American and US Airways Get Their Day in Court With a Side of Turkey and Stuffing

If you’re a fan of justice, then you’ll agree that Friday was a good day. The judge in the Department of Justice (DOJ) lawsuit trying to stop the American/US Airways merger set the trial to begin on November 25, right before Thanksgiving. That means that if this merger is stopped, it will have to be on the strength of DOJ’s argument instead of simply by having the clock run out.

American US Airways Thanksgiving Trial

After DOJ filed suit to stop the merger, the two sides proposed very different timetables. American/US Airways proposed a November 12 start date but said they could have been ready as early as October. In other words, they were confident of their arguments and wanted to go to trial quickly.

Meanwhile, DOJ proposed a February trial date but when the judge said she had another trial scheduled, DOJ pushed the request out until March. That kind of delay made me think DOJ wasn’t as confident in its case as it originally suggested and needed more time, but it could have just been an insurance policy. A delay that long could kill the merger because the parties can’t wait forever. Time is a killer.

The judge agreed with the airlines that they deserved a speedy trial, and so the date was set for November 25. It may seem a little strange that it will start the Monday before Thanksgiving, but it sets up a good timeline. The airlines predict a 10 day trial, though it could go a couple days longer. Either way, we should have a decision before everyone takes off for the holidays.

More importantly, we may very well have a decision by the self-imposed December 13 merger deadline. If the merger isn’t completed by then, either party could theoretically walk away per the merger agreement. Both parties have been clear that they don’t plan on walking away, but who knows if that would have been true if the trial was delayed all the way until March.

So what happens now? A bunch of technical stuff. There will be depositions and file exchanges, and a lot of things will have to be filed with the court at several steps along the way. As far as I can tell, there shouldn’t be anything particularly interesting to the general public until the trial happens… with one possible exception.

There is still always the chance that the two parties could come to a settlement that would allow the merger to go through with concessions. They both say they’re open to hearing proposals but neither side seems to actually be proposing anything anymore. I’ve already noted how I think a settlement is pretty unlikely, but I do wonder if DOJ will start to feel some pressure.

The easiest way for DOJ to win was to push the timeline out and hope the merger fell apart on its own. It lost that battle, so now it has to win on the merits of its arguments. If it’s not able to turn anything up over the next couple of months, it might decide that it’s better to settle and look stupid than it is to go to trial and lose everything.

I would say the airlines could come to the same conclusion, but I’m really not sure how they could craft a settlement that would satisfy DOJ unless DOJ decides that its case is weak enough that it better start negotiating.

Regardless of what you think about this merger, you should be happy about the trial date. It’s only fair that the airlines have their day in court in a timely manner… assuming it gets that far.

[Original knife, turkey, table, and stick figures via Shutterstock]

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50 Comments on "American and US Airways Get Their Day in Court With a Side of Turkey and Stuffing"

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David SF eastbay
Member

Maybe the DOJ is hoping a longer delay would get the American people (aka American voters) to feel as I do right now and not care any more.

If things happen to fast it gets more media attention which can get voters sounding off to their elected officials who could get more involved. We all know the longer something takes, the media looses interest so this becomes less of a new item and people forget about it.

SEAN
Guest

You got that right. As WPIX-TV commentator Lionel puts it “Americans have the atention span of a gnat.” This can be illastrated with who is starring in the next Batman flick & then Twerking.

This court case will be ignored by most Americans unless it involves states where job losses could come into play, but that’s why we have cranky to keep us informed of the developments.

Red
Member

I think AA/US will be able to get DOJ’s case thrown out by day two or three if they are able to show if you block our merger you are being hypocritical. You allowed UA/CO DL/NW SW/FL why not us

Jim
Guest

That is like going to traffic court and telling the judge “but the officer didn’t pull over the other guy who was speeding too”.

Not going to fly.

H&k
Guest

Uh, no it’s not. Unless you think all previous mergers broke the law somehow. It’s called business. Companies merge, acquirer, sell off assets. Maybe you think the govt should run every business in the U.S. too. There is no monopoly here, just the government trying to feel important, or help someone else’s interests(not the public). Eric Holder is a disaster for this Country.

Consumer Mike
Guest
It’s only called business today since Bush & Co. (2000 – 20008) changed the laws to allow gross abuses to happen. Unfortunately the collateral damage will continue as long as you have a stacked deck of judges on the Supreme Court. Your description of how companies function sounds like a template written by Geroge Romney, I might add. Eric Holder is Honest Abe compared to the gang of ultra conservative and super business friendly judges there. FOR LIFE (sounds like a verdict). Naturally, I will admit, Libertarians would agree with you 100%. They are the anarchist thinkers of the 21st… Read more »
MS0177
Guest

Actually most of the laws were changed during Clinton’s presidency, but why let facts get in the way of a good narrative.

DesertGhost
Guest

I think the November trial date makes a settlement more likely. Taking a case to trial involves real risk for both sides. Settlements are often reached at the last possible minute, even after a trial is held. The bottom line is that neither side knows how the judge will rule in this case.

We, the two airlines, consumer groups and pundits can argue the case’s merits over and over, but the judge’s decision is the only one that counts. And as the old saying goes, “You’re better off with the devil you now, than the devil you don’t.”

kozmaterry
Member

Remember AA had a merger with Twa
Remember that US and AW
they have had their mergers so the idea that Dl and Ua mergers should allow AA/US is pure bunk

Nick Barnard
Member

NW had Republic, why should it have been allowed to merge?

CO is an amagalmation of too many airlines to count… Why should it have been allowed to merge?

Oh and you forgot US’s mergers with Piedmont and PSA!

yo
Guest

And Republic had Hughes Air West, and Hughes Air West had Bonanza!

Cook
Guest

Agree with 95% of what you write. Too many reasons to list, but DOJ’s case is weak and I do not believe they can win on he merits. Still scratching my head about WHY they filed this, yet let the other two, similar mergers proceed without complaint. I hope that American and United Air prevail, but that’s for personal reasons. The merger is going to be difficult and expensive to implement even without the added costs and delays imposed by DOJ. Again, I have to wonder about t heir motivation.

1js7371
Member

It will settle because it’s in everyone’s best interests to settle. Horton wants his $19 million. Parker wants to be The Man. Justice would be embarrassed by a loss and settling over slots would allow it to proclaim Victory For The Flying Public. The Unions want a raise. AA/US would be foolish NOT to settle if slots (even valuable ones) are all that is required. But if Horton keeps crowing about his bankruptcy profits, Justice might just dig their heels in a little. Wisely, Parker’s bravado has been notably absent lately.

Consumer Mike
Guest

You don’t see or hear from old Doug much because Parker is probably spending a lot of time in church praying for his designed goal of a mega merger. My personal hope is that the DOJ is successful in defending competition.

For the folks who keep chirping about the UA/CO and DL/NW mergers, just remember, two wrongs don’t make a right.

Goober
Guest

You don’t understand competition then.

3 airlines is better than 2. If doj blocks this merger with their weak case then it will allow delta and ual to have a duopoly.

Jim
Guest

There is a long discussion of this on Flyertalk. However, under US antitrust law, the only thing that matters is whether the merger will raise prices for consumers. The financials of the airlines are not an issue. There is an exception if one of the airlines is at imminent risk of failing, but that is not the case here. Therefore, all DOJ has to do is convince the judge that the merger will raise prices for customers. Given that Doug Parker has already admitted to as much, this should be an easy case.

DesertGhost
Guest
This is from the Antitrust Law Center: “Antitrust laws protect competition. American Consumers rely on free, fair and open competition-getting goods and services at the lowest prices. Businesses and public entities rely on bidding and the free market to ensure the best prices. Markets can work only when the competitors set prices honestly. When competing businesses agree to cooperate behind the scenes by fixing prices, rig bids, or divide up customers – prices are inflated and consumers are cheated.” Note that the first sentence says, specifically, that “antitrust laws protect COMPETITION.” It says nothing about anti-trust laws keeping prices low… Read more »
Jim
Guest

DesertGhost, your quote appears to be from some sort of a publicity flier or pamphlet, which has been watered down for the general public. It is not a legally accurate statement of antitrust law.

SidelineObserver
Guest
The American people want to get on an aluminum tube, whiz along at 600 MPH,30,000 feet over the ground,eat chateaubriand whilst being fanned with palm fronds,then get off said aluminum tube on the other side of the country,ocean or world and pay less for it than they would to have a set of quality tires installed on their car. Remember immediately after 9/11 the American flying public was so traumatized they would never set foot on an airplane again? What happened? The airlines lowered fares so much that in some divine miracle, people over came their deathly fear of flying… Read more »
Eric A.
Member
IMHO the main thing US and AA are guilty of is being tardy to the party. The first mega-merger was done by the MBA’s playbook. The overlap was minimal, the overlay was excellent, key labor agreements were in force before the first plane was repainted and integration was almost flawless. Round II looked great on paper and involved some concessions (EWR) but has been difficult to execute. New UA is getting better….but ‘better’ is relative to the mess it was in 18 months ago. I think most of us agree that Round III was about taking out competition. There will… Read more »
aerodawg
Guest

Reading some of the comments here, it’s quite obvious some people have no idea what the definition of “monopoly” is. I don’t quite understand how you can call any industry a “monopoly” that has 4 major players competing for business and a pile of minor players besides.

Consumer Mike
Guest

Understan this, monopolies do not occurr over night. One by one the “players” are disappearing from the table. Sometimes people wake up when it is to late.

Excuses and bright forecasts will not save the day, jobs or consumer interests by letting only the mega merged airlines run the show. You talk as if the survivng independents are assured of a long and healthy life if another mega merger occurrs as it will help the industry. Sorry, greed does not end the story allowing another mega merger happen.

Jim
Guest

There are monopolies or effective monopolies on many routes. The rest are oligopolies.

L
Guest

Mike, do you think the airlines exist to fly you around for free or worse to loose money to fly you around. Even on a good day, the profit margin is less than 2%, that is hardly greed!

Consumer Mike
Guest
Dear “L”, I always have said in this blog that EVERY business should get a fair and reasonable profit. That is the AAMERICAN way. As much as most people would not turn down ANY generousity from any of the airlines,l it would be a cold day in Hell before you would see it. Good day or bad day, Consumers and most reasonable people would not want to trust what a real profit margin any airline says they need. I do not deny that it is a slim margin. BUT, please remember to take into account the numerous tax write-offs and… Read more »
L
Guest

No matter if you have 4 or 20 airlines, they cannot sell you a ticket for less than the cost of opperating and expect to survive. Get the picture?

Bill Hough
Guest

I’m not really sure I like all these recent mergers, but that ship has sailed for everyone except AA/US. I’m no fan of Dougie Parker but I’m not sure it’s right for the feds to change the rules in the middle of the game.

On the other hand, DOJ’s action is clearly political and deserving of the Crazy Jackass award as stated here http://crankyflier.com/2013/08/14/us-department-of-justice-gets-a-cranky-jackass-award-for-its-lawsuit-to-stop-the-us-airwaysamerican-merger/ .

But whether you’re pro- or anti- merger, I agree with the court’s decision to get on with it and not drag the proceedings out till next Spring.

SidelineObserver
Guest
The DoJ will want the new American to surrender slots at DCA, that is the crux of the issue.This nonsense about 1,000 pairings with no competition is noise.Some of the routings in the complaint average 5 pax a day each way. They want more “Low fare competition” at DCA? How many more jetblue flights to MCO do they need? Or WN to AUS? Come on now, the DoJ didn’t even mention WN, the largest US domestic airline in their “Complaint”. I know the American public wants hourly widebody service from their town to the rest of the world, but that… Read more »
traderprofit
Guest
I’m not at all sure why anyone would think DOJ’s arguments are DOA. I’ve traded merger arbitrage for years and there is a specific hatred reserved for the anticompetitive nature of airlines. Arbitrage spreads have always traded wide on these deals. Part of the dislike is related to “barriers to entry.” The idea some new airline can just start up and offer service doesn’t pass muster. This industry has the highest barriers to entry of any I can think of which have engaged in merger or potential merger activity. The DOJ suit seems pretty sound to me, from an antitrust… Read more »
Consumer Mike
Guest

Traderprofit, Great input. Very educational and interesting. Your observations make sense.

Personally, I hope that the thinking of your blog carries the day in court. It is always a good thing for consumers to have a watchdog protecting the well being of the public, when it is reasonable and makes sense. This mega merger proposal fits into this category.

traderprofit
Guest
@CF @SidelineObserver. I am wondering where you are getting the 5 pax per day figure, and if you have seen any stories about the total number of affected passengers by market. If it’s 5 in each market, then you perhaps really have a “relevant geographic market.” But, these things have a mind of their own: Take into consideration, though, that small market areas can be relevant product markets in a national merger. In a merger of grocery store chains, every one I know of was required to divest competing stores in the same neigborhoods (Kroger/Fred Meyer, Albertson’s, etc). These deals… Read more »
traderprofit
Guest

I meant 5 pax and you perhaps DON’T have a relevant geographic market

traderprofit
Guest

and further correcting myself, I should have said : small markets can be relevant GEOGRAPHIC markets

traderprofit
Guest

I meant 5 pax and you perhaps DON’T have a relevant geographic market.

steve
Guest

Very rare that antitrust suits go to trial. This will be settled before trial.both sides want the most leverage for the settlement

traderprofit
Guest
The Aspire article is very interesting, but I am not persuaded by it. I find DOJ’s assertions win the day right now. Baer is also a guy who doesn’t bring cases that aren’t strong. As he said ,DOJ thinks a “full stop” is the only remedy. I have trouble imagining the airlines did not negotiate with DOJ prior to the suit being filed. I do agree these cases rarely go to trial, but that is because they are dropped by the merging parties. If the airlines–as any other business would–really expect to get their merger done, they should not set… Read more »
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[…] has been over a month since I last wrote about the American/US Airways merger, and I figured it was probably time to check in on things. Back then, I said “there […]

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