in this environment that they helped create - changes in access should be the #1 determinant in whether the merger makes sense for the consumer.
Take a look at non-AA served airports such as Bangor, Sarasota Bradenton, Newport News, and more. The combined AA/US will inherit not only viable feed markets - and a frequent flyer base - to the current US hubs they access, but also potentially to American global connecting hubs at DFW, ORD, and MIA.
"Yeabutt," is the comment from the self-appointed consumer gadflies, "you can't prove or guarantee that'll happen!" That is true, but unlike these jihadists-without-a-clue, we have data that points strongly in that direction. And we can guarantee almost to a certainty, that it won't happen without this merger.
So, in reading all the media stories about an airline environment that is long gone, there is one question that is the only one of long term value in measuring this merger: Will it make it easier for Mr. Zhou get here from Beijing? Or that financial company in Phoenix looking for a new branch office? Or Takata executives from Japan or Michigan to look at buying a local business?
In this now-truncated airline industry, that's the value-equation of this merger.
The only one that's related to economic impact and the economic well-being of the communities affected.

 

[scoreboardII]

Meet Mr. Zhou Jiping. He's CEO of Petro China. A powerful company in a powerful nation. He and his distinguished colleagues at other companies across the globe and in North America increasingly do business in the US. If they can get to your community reasonably easily, you're in the game. If not, you're not. Simple as that.

So after Mr Jiping flies in and sets up shop during a once a year meeting, who else will support the cost of flying that flight which is deemed crucial to capture the Chinese business, the US government?

This country needs to move forward to a time when demand drives service, not the government deems service. Yes, that will mean 50% of the US will need to drive 4 hours to get to a REAL airport, unless they want to pay $1000s.

 

[Bringupthebird]

Nonstops should be more expensive than one-stops. The DOJ is trying to play a nostalgic game of CAB junior, except in reverse since the CAB was protecting airlines at the expense of the consumer.