Why Mergers get Axed by the Feds

[FDJ2]

Oberstar, Slaughter to Release GAO Study United-US Airways Merger
Analysis shows merger would reduce competition in 290 markets and spur further airline consolidation.

WASHINGTON—The proposed merger between United Airlines and US Airways will reduce airline choices for millions of air travelers and is likely to push other carriers to consolidate in order to compete with the merged airline, a new study by the General Accounting Office shows.


Rep. James L. Oberstar (D-Minn.) and Rep. Louise M. Slaughter (D-N.Y.) are to release the GAO report, "Aviation Competition: Issues Related to the Proposed United Airlines-US Airways Merger"(GAO-01-212), today at a Capitol Hill news conference. Oberstar is the Ranking Democratic Member of the House Transportation and Infrastructure Committee. Slaughter, represents Rochester, N.Y., a market that already has some of the highest airfares in the country. Rochester stands to be heavily affected by the merger.

“I have been deeply concerned about the anti-competitive effects of the proposed merger of United Airlines and US Airways, and the accompanying proposed transfer of slots to a new airline, DC Air,” Oberstar said. “I believe that, if the proposed merger were to be approved, the remaining large airlines would feel compelled to merge to retain their shares of the overall market. We would soon be reduced to an industry of three major competitors, resulting in a devastating loss of competition for consumers.”

“This report underscores what I have said all along–that this proposed merger would be the beginning of the end of the aviation industry as we know it,” said Congresswoman Slaughter. “If the merger goes forward, other mergers would follow. Communities would be at the mercy of three carriers, dominating the entire United States. Deregulation was never intended to facilitate the creation of de facto monopolies controlling which communities live or die depending on their access to air service.”

Among the study’s findings:

· After a merger, the New United would dominate 1,156 of the 5,000 most heavily traveled markets, affecting 61.1 million passengers. New United’s market dominance would be 36 percent larger than that of the next carrier, Delta Airlines.
· The merged airline would carry 33 percent more passengers than Delta; 89 percent more than American; and 89 percent more than Southwest, and New United would carry nearly the same number of passengers as Northwest, Continental, TWA and America West combined.
· Based on interviews with industry analysts and officials from several airlines, GAO concluded that if the merger were approved, the “new United would so alter the existing balance in the domestic market that, for the other major U.S. airlines to compete successfully, they would have little choice but to consolidate as well.”
· The merger of United and US Airways would reduce or eliminate competition for almost 16 million passengers in 290 of the most heavily traveled aviation markets. In 43 of those 290 markets, the merger would reduce the number of competitors from 2 to 1, affecting 4.1 million passengers.
· GAO compared the proposed United-US Airways merger to the proposed alliance and stock acquisition between Northwest and Continental, which DOJ found to violate anti-trust laws. GAO’s findings indicate that the loss of competition from a United-US Airways merger would be much greater than from a Northwest-Continental relationship.

“Fewer choices, higher fares and a deterioration in service is not what Congress contemplated in 1978 when it deregulated the airline industry. Yet, that is the likely result if a United-US Airways merger is approved by the Department of Justice,” Oberstar said. “I strongly urge the DOJ to take heed of the GAO’s analysis of the merger’s impact on competition and consumers, and reject this proposed merger.”

 

[FDJ2]

"Mergers reduce opportunity for competition and thereby increase costs to travellers."

Jim Oberstar, the Minnesota Democrat who will become chairman of the House Transportation Committee

 

[Yuppyguppy]

runin scared?

 

[The Prussian]

------

 

[FDJ2]

The article lays out the reasons the Feds axed the UAL/US merger. I just found it interesting that the reasons set forth for the denial of the UAL/US merger were

1. System overlap and the resulting loss of competition. and

2. That the merger would force other carriers to merge also, therby reducing competion and raising fares.

I believe Oberstar is in line to be the new Chairman of the House Transportation Committee, so his thoughts on mergers seem relevant.

 

[PHXFLYR]

The article lays out the reasons the Feds axed the UAL/US merger. I just found it interesting that the reasons set forth for the denial of the UAL/US merger were

1. System overlap and the resulting loss of competition. and

2. That the merger would force other carriers to merge also, therby reducing competion and raising fares.

I believe Oberstar is in line to be the new Chairman of the House Transportation Committee, so his thoughts on mergers seem relevant.

The competative landscape has changed quite a bit since that merger. You have SWA,AirTran and JetBlue,all with plenty of airplanes on order and looking for a place to fly them to. If this merger goes through,watch for them to pick up the slack should any route consolidation occur.

PHXFLYR

 

[FDJ2]

The competative landscape has changed quite a bit since that merger. You have SWA,AirTran and JetBlue,all with plenty of airplanes on order and looking for a place to fly them to. If this merger goes through,watch for them to pick up the slack should any route consolidation occur.

PHXFLYR

I don't think so. Too many small and medium sized cities would lose competitive service. These would be cities that are not on the top on the list for low cost carriers. Also, any merger between LCC and DAL would in all likelihood spark additional industry consolidation, which would also take more competition out of the industry.

The fact is that there is a tremendous amount of system overlap between LCC and DAL. The purpose of this merger is not to extend market presence, it's to reduce competition.

 

[General Lee]

The competative landscape has changed quite a bit since that merger. You have SWA,AirTran and JetBlue,all with plenty of airplanes on order and looking for a place to fly them to. If this merger goes through,watch for them to pick up the slack should any route consolidation occur.

PHXFLYR

Even Boyd said every airline out there is running 80% full. Nobody is really doing poorly right now. Even DL and NW were profitable last quarter. How has the landscape changed again? When will Airtran or JB add FAY to their routes? How about Wilmington, NC? Southwest can't wait to go into that small town. What about Florence, SC or Augusta, GA? Southwest and Airtran are rushing to get gate space there..... How about Gainesville, FLA? Tri-Cities,TN? Huntington, WV? Greenbrier, VA? Huntsville, AL to DCA are flown by DL and US exclusively. Do you think SW will start that route? Why don't SW, Airtran, or JB go to Huntsville now? Why not? But they will start service from DCA to fill in for one competitor? Really? How many more of these do you want me to provide?


Bye Bye--General Lee

 

[General Lee]

I don't think so. Too many small and medium sized cities would lose competitive service. These would be cities that are not on the top on the list for low cost carriers. Also, any merger between LCC and DAL would in all likelihood spark additional industry consolidation, which would also take more competition out of the industry.

The fact is that there is a tremendous amount of system overlap between LCC and DAL. The purpose of this merger is not to extend market presence, it's to reduce competition.

Why didn't LCC go after NW? They have very little overlap (like US and AWA). Their hubs are not very close. (like CLT and ATL--250 miles apart! And what about LAS/SLC/PHX?) And they have almost the same aircraft:

Both have A330s, both have A320/319s. Both have 757s. Both will have E190s (NW very likely will order them). There are differences in the DC9s, 737-3(4)00s, and 747s. But, DL and US have nothing in common at all.

NW and LCC can fly to Europe (from DTW/MSP for NW, and PHL/CLT for LCC, without any overlap), and NW could give them Asia.

It makes no sense, unless Parker just wants to get rid of the competition, and that would be blocked by the DOJ and Congress anyway.


Bye Bye--General Lee

 

[FDJ2]

Even Boyd said every airline out there is running 80% full. Nobody is really doing poorly right now. Even DL and NW were profitable last quarter. How has the landscape changed again?

Bye Bye--General Lee

General, as we all know this merger is about reducing competition. When a competitor is removed, their is one less consumer option. Even if a LCC would eventually enter the market, and in many of these are markets they wouldn't enter, it doesn't change the fact that their is one less competitor and one less option for the consumer.

The communties that will really suffer the most are the small and medium sized communitees.

Here is just a small example of communities that would lose competitive service all together:

Huntington
Lynchburg
Florence
Augusta
Wilmington

Here's a small list of communities, along with the percent of traffic that would be dominated by the new "Delta" with virtually no other choices for the consumer.

CHS 63%
CHA 69%
AVL 74%
BGR 75%
BGM 65%
ERI 63%
CRW 69%
GNV 85%

Remember, that's just a small sample.

This merger isn't about creating a new entity with broader market reach, like HP/US, this merger is about eliminating competion.

 

[General Lee]

General, as we all know this merger is about reducing competition. When a competitor is removed, their is one less consumer option. Even if a LCC would eventually enter the market, and in many of these are markets they wouldn't enter, it doesn't change the fact that their is one less competitor and one less option for the consumer.

The communties that will really suffer the most are the small and medium sized communitees.

Here is just a small example of communities that would lose competitive service all together:

Huntington
Lynchburg
Florence
Augusta
Wilmington

Here's a small list of communities, along with the percent of traffic that would be dominated by the new "Delta" with virtually no other choices for the consumer.

CHS 63%
CHA 69%
AVL 74%
BGR 75%
BGM 65%
ERI 63%
CRW 69%
GNV 85%

Remember, that's just a small sample.

This merger isn't about creating a new entity with broader market reach, like HP/US, this merger is about eliminating competion.

But wait FDJ2, the whole landscape has changed...... Southwest, Airtran, and JB can't wait to get "slots" into those small airports.....riiiiight. But PHXflyer and Parker know differently... Come on. Look at a combined route map and look at the overlap. Ridiculous. USAir needs to start looking at NW instead.


Bye Bye--General Lee

 

[HomerJ]

To The General and FDJ2, your homes have doors (or so I'm assuming). You simply walk up to them, turn the knob, and pull. There's a whole world outside with fresh air and everything. Relax on the merger stuff for a while, will ya? WOW...

 

[lowecur]

But wait FDJ2, the whole landscape has changed...... Southwest, Airtran, and JB can't wait to get "slots" into those small airports.....riiiiight. But PHXflyer and Parker know differently... Come on. Look at a combined route map and look at the overlap. Ridiculous. USAir needs to start looking at NW instead.


Bye Bye--General Lee

The service to the small cities would have to stay, otherwise the DOJ would never let it happen.

One of the shuttles would be trimmed, along with consolidation of major routes along the Eastern corridor. Comair is history. I see they are subpoenaing the merger proposal from US Air. They are suspicious that they will be chopped at the knees, and they are right. Republic will get the business.

You guys keep hoping that US Air will go elsewhere. It's very clear that US Air and UAL want to merge with someone. They could either dance with each other or look at CAL or NWA. Either way, once the domino's begin to fall....DL will be left on the outside looking in with no chance in hell of going to the dance. What do you think DL's future is if 4 other legacys decide to merge?

One thing the DOJ will look at with the help from the FAA is a way to free up the major hubs from the 50< a/c. This high frequency feeder system needs to be taken down a few notchs to free up the overall system. I'm not talking about the tiny airports, but the small/mid sized airports that run 6-15 flts per day into these major hubs. The legacys should be forced to run 76> a/c on these routes. Frequency needs to be taken out of the system in favor of efficiency. If you think B6 or FL couldn't be counted on to fill the gaps at these small/mid sized markets you are mistaken. Carriers like Spirit and F9 would also grow very quickly into many of the small/mid sized markets where the legacys don't have the 76> a/c.

imp: ​

 

[General Lee]

The service to the small cities would have to stay, otherwise the DOJ would never let it happen.

One of the shuttles would be trimmed, along with consolidation of major routes along the Eastern corridor. Comair is history. I see they are subpoenaing the merger proposal from US Air. They are suspicious that they will be chopped at the knees, and they are right. Republic will get the business.

You guys keep hoping that US Air will go elsewhere. It's very clear that US Air and UAL want to merge with someone. They could either dance with each other or look at CAL or NWA. Either way, once the domino's begin to fall....DL will be left on the outside looking in with no chance in hell of going to the dance. What do you think DL's future is if 4 other legacys decide to merge?

One thing the DOJ will look at with the help from the FAA is a way to free up the major hubs from the 50< a/c. This high frequency feeder system needs to be taken down a few notchs to free up the overall system. I'm not talking about the tiny airports, but the small/mid sized airports that run 6-15 flts per day into these major hubs. The legacys should be forced to run 76> a/c on these routes. Frequency needs to be taken out of the system in favor of efficiency. If you think B6 or FL couldn't be counted on to fill the gaps at these small/mid sized markets you are mistaken. Carriers like Spirit and F9 would also grow very quickly into many of the small/mid sized markets where the legacys don't have the 76> a/c.

imp: ​

So, we will keep the combined 5 daily RJs from DCA to Huntsville? You are dreaming. And, Airtran and JB will NOT fill in the gaps left over. Again, you are dreaming. If our SLC were to downsize (why have 3 hubs next to eachother? SLC/PHX/LAS?), would each Montana city still be served? Skywest will become a feeder for JB or AT? Riiiiiight. JB will send their E190s to Butte? More likely consumers will lose a choice and then have to go to DEN on UA Express, at a higher cost. Nah.... You can't debate this one.

And Lowecur, mergers may happen. But, dumb ones with route overlap, wrong fleets, and ones that have airlines still in the process of merging, might not.

Bye Bye---General Lee

 

[737 Pylt]

runin scared?

Better than runnin stupid!

737

 

[lowecur]

So, we will keep the combined 5 daily RJs from DCA to Huntsville? You are dreaming. And, Airtran and JB will NOT fill in the gaps left over. Again, you are dreaming. If our SLC were to downsize (why have 3 hubs next to eachother? SLC/PHX/LAS?), would each Montana city still be served? Skywest will become a feeder for JB or AT? Riiiiiight. JB will send their E190s to Butte? More likely consumers will lose a choice and then have to go to DEN on UA Express, at a higher cost. Nah.... You can't debate this one.

Bye Bye---General Lee

Knock, knock....is anyone home? Tiny cities will not lose air service, and the DOJ will mandate it. 50< a/c in Small/Mid Sized cities will need to be substituted with mainline a/c to free up the system. These are the cities Jetblue, Spirit, AirTran, Frontier, along with new startups will be glad to fill in the gaps with additional 2 to 4 mainliners to their hub markets. You'll notice presently JBLU does very nicely with 4-8 mainliners to NYC area from upstate, not the 10-15 flts per day on 50< a/c presently used by US Air, DL, and CAL. This is what's killing the efficiency in the system.

SLC and CVG will have mandated service to these tiny markets. They will no longer be as large as they are now, probably more in line with what PIT looks like.

I notice you didn't address the "what if" DL is the odd man out if 4 legacys combine. US Air/UAL are hot to do a merger with someone, and it's only a matter of time before it's all sorted out. DL needs to be in on one of those mergers to compete.

imp:​

 

[General Lee]

Knock, knock....is anyone home? Tiny cities will not lose air service, and the DOJ will mandate it. 50< a/c in Small/Mid Sized cities will need to be substituted with mainline a/c to free up the system. These are the cities Jetblue, Spirit, AirTran, Frontier, along with new startups will be glad to fill in the gaps with additional 2 to 4 mainliners to their hub markets. You'll notice presently JBLU does very nicely with 4-8 mainliners to NYC area from upstate, not the 10-15 flts per day on 50< a/c presently used by US Air, DL, and CAL. This is what's killing the efficiency in the system.

SLC and CVG will have mandated service to these tiny markets. They will no longer be as large as they are now, probably more in line with what PIT looks like.

I notice you didn't address the "what if" DL is the odd man out if 4 legacys combine. US Air/UAL are hot to do a merger with someone, and it's only a matter of time before it's all sorted out. DL needs to be in on one of those mergers to compete.

imp:​

Again, mergers will probably happen. But dumb ones with route overlap, wrong fleets, and carriers still in the process of merging, may not. And, with Oberstar incharge, he is the wild card. He may be against all mergers since according to his CNBC interview, most airlines are doing well now.


Bye Bye--General Lee

 

[lowecur]

And, with Oberstar incharge, he is the wild card. He may be against all mergers since according to his CNBC interview, most airlines are doing well now.


Bye Bye--General Lee

The man is a bonafide idiot if he doesn't think consolidation and LCC expansion is cheaper than rewiring the present system to manage the present inefficiency of 50< seat a/c.

imp:​

 

[xanderman]

....

Well guys.... As much as it seriously concerns me as a AWA/US pilot I have a to say this deal has a better chance of succeeding than not. Parker has a way of getting the right people onboard. It's a big sh!t sandwich and eventually we are all gonna have to take a bite....

Andy

 

[lowecur]

Well guys.... As much as it seriously concerns me as a AWA/US pilot I have a to say this deal has a better chance of succeeding than not. Parker has a way of getting the right people onboard. It's a big sh!t sandwich and eventually we are all gonna have to take a bite....

Andy

Neotrend leaders like Doug Parker understand that streamlining the system is the way to go. Economies of Scale will have an enormous effect in favor of the mainline pilots for any participating carrier. Profits will be outrageous, which can only transfer over to employee groups within the airline as their contracts come due. Eliminating the present 50< seat feed system is a must over the next 10 years, if the system is to maintain viability. The key will be patience and trust between mgt and employees. Successful airlines will be the ones where mgt and employees both put the airline ahead of their own self interests. Their reward will be pay rates and profits that will dwarf todays numbers. Those that are impatient and fail to put the airline first will be relegated to walk the same path previously taken.

imp:​

 

[Flopgut]

WHY is it the responsibility of the legacy carriers to sustain airline connectivity in very small markets? Recap: Legacy airline mergers=BAD because competition in rural MS might suffer, so they get stopped butt cold?! Here's an idea: FORCE an LCC to fly to some of the quasi/not profitable cities! Preclude a legacy involved merger, or impose an unprofitable city pair on an LCC, it's NO different! Free market forces are betrayed either way.

Let mergers happen without artificail input from regualtory oversight and control and the business will fix itself.

 

[Marko Ramius]

Great article......essentially meaningless though

Is it of any consequence to you guys/gals at DL(or the papers for that matter) that DOJ never rejected UsAirways/United? They stonewalled the review process because of the election initially, and then because Bush's DOJ appointee didn't take office until spring 2001. TWA/AA was already a done deal and there was little doubt that United/Airways was going down as well. The only question was what stipulations DOJ was going to put on it. UA knew this as well which is why they pulled out of the deal before DOJ could rule. They got cold feet about what they were getting for $60 a share and no longer wanted the deal. If they thought DOJ was going to turn it down, they could have just waited another month, let DOJ block it, and not owe Wolf and Airways a ton of cash. Instead they chose to pull out, attempt to falsely blame DOJ, and ended up forking over the loot anyway.

I can completely understand why DL employees don't want this deal, but I cannot understand why you're hanging your hats on something that has little basis in reality. I don't believe the DOJ has ever rejected an airline merger, including TWA/Ozark which I believe is still the reigning king for overlap with the combined entity controlling something like 95% of STL and no failing carrier doctrine in sight. They just come up with stipulations, just like they'll do here if this deal gets approved in BK court. As far as Oberstar and other politicians, I think the surprise so far has been the overall silence. I think this merger is bigger than UA/UsAirways would have been, yet there hasn't been nearly as much moaning and complaining from politicians and action groups on DL/UsAirways' proposal as there was back in 2000/2001. Even with all of that, the deal was likely to go through. Back then, the politicians that supported the deal like Specter, and Rockerfeller were conspicous by there support, this time people like Oberstar are conspicous because of their opposition.

PS. When has trusting politicians and big business to look out for what you want ever been effective? You're far more likely to get left outside of the boardroom like Thomas Callaghan.

 

[FDJ2]

Is it of any consequence to you guys/gals at DL(or the papers for that matter) that DOJ never rejected UsAirways/United? .

Justice Department Rejects Proposed US Airways, United Airlines Merger.

From: Knight Ridder/Tribune Business News | Date: July 28, 2001

The Charlotte Observer, N.C. Knight Ridder/Tribune Business News
Jul. 28--The US Airways deal is dead.
The Justice Department strongly rejected United Airlines' planned $12.3 billion takeover of US Airways Friday, saying it would have reduced competition, raised fares and harmed airline passengers.
"While mergers can further competition, this one does not," said Attorney General John Ashcroft. "If this acquisition were allowed to proceed, millions of consumers would have little choice but to pay higher fares and accept lower quality air service."

 

[General Lee]

The man is a bonafide idiot if he doesn't think consolidation and LCC expansion is cheaper than rewiring the present system to manage the present inefficiency of 50< seat a/c.

imp:​

So, put two completely fine companies together, get rid of the excess (and higher paying jobs--local jobs), and have the LCCs come in and start anew at the local stations with lower paying jobs? That is what you want, right? Two companies that are doing fine on their own (each recording profits), with healthy load factors, and merging and divesting of assests that will be taken over by cheaper companies? JB has 12 rampers at LAS, and only 2 get health benefits. Is that good for the local economy? You think so. You just want more E190 orders. Oberstar knows this because he represents MN, where NWA is based. He knows a merger could take the NWA headquarters (and the jobs) away. There could still be a base, but maybe not the headquarters. Those are his constituents.


Bye Bye--General Lee

 

[General Lee]

Justice Department Rejects Proposed US Airways, United Airlines Merger.

From: Knight Ridder/Tribune Business News | Date: July 28, 2001

The Charlotte Observer, N.C. Knight Ridder/Tribune Business News
Jul. 28--The US Airways deal is dead.
The Justice Department strongly rejected United Airlines' planned $12.3 billion takeover of US Airways Friday, saying it would have reduced competition, raised fares and harmed airline passengers.
"While mergers can further competition, this one does not," said Attorney General John Ashcroft. "If this acquisition were allowed to proceed, millions of consumers would have little choice but to pay higher fares and accept lower quality air service."

Any comments, Marco? Hello? Echo, echo....(good job FDJ2)


"As far as Oberstar and other politicians, I think the surprise so far has been the overall silence."---Marco Ramius

You didn't see Oberstar the day USair made it public (Nov 15th)? He stated USAir's bid was "nonsense." Silence?




Bye Bye--General Lee

 

[General Lee]

Neotrend leaders like Doug Parker understand that streamlining the system is the way to go. Economies of Scale will have an enormous effect in favor of the mainline pilots for any participating carrier. Profits will be outrageous, which can only transfer over to employee groups within the airline as their contracts come due. Eliminating the present 50< seat feed system is a must over the next 10 years, if the system is to maintain viability. The key will be patience and trust between mgt and employees. Successful airlines will be the ones where mgt and employees both put the airline ahead of their own self interests. Their reward will be pay rates and profits that will dwarf todays numbers. Those that are impatient and fail to put the airline first will be relegated to walk the same path previously taken.

imp:​

Streamlining? There are NO synergies with a DL and US merge. None. The fleets are totally different. They can't even merge their own seniority lists. Did you hear about the 600 pilots picketing the other day at PHL and PHX? They are mad as heck. Why should USAir go out and buy another company, and not work with them at the bargaining table like they PROMISED? Huh? And small communities would lose service or choice, and SW/AT/JB would not enter into all of those communities. You are still dreaming..... Streamlining? So, if a small community with only USAir and DL service (Hunington, WV for example) has to go to one (reducing CHOICE), the streamlining would include cutting half of the workers out (half of the rampers, gate agents, etc all lose their jobs). Do you think local polititions want that? Streamlining can hurt communities. NEOTREND leaders, my arse! Where did you come up with that one? How about axemen?

Bye Bye--General Lee

 

[Marko Ramius]

Any comments, Marco? Hello? Echo, echo....(good job FDJ2)


"As far as Oberstar and other politicians, I think the surprise so far has been the overall silence."---Marco Ramius

You didn't see Oberstar the day USair made it public (Nov 15th)? He stated USAir's bid was "nonsense." Silence?




Bye Bye--General Lee

General it comes down to big business and politics, like most things these days, and neither one of these entities tend to tell the whole truth and nothing but. They tend to spin things for public and employee consumption and to avoid lawsuits. We never get the total truth about things like Enron, Halliburton, 767 tanker deal, etc. Spin doesn't work well for us pilots who like things in black and white, and hang on the words of these people literally. You rail at the SkyWest guys all the time about their gulliability when it comes to unions and what's going on with ASA and probably with Comair in the near future. You have a point but don't realize that you are guilty of it yourself as well-we all are at one time or another.

Anyway, on to your points. The endgame of the UA/UsAirways deal from @ May 2001 on was basically a charade. UA got through its summer of fun in 2000 and then got down the business of the merger in late 2000 early 2001. They tried a hail mary in January 2001 to see if they could get the outgoing lame duck DOJ head and staff to bite off with some minimal changes to the DcAir deal, which DOJ predictably rejected. During the time they were waiting for the new guy, Hewitt Pate, to get involved the economy started to tank and they began to realize that they were paying too much for a bad deal. The sentiment grew to a head by the shareholders meeting in May, which is about the time UA management internally had had enough. They sent home the merger teams indefinately, told the DOJ they needed more time to work on things, and basically looked like they were going to let the Aug. 1 deadline come and go and walk away from the deal. Problem was that Wolf may be jerk, but he isn't an idiot and more importantly he and Gangwal weren't about to start working for a living. The deal called for due dilligance to get approvals by both carriers, and he threatened to sue UA over that for alot more than the termination fee. I believe that there was language that gave Wolf and Gangwal more money if they saw the deal through to a DOJ termination(remember all the hubub about their pay and bonus when the deal went south?). So UA reluctantly agreed to come back in to a deal they no longer wanted. UA then basically submitted the same plan from January which they knew had no chance of approval so that they could get out of the deal for the least amount of money and avoid additional lawsuits. All UA had to do was open up the DcAir assets to any interested bidder(s) and the deal would have been done despite the mountain of objections. Fair? no. A good thing? no. But it would have been reality, because if you read between the lines on Justice's comments they basically say the deal can happen with the appropriate concessions. The PA attorney general just came out and said it.

I think all of this is one of the more suddle reasons Parker wants this deal done in BK. You may not like him, but you cannot possibly believe that you or any of us have thought this through more than him and his team before proceeding. Someone will jump in here if I'm wrong, but I believe the way the UsAirways deal went down was like this: creditors/shareholders approve the exit plan, judge approves plan, exit date is set for 30 days later and BK exit and deal closure occur simultaneously. Now after the judge approves the plan, the companies are not merged yet but Parker and crew are basically in charge of both. This is key for him because, I don't think he is counting on DL management to help him present this deal to DOJ positively! Parker will likely let DOJ point out what they want to see done to approve it, and he'll do it. Under that scenario he won't be the hatchet man, and he can cut out exactly the minimum that DOJ wants-that's all UA would have done if they really wanted that deal.

As far as Oberstar et al go, I know that they object just like they did in 2000. I wasn't disputing that. What I was trying to convey was that there isn't as widespread of an opposition from politicians and action groups as there was on UA/USA. Some have voiced their opinion, the majority have remained silent/neutral so far. Even so, all of the angst over US/UA would have been for naught if UA wanted the deal and I wouldn't expect this deal to be blocked by anyone other than DL's secured creditors and by extension the judge. Those parties are basically a wild card this early in the game, so who knows.

Lastly, I know mergers suck booty but there is no need to act like you're at war just because some people have different info/opinions than yourself. I don't think anyone here is really attacking you yet you act like someone stole your GI Joe with the kung fu grip. Parker is, the FI community is not.

http://www.usdoj.gov/atr/public/press_releases/2001/8701.htm
http://news.bbc.co.uk/2/hi/business/1418417.stm
http://www.bizjournals.com/pittsburgh/stories/2001/07/23/daily43.html

 

[General Lee]

Marko,

Stop right there. The Creditors who will make the decision are full of DL allies. They want a stand alone carrier. That is why some bondholders want to create a splinter group--to have a "say" in what may happen. Doesn't really matter though, since the creditor committee will make the decision. Dalpa is the largest single unsecured creditor on that committee. The others include Boeing, Pratt, Coke, Fidelity, and the PBGC.

Parker can try all he wants, but none of those have to agree with him. Oberstar is just the icing on the cake, since his views about mergers are well known, and he will be the new Chairman of the Transportation Sub-committee, looking into this merger. Everything else is moot.


Bye Bye--General Lee

 

[Flopgut]

Before UAL went after USAir they wanted America West. That too was going to get squelched by oversight. They weren't going to let an airline that large and successful become larger although that was a logical market move. Deregulation's design was ultra low fares but we have exceeded our mandate. Heck with the consumer! Do they want what they have or what they are paying for! Flying somewhere is not only cheaper than staying at home, it's SAFER than staying at home!

Mergers stink! Oversight seems primed to favor the more successful carrier being consumed by the less so, at least as a not so distant second to the all important LCC! Keep the seats cheap and the airline help hungry is all oversight cares! BUT, if a few mergers can happen and we get down to two or three majors, we'll squeeze down LCC and start charging what we want for airline tickets...That would be nice...

 

[FDJ2]

"The last major domestic airline merger DOJ investigated was in 2000-2001, United's proposed acquisition of US Airways. United-USAir provides several examples of competitive problems that can arise in airline mergers:

1. United had a large base of operations at Washington Dulles, and USAir at Washington Reagan and BWI. Therefore they were the only two significant competitors for nonstop service from the Washington area to a number of cities, such as Rochester and New Orleans.

2. Similarly, the two were the most significant nonstop carriers in a number of hub-hub markets, including Philadelphia-Los Angeles, Philadelphia-San Francisco, Philadelphia-Denver, and Pittsburgh-Washington.

3. With their strong east coast hubs, these were the only two carriers, or two of three, connecting some northeastern cities (such as Burlington and Albany) with some southeastern cities (like Greensboro and Roanoke).

4. More generally, the merger increased concentration in large business centers along the east coast, possibly affecting bidding for corporate and government contracts.

5. Finally, the merger would have lessened competition in several transatlantic markets.

Competitive problems like these convinced us that this merger would substantially lessen competition in numerous markets. DOJ announced it would sue to block this transaction, and United and USAir abandoned the deal."

Remarks by​

J. Bruce McDonald
Deputy Assistant Attorney General
Antitrust Division
U.S. Department of Justice