US Department of Justice Gets a Cranky Jackass Award for Its Lawsuit to Stop the US Airways/American Merger

The shock of the year was delivered yesterday when the US Department of Justice (DOJ) announced that it was suing to stop the merger between American and US Airways from going ahead. While I think everyone figured that there would be some concessions required at slot-restricted Washington/National airport, nobody predicted that the DOJ would really try to block this in its entirety. The response has been nearly unanimous — this is insane. And for that, the DOJ has earned itselfCrazy Jackass Award a Cranky Crazy Jackass award.

The Merger is On Hold, Temporarily
Let’s start with what this means for the merger. The DOJ has decided it wants to block the merger, and to do that, it has to file a lawsuit. That is what happened yesterday. There will now be a million meetings back and forth seeing if they can hammer out some sort of agreement around concessions to get the DOJ to withdraw its lawsuit. If that happens, then it’ll be back on track. If it doesn’t, it’ll go to court, and they’ll have to fight it out. That could take months.

Why is this happening right now? Well, the bankruptcy judge was about to approve the merger at a hearing tomorrow, so DOJ had to act now if it wanted to butt in. It did. This could mean that they just wanted more time to conclude an agreement with the new American, and this is the way to do it. But the wording that’s coming out of the DOJ right now is so strong (read this transcript) that they are trying to make it clear they want this thing called off. Of course, this is Washington so you can never take anything at face value anyway. It could just be politics and negotiation. The only thing we know is that the merger isn’t closing in the next couple weeks. They’ll be lucky to get it done by the end of the year, if at all.

Sloppy Arguments
If you’d like, you can read the 56-page complaint filed by the DOJ here, but I might recommend against it. Personally, this lawsuit bothers me a lot. Why is that? Because when I see the government delve into something that I actually know about, and I see how absolutely amateurish and inaccurate the arguments are, it makes me lose faith in our government’s ability to do anything.

There are several arguments being laid out, and I’m going to post tomorrow with a point-by-point review. But the DOJ really seems to have outdone itself this time. I like the first impression from Jamie Baker (analyst with J.P. Morgan).

While we’ve not thoroughly digested all the legal merits of a proposed suit(s), our first interpretation is that DOJ has significantly altered its usual [mergers and acquisitions] analysis to introduce connecting markets and baggage fees into its calculus. As such, it is difficult for us to imagine how both parties could offer any meaningful regulatory appeasement.

It really does appear that DOJ has gone off the rails. The best way to sum up the argument is that airlines should all be punished for trying to be successful enterprises. The complaint is filled with talk about how capacity has shrunk and fares have risen. They think this merger will result in more of the same. But what they’ve failed to recognize is that the airline industry of the past was a sickly mess. You had too many cooks in the kitchen and some of them had the cooking skills of a 12-year-old. So airlines pushed in too much capacity just to gain market share, then they had to discount fares and nobody made money. It was a mess.

Apparently the DOJ likes that plan. It’s sad to think this is how the government looks at private industry. If you want to decide that the airline industry is a public utility, then go all-in and fully regulate it. (Fares will rise, but I would respect the argument.) Otherwise, this nanny-state-style semi-regulation will keep the industry from ever becoming truly healthy.

A Lawsuit That Will Do the Reverse of What It’s Designed to Do
What makes this worse is that all the other big mergers have been approved. Delta and United are now so much bigger and have so much more coverage than either American or US Airways, that they are in a different class. Neither American nor US Airways can adequately compete with those two alone. So by denying the ability for American and US Airways to become one, DOJ is actually hurting competition by ensuring that there are only two competitors at the top instead of three.

What I find really frustrating is how the DOJ seems to have decided to take some arguments at face value while refuting others, solely because it helps their complaint and not for legitimate reasons. They have no problem accepting historical statements from American and US Airways that they’ll be fine as standalone airlines. DOJ applies no rigor to see if that’s actually the case. But they refuse to accept the merger arguments being made by both airlines. That doesn’t make much sense.

I do believe US Airways can survive as a standalone airline; a niche carrier that earns less revenue and therefore has to keep its costs lower. That means labor gets paid less, so they don’t really like this plan either.

I have a more difficult time imagining American surviving on its own. It simply can’t provide the breadth and depth needed to compete with Delta and United (once it gets its act together) on a global scale. What’s more, the very plans to provide substantial capacity increases (praised by DOJ), are misguided and likely to hurt not just American but the entire industry, if seen to fruition. If American remains under current management, I do have concerns about its ability to succeed in the long run.

But is that really for DOJ to judge? If the two airlines can combine to create a better, more profitable company, then that should be their prerogative, assuming the anti-competitive effects aren’t too great. DOJ has used flawed analysis to try to prove that this is anti-competitive, and I’ll show more about that tomorrow.

Something Smells
Ultimately, DOJ doesn’t want this to happen, and it’s hard to figure out why, exactly. Something doesn’t smell right. Maybe this will give the government a little good press in the eyes of the common man after so much bad press coming down the pipe? Maybe there are some stakeholders who really don’t want this to happen and have leaned on their contacts to make that the case? Or maybe some of those parties are trying to extract a pound of flesh before the merger goes through? Regardless of the motivation, what the DOJ has done is shameful. It has put together some half-assed arguments that are not supported by fact.

I’ll get into these arguments more tomorrow, but when the government decides to cut and paste screenshots from a specific flight search on a single day as evidence that fares are lower on one airline, it’s not even trying. (And it’s way worse than that, since the truth is the complete opposite when you look at DOT fare data.)

Where does this leave us? We sit and wait. With any luck, this will actually just be DOJ rattling its cage to get more concessions and we’ll have an agreement eventually. But the way they’re talking, we might be in for a long slog on this.

More tomorrow.

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135 Comments on "US Department of Justice Gets a Cranky Jackass Award for Its Lawsuit to Stop the US Airways/American Merger"

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AA fan Chicago
Guest
Cranky – I think your thoughts are spot-on and I had similar thoughts yesterday when I read the new release as well as the actual filing. In short, I just don’t get it. The DOJ allowed two similar mergers to occur (and one could make an argument that the Southwest/AirTran was also similar in that in combined the two largest “low cost” carriers) and raised few red flags but now AA/US is an issue? As you commented, this essentially ensures that United and Delta will maintain an oligopoly as 1) AA and US don’t have the scope or network to… Read more »
Jumpseat
Guest

Cranky I would not call you an industry expert but a person who gives his unexpert opinion about the industry. I have 20 years experience and beg you to be objective let this play out in the courts. Are you pro USAirways by any chance. Most AA employees want nothing to do with drunk Dougie or his hodge podge carrier us scareways!!!!!!

Susan N
Guest

If you have 20 years experience, why do you write and sound like a 5 year old?

Hunter
Guest

Please define your criteria/requirement for someone to be an industry expert?

yo
Guest

Re: Drunk Dougie

Grow the hell up. This isn’t a union thug board, take that talk elsewhere.

Alex
Guest

I think this raises an interesting point Cranky. Do you think that the unions are leaning on the Obama administration to block this merger? I suspect they may be the “stakeholders who really don?t want this to happen” you talk about.

Jumpseat
Guest

Hope it doesnt go through Cranky you get the ultimate Jackass award . AA employees want no part of Drunk Dougie bring on JetBlue or Alaska Hawaiian f

Ben G
Guest

Sorry but you’re the one being the cranky jackass here. How can you say that AA employees want no part of this when the 3 major unions have all been onboard since the very beginning of this process.

Kathryn Creedy
Guest
Good analysis, Brett. What the DOJ action says to me is that DOJ hates Doug Parker. Remember the trouble they had with the slot swap? The other thing this says to me is that DOJ is completely ignorant of the airline industry. The basis of the price increases in the past five years began with the price of oil. You are right that the airline industry was a crazy, stupid mess when it was ruled by gaining market share instead of profits. But you hit the nail on the head when you said DOJ liked the crazy, stupid mess because… Read more »
DC
Guest

Fuel prices yes, but also discipline in capacity growth as Cranky has noted in previous posts.

Southeasterner
Guest

“If they want lower fares then they should talk to the fuel speculators.”

They did but a Republican congress and Democratic president (Clinton) overturned Glass Steagall and a Democratic congress and Republican president (Bush) put the commodities modernization act through.

The idea of letting the financial sector take over commodity prices were some of the few major pieces of bi-partisan legislation to make it through our divided government.

DC
Guest

Brett – What do you make of the Texas and Arizona Attorneys General supporting the action? Was similar support shown for previous large mergers?

Hunter
Guest

I think that would have been expected even without a DOJ lawsuit, particularly with AZ. No state wants to lose a corporate HQ. The TX support is a little more curious, but probably related to overall job reductions that are likely as a result of the merger. These seem more a case of putting on a show for the constituents who may be directly and negatively affected by the merger.

XJT DX
Guest

Surely you can’t be serious… As comical as this lawsuit is it couldn’t be true.

I now truly understand why there’s so much complaining about the government. The only saving grace is that even if it takes months, the merger should still go through.

trackback

[…] While not a legal analysis, from an argumentative perspective the DOJ filing is unpersuasive. Cranky Flier goes further, describing the filing as the DOJ going off the rails. […]

noahkimmel
Member
It is sickening that one of the highlighted routes in the DOJ argument was CLT-DFW. The idea that WN or NK wouldnt start that route the day it goes from 2 carriers to 1 and fares rise, is crazy. And the other highlighted fares for connecting markets don’t give dates for search or advance purchase. It is simply a snapshot with no context! Lastly, hasn’t the total cost of flying remained fairly stable in real dollars in the past decade? Geeez! Even worse, with cost increases, the airlines have managed to do well. It’s sad that the government cannot distinuish… Read more »
garrigan
Guest

“Even worse, with cost increases, the airlines have managed to do well”
If they’re doing well then why merge? “Well” is good enough for me.

noahkimmel
Member
well for 1-2 years, maybe. Remember, when combined, since deregulation, airlines have lost billions. Worse, when they fail, the debt and obligations fall on other companies, workers, or worse, the taxpayer by picking up things like failed pensions. So no, “well”, over an extremely short time period of time is not good enough. Wiping out debt just to re-create it is not long term sustainable. Worse, we punish an airline, AA which tried its hardest not to go into BK, and US (while no one likes Doug Parker), is trying to be profitable in an extremely challenging industry and has… Read more »
Grover Jones
Guest

Check your heading: A Lawsuit “That” not “The”

garrigan
Guest
You’re right about the airlines wanting to merge so they can be more profitable. An email has surfaced that said the main reason for the merger was that they could raise fares and thus make higher profits. And that’s as it should be. Companies want to make money. It’s just that pubic transportation is a little different than, say, making furniture or even a car. It affects us, the public. Have you been to Cincinnati Airport lately? It’s big, centrally located, and a ghost town. In the ten plus years I’ve lived in the Lexington, KY area only one airline… Read more »
noahkimmel
Member
But don’t forget–many of those connections will still be available. Many of those customers will be given more choice where to connect. Many of those 1600 markets are not connections that the people would end up taking anyway. Just because US or AA puts a price in the market, does not mean it has any meaningful share on the route. A 3 stop itinerary for $300 more is not competition for 99% of the flying public. The “non-stakeholders” you refer to are given access to a larger domestic and international route network. Even if capacity discipline cuts frequencies, cities altogether… Read more »
M P
Guest
@jumpseat…your rationale is immature and foolish…If AA employees were faced with the following choices 1) A merger with US Air and a job or 2) no merger, no job, i think that is a pretty clear choice. Brett did a great writeup of a horrible analysis on behalf of the government, who certainly deserves an award for sheer s….p…ty. There are a lot of individuals who think that airline mergers=higher prices and less competition, and while there is some historical truth to the idea that airline companies do collude to raise fares, add fees, etc. But the bottom line is… Read more »
Sean S.
Guest
But what they?ve failed to recognize is that the airline industry of the past was a sickly mess. You had too many cooks in the kitchen and some of them had the cooking skills of a 12-year-old. So airlines pushed in too much capacity just to gain market share, then they had to discount fares and nobody made money. It was a mess. Surprisingly the “health” of the market is not the governments concern, but rather whether or not it is competitive. I’ve never seen an industry where the consumers argue for being charged MORE ostensibly for some abstract concern… Read more »
Southeasterner
Guest

Agreed. Cranky missed the fact that Southwest was making money while the big guys were losing billions of dollars. While the likes of United, American, and Delta put the blame on the unions (instead of failed strategies that focused on market share over financial returns), Southwest became one of the largest union employers in the US and still made money.

By combining inefficient airlines and making them too big to fail, requiring bailouts every 5-10 years through bankruptcy protection, we aren’t doing ourselves any favors. I’m starting to agree with the DOJ on this one.

Jason H
Guest

However, US and AA are both individually too big to fail as they are right now (both have or are going through bankruptcy), so how would combining them to make a carrier that’s more likely to be successful going to make anything worse?

Southeasterner
Guest

Based on PanAm, TWA and all the major airlines I don’t think we have a shred of evidence that can support the idea that combining carriers will make them more likely to be successful. If anything it has been the opposite with profitable carriers merging or being absorbed into poorly structured mergers that lead to failure.

Jason H
Guest

Based on DL/NW and US/America West, I’d definitely say that there’s evidence in recent years. Both airlines are quite profitable and doing better than either of their predecessors were in the few years before the merger.
PanAm and other mergers or failures were decades ago when the air travel market was very different. As for TWA, it was essentially absorbed into AA, and nobody was any worse off (AA did fine, TWA couldn’t have survived alone).

MeanMeosh
Guest
I strongly suspect there is something else going on here that we aren’t seeing. The fact that Texas’ AG Greg Abbott, who wouldn’t in a million years be on Eric Holder’s Christmas card list, is in on the action raises my suspicions even further. I haven’t heard anything through the local grapevine, but I’m suspecting that someone influential (more likely several influential people) in the DFW business community either got wind of something and/or didn’t get the answers they wanted to hear from Doug Parker, and so leaned on the powers that be to throw sand in the gears of… Read more »
Nun
Guest

> “There will now be a million meetings…”

I was under the impression there had already been meetings before the suit was filed. Is that not the case?

I can’t see AA wanting to fight this. They need to exit bankruptcy proceedings ASAP and move on, not sit in court forever.

mstengel
Member

I think they will definitely fight this. A major part of their reorganization plan, which has to be approved by the bankruptcy judge, is to merge with US Airways. The DOJ action is going to delay their exit from bankruptcy now, and they will sure as hell fight against that.

DesertGhost
Guest

Well put, Brett. I guess the DOJ wants to keep the airline industry in continual bankruptcy.

David SF eastbay
Member

Sounds like some people in DC got screwed one time by AA or US so don’t want to make life easy for them.

Since AA/US don’t have large hubs in the same city, and except for the DCA issue there shouldn’t be a problem with a merger. If there were no issues on service/fares with UA/CO or NW/DL then there wouldn’t be with AA/US.

Rob McMillin
Guest

The cynic in me sees this as a bid for more campaign contributions for the 2016 election cycle.

Southeasterner
Guest

“So airlines pushed in too much capacity just to gain market share, then they had to discount fares and nobody made money.”

Umm except of course Southwest who is the second largest domestic airline in terms of seat-miles.

I think the concern may be that by propping up Us Airways/American, Delta, and United you are encouraging inefficiencies and preventing more efficient airlines (the likes of SWA) from entering the market.

yo
Guest

It is a BS lawsuit. They let the last few ones in, but not this one? Of course, SW will whine and end up getting more precious DCA slots out of this, because people still believe all the PR that Southwest is the best, blah blah blah…

Rob
Guest
You could not be more wrong Brett, in this case. I like your tweets and your opinions usually, but too say that allowing another mega merger is good and that this will be good for customers is so screwed up. You are listening to opinions of analysts that have stock in the game make these opinions, ands instead you should use your own logic in your head. Allowing US Air and AA to merge creates one LESS airline, its that simple. All the gates between the two, all the slots between the two will be combined to one. There will… Read more »
yo
Guest

But, without the merger AA would probably go out of business.

And you end up with one LESS airline (and lots of people out of work)

If the merger goes through, and airfares go up, the ultra LCC’s will take advantage and create more competition, or someone will start up a new carrier. That is how the free market works.

scott.wintner
Member
If that were true, you’d be correct. However, there’s no evidence AA couldn’t survive alone. In fact, it was AA’s preference all along to remain a stand-alone carrier and grow on its own without consolidation. The whole merger was pushed by US. DOJ cites AA sources as confirming as much. While those AA sources may be deluding themselves, that’s not DOJ’s problem. It’s nearly impossible for a new-entrant carrier to compete in the market today — largely due to the “CMI” factor that the DOJ cites in their lawsuit. In simple economic terms, the principles you state here are sound…… Read more »
scott.wintner
Member

In another odd moment a-typical of CF, the pull quote from JPM analyst Jamie Baker was completely out of left field… it has nothing to do with what CF was writing about where that quote appears. Baker’s comment, simply, was that the nature of DOJ’s complaint will make it hard — if not impossible — for US/AA to offer-up concessions that appease DOJ’s concerns. Baker does not pass judgement on DOJ’s action, which is what CF was doing in the context he cites Baker. Very odd.

sjc user
Guest

If I’m an executive or shareholder in DL or UA, I’m really happy right now because they duopoly they have is safe.

alex
Guest

Merger is good for everyone in the industry. That is why DL and UA stocks got hammered on the news. So I don’t think the shareholders were happy.

Rob
Guest
Let me say the Delta / NW merger should have alos been stopped and so should the Continental UA merger. So yes AA will be smaller, along with USAIR, so what! each of these companies will be able to make money, even smaller than Delta and UA..They each control larger market segments, and that can continue regardless of if some AHOLE institutional investor gets his stock bump from a merger. People this is all just Wallstreet BS, nothing more. Competition is always better than less competition, except on Walstreet, where collusion and manipulation are always better than honest business and… Read more »
A
Guest
Agreed. Using the DOJ argument, which I don’t 100% disagree with, all the mergers should’ve been stopped as there is ALWAYS overlap and it technically reduces competition. Think about it, if all mergers post-deregulation never happened I don’t think the airline landscape would be all that different. Poorly run airlines would fail – go CHAPTER 7 – and the healthy airlines would pick up their assets. Not all that long ago AA was the “biggest” airline and the only legacy not in bankruptcy. Without the INSANE bankruptcy laws we have in the USA American Airlines would be the top dog… Read more »
mstengel
Member

“The best way to sum up the argument is that airlines should all be punished for trying to be successful enterprises.”

Holy crap. Thank you. That has been screaming in my head since yesterday!!

kozmaterry
Member

Cranky is way off base on this one

The Anti-trust law is complex, but as a student of the law and the industry this is needed. The is not a speed bump. AA and Us air will make it on their own. Any mergers will ow be small carriers. The drop to a big 3 from a big 5 is major in any industry.

Rob
Guest
That is such a faulty argument, it just stinks of stupidity, I disagree completly Mike… Success is not simply merging two already large companies just so that they don’t have to compete against each other, so that you can artificially raise prices and restrict resources.. America defines success on Wallstreet standards these days, as you have chosen to do. Wallstreet is hardly an honest,trustworthy entity these days. There are NO shortcuts to success, there are only schemes and manipulation that always ends up screwing someone, in this case higher airfares FOR SURE. If one of these airlines really wants to… Read more »
scott.wintner
Member
I rarely disagree strongly — if at all — with CF, but this post lacks CF’s usual sound logic and reason. “The best way to sum up the argument is that airlines should all be punished for trying to be successful enterprises.” So, Congress was punishing American enterprises for being successful when it passed the Sherman Act in 1890? Of course airlines will do whatever they can to grow profits and return value to shareholders — which is why it’s so critical that our government function as a counterbalance. It was one thing when the airline industry was teetering on… Read more »
Joe
Guest

I think breaking up true monopolies like Standard Oil and US Steel is a bit different than this case.

If the merger goes through, there will be 4 large players in the domestic market (AA, UA, DL, WN) to go along with some smaller players (Alaska, Jet Blue, . . .). If a marketplace (here, the domestic airline industry) has 4 competitors + others, I fail to see how it is anti-competitive. If the DOJ is upset about airlines colluding now, how does that change by not allowing the merger to go through?

Consumer Mike
Guest
It is refreshing to finally see there are others, such as Rob and Scott, who also follow Cranky, have not bought into the mega merger mania in different industries over the last few years. Banking, Oil, Wall Street, Broadcasting AND Airlines. I think that, in this case, Cranky should have awarded himself the “AWARD”. As CF has stated, his blog is for voicing opinions on different airline issues. So, here is mine: At times I feel that for some reason Cranky sounds like a cheer leader for Parker, CEO of US AIR. If anyone really needs this merger it is… Read more »
Hillrider
Guest
The core American ideal of success is not corporatism, it is free market. Kudos to the DOJ for not succombing to the Wall Street screw-the-citizen (so we can make money) mentality. They definitely got DL/NW wrong UA/CO (remember those execs who went in front of Congress telling everyone how they would not reduce services to their various hubs? Nope, it was just a lie), but show that they can learn from their past mistakes. And what’s this whining about the analysis actually reflecting the way people fly? I.e., by sometimes connecting and often paying bag fees? If they did not… Read more »
Bill from DC
Guest

Looks like somebody at DOJ is bucking for a promotion. I bet it’s that pederast Hanrahan.

Hillrider
Guest

Anybody who thought that this was pro-consumer have their head examined.

From the DOJ complaint:

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.

“US Airways? own documents estimate that ?fee harmonization? would generate an additional $280 million in revenue annually?directly harming consumers by the same amount.” The complaint explains that by “fee harmonization” they meant increasing fees charged to consumers.

Hillrider
Guest

>> But what they?ve failed to recognize is that the airline industry of the past was a sickly mess. You had too many cooks in the kitchen and some of them had the cooking skills of a 12-year-old. So airlines pushed in too much capacity just to gain market share, then they had to discount fares and nobody made money. It was a mess.

Nobody compels you or me to buy airline stocks or bonds.

Guaranteeing investor’s returns in a particular sector is certainly not the government’s business. Maintaining free markets everywhere is.

Rob
Guest

The DOJ is specifically charged to ensure a competitive, free marketplace. They are doing their job in this case and the finally did it right. They should never have allowed the last two mergers either.

Joe
Guest

But can AA survive on its own with it plan of large capacity increases, a plan that has routinely failed in the past? If AA goes down and US is marginalized because they are unable to compete with UA and DL, has a competitive marketplace been achieved?

serfty
Guest

AA looked to be doing well under Ch11 before Parker became involved – if not for the merger they would be well on the way to exiting bankruptcy protection, if not already.

It will be interesting Horton’s take on this.

Peter Mac
Member
When I heard about the DOJ filing suit I laughed. Being now quite cynical lately about this government in general and this administration in particular, I immediately concluded that this is ‘thus politics’ at work. This is extortion, plain and simple. Someone, somewhere is looking for ‘something’ . The administration has simply no clue how this works and is being a bully. (thought they had a campaign on against that) What they don’t have the mental capacity to grasp here is that if this merger doesn’t go through, quite possibly, AA can go out of business totally. Then, please someone… Read more »
Rob
Guest
You could not be more wrong about this. You are totally uninformed about how the DOJ works and what they are charged by Congress to do. You make it sound like the White House is pulling strings here when one of the main jobs of the DOJ is to make sure the marketplace remains competitive. Having 5 carriers is MORE competitive than 3. I dare you to dispute this. Hence the intervention by the DOJ. Wall Street would have you think this merger is just the free market operating, but this is nothing more than some rich investors trying to… Read more »
Peter Mac
Member

Rob: If it sounds like I think the White House is pulling strings then my message did get through, 5×5. The DOJ in consort with the White House has been acting more like a criminal activity created and bred in the Chicago ghetto then the professional guardian of the US Constitution. Shame on them both

Peter Mac
Member

sorry, that should have read “thug politics”

jaybru
Member

I was losing sleep last night worrying that poor Cranky might not be able to find a topic for today’s post.

Ahh, I’m feeling better, now! Shouldn’t have worried.

And of course he’s got that little princess to take care of, but “why is Daddy running around kicking and screaming again? Must be one of those nasty commenters questioning his experience again, I suppose!”

Jim
Guest

Cranky, while I respect your argument, I have to say that your first point is a bit off. The airline industry of the past was a sickly mess, but at the moment it is quite healthy. Most if not all of the major carriers are turning a profit (even Virgin America!) and the industry as a whole is doing fine. It is highly unlikely that there is going to be another round of bankruptcies any time soon.

MileHighJoe
Guest

FINALLY! Finally the government is putting the brakes on massive anti-consumer mergers.

Some call it a “nanny state” and whine about “gov’t regulations” of a quasi-utility, but the rest of us are sick & tired of the government ignoring longstanding anti-trust principles.

I just wish the government had grown a pair before United & Continental merged and destroyed competition in so many markets!

azpilot757
Member

Well said, Brett!!

George
Guest

Prediction: If DOJ does stop this merger-watch them go after DL and UA and try to break them up.

Southeasterner
Guest

We can only hope.

Jim
Guest

DOJ has no authority to “break up” an airline.

George
Guest

Jim, really??? The last administration-the pro bussiness Bush, and his Attorney General went after Microsoft and tried to break them up. Ultimately they lost, but the government has the power and authority to sue companies and break them apart-It’s called the Sherman Antitrust Act.

georgechesney
Member

I agree completely Brett. I was sure when I opened up the article it was somehow going to deny the headline — but no such luck. I worked in the industry twice (WA & TW) and loved it, but fortunately didn’t get addicted to the smell of Jet A. I really think the broader issue that shows here is just how anti business this administration really is. They simply can’t help themselves with tinkering and puttering and trying to gum up the works. Hopefully sanity will prevail.

Southeasterner
Guest

Anti-business? Considering the record profits and record share prices this has actually been the second best administration in terms of profitability for the fortune 500 since the great depression.

Roneill000
Member
A complete opposite analysis appeared at millionmilesecrets.com today. I don’t have as extensive a post graduate education as he does, just your typical business school, but I find myself completely in the Cranky camp. Oh, and I had been traveling frequently for business for three years when the FF programs began in 1981. Remember, if you wanted all the points and miles, you bought a ticket then flew. All of them stated that they reserved the right to change at any time. Weak airlines? I flew Pan Am, TWA (a lot and redeemed a lot and was saved, maybe temporarily… Read more »
Consumer Mike
Guest
Shindig, I too was flying on business when AA started the FF program and others followed. At the time I used TWA extensively. What happened to TWA when Ichann bought the company and gutted the assets and selling it to AA was a disaster where everyone lost – EXCEPT Ichann. AA, who received MAJOR tax breaks after promising the moon to the government and many cities to maintain service/presence, then cutting service, laying off (screwing) most of the TWA personnel and keeping the cream of TWA. Granted, there were economic down turns which forced some of these actions. I do… Read more »
SAN Greg
Guest

Three cheers for the DOJ!!! Finally a voice other than those of the airline execs being heard. Listening to them brag about how good this merger will be for consumers is akin to foxes trying to explain why access to the hen houses will be good for the hens.

jaybru
Member
Cranky, another classic post for your book! Can we agree that DOJ had to look at the situation, maybe not file suit? The antitrust law is pretty clear at what DOJ has to look at, “delve into,” the situation, whether or not they may know as much as you do about it. Drives you nuts, I can see. Filing suit, well, they could have ended their analysis without doing that, of course. I believe they are required to look into antitrust concerns as to: “whether a proposal will likely create, enhance, or entrench “market power,” or facilitate its exercise.” “Market… Read more »
1js7371
Member

Brett….A surprising turn of events. While I agree WN raised an eye at the DOJ news, I genuinely believe they do not have the horsepower to coerce or manipulate the DOJ into anything along these lines……..Now that the cards are on the table, what do you believe it will take in terms of AA/US concessions to appease the DOJ into settling (or, perhaps, abandoning) their suit? What will it take to make this go away?

Billy D
Guest
Each merger is judged on it?s own merits, therefore forget about other airline mergers. This has to do somewhat with what is taking place now in the airline industry, i.e. the additional fees that have been added to passengers and millions of dollars a years that have generated by airlines over the past few years which leads to THE most important point. The one glaring red-flag of this merger which USAIR is going to regret is the actions by their CEO Doug Parker who forwarded that email to a rival airline in an attempt to ?collude? with a rival airline… Read more »
Billy D
Guest
I’m sorry; here are the details of the email: Doug Parker is alleged to have forwarded an email to a rival airline CEO about how bad a ?triple miles? promotion was for the airline industry profitability. I was shocked to read this because many large companies make it VERY clear in their training to employees that such attempts to collude could be potentially illegal. In 2010, one of US Airways? larger rivals extended a ?triple miles? promotion that set off a market share battle among legacy carriers. The rival airline was also expanding into new markets and was rumored to… Read more »
Consumer Mike
Guest

Good Info Billy D! Honest Abe Parker will do or say whatever it takes to get what he wants. Yet, there are people who can see him do no wrong. He and Ichann come from the same cloth.

tharanga
Guest
Cranky, I’ll probably end up agreeing with you on the details, but I have to disagree on how you’ve packaged the big picture. First off, it’s just silly to complain about “semi-regulation”. This is meaningless, because pretty much every industry is going to be “semi-regulated”. Every industry is going to have to abide by rules regarding safety, health, environment, collusion, fraud, anti-trust, etc etc etc. So the question is always whether any particular regulations are smart, not broadly whether we should be fully regulated or semi-regulated or unregulated. The way you posed it is more emotional, and simply does not… Read more »
political_incorrectness
Guest
political_incorrectness
The other side of the coin that I listened to on NPR today and from what I have read elsewhere is simply the fact that this is seen as even more consolidation and US Air having close to a monopoly on DCA due to holding 70% of the slots. Since airfares have gone up since consolidation, the theory would be that more competition is great. However, Cranky makes a very good point. If the competition is smaller, it can get squeezed out very quickly and then you end up with consolidation anyways. This merger would end up creating a large… Read more »
AllUnderControl
Guest
This sucks. It’s the first time I feel like CF is a shill. Think about all the options Cranky Concierge had when there were Worldperks, Onepass, and many other awards. Everything has it’s limits, including free markets. At some point (and I think we’ve reached it), there”s no more room to remove competition without seriously hurting consumers. You might say that startups and smaller airlines can then move in, and bring competition back. What, that’s not good enough for US? They need to BUY their way big? Do you think US can’t compete based on their own merits in the… Read more »
Full Disclosure
Guest

Cranky-

Please disclose if you have ever worked at one of these two airlines and if you currently own stock in either.

Thanks!

Olamide
Guest

Although I don’t always agree with cranky about his opinion on the airline industry I have always found the information to be spot on. Cranky keep up the good work. I hope the wife and baby are doing well.

John U.
Guest

“The shock of the year” SORRY, its not a shock as I almost always flew out of Reagan-National when I studied in DC b/c it was convenient to get to from the city to the airport and to the West Coast (the old TWA red eye via St. Louis flights). Something tells me a few congressmen etc. also like flying out of Reagan-National b/c its convenient and want to make sure they can continue to do so by meddling in this merger!!!