The Latest News in the American and US Airways Merger

It 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 shouldn’t be anything particularly interesting to the general public until the trial happens.” That’s true in a sense, but that doesn’t mean that there hasn’t been any action at all. Let’s take a look at what’s been going on.

American and US Airways Merger Waiting

The Department of Justice Tries More Delay Tactics (part 1)
The Department of Justice (DOJ) and the airlines are all in the middle of sifting through thousands upon thousands of documents, asking for more, and talking to people in order to prepare for the trial. DOJ’s playbook seems to be full of ways to slow down this process. In this case, DOJ is refusing to turn over the data the airlines want.

The airlines filed two motions with the court trying to force DOJ to fork over the info. The first asks for the “factual record on which the [DOJ] approved four prior airline mergers.” The second asks for “the identities of the third parties who [DOJ interviewed during the merger investigation] and the factual information those witnesses disclosed.” DOJ, naturally, has objected and says that info doesn’t need to be disclosed.

The decision from the “Special Master” (law names are awesome) is that DOJ shouldn’t have to turn over any of this except for one document. Even with that doc, by fighting this, DOJ has at least delayed the amount of time the airlines have to review. Point: DOJ

The Merger Agreement is Extended
American and US Airways had originally set December 17, 2013 as the date when either party could back out of the merger if it hadn’t been completed. But now, that has been extended to January 18, 2014. (A couple exceptions: If the court ruling comes in before January 3, then the airlines have 15 days to complete the merger before either side can walk away. Or if they lose the case, then they will be able to cancel 5 days after the ruling is final.)

Does that matter? It’s more symbolic than anything. This agreement never meant the merger had to be terminated on December 17 but rather made it an option. The decision by both airlines to extend it a month shows that both sides are behind the merger being completed. It looks good to see them acting on the same page. Point: the airlines.

The Department of Justice Tries More Delay Tactics (part 2)
You know it was just a matter of time before DOJ requested that the trial be delayed because of the government shutdown, right? It didn’t actually take much time at all. The morning the shutdown went into effect, DOJ asked for a delay in the trial. To be fair, DOJ protocol says they have to ask for this, but the judge didn’t budge. The request was shot down within hours of the filing saying that too much was at stake to make this trial wait. Point: the airlines.

Texas Pulls Out of the DOJ-led Lawsuit
There aren’t a lot of states participating in the lawsuit in the first place, but one of the strangest was Texas, a state that had so much to gain from this merger actually going through. Now, Texas has withdrawn its participation in the lawsuit against the merger thanks to a written guarantee that American will keep service to all Texas airports for three years and keep the headquarters there as well.

This is all just a political ploy. The Attorney General Greg Abbott is running for governor, and he was able to get a double whammy out of this one. First, he fought the merger trying to attract moderate Democrats to his cause. (His biggest Democratic opponent supports the merger, so he had to hope this would sway some of those who don’t like the idea.) For his encore, he was able to get some good camera time saying he saved Texas with this agreement. The reality is that it brings nothing to the state that wouldn’t have been there anyway. But if he can settle, why can’t others? Point: the airlines.


We continue to march toward that November 25 trial date and now we have more clarity on how long it will take once it starts. The last day of testimony is expected to be December 16 or 17. Final arguments would be made January 6 with a ruling expected by January 10. In other words, the judge seems quite cognizant of the January 18 date we talked about earlier and wants to get it done quickly. But we may have to wait until the new year to get our answer.

44 Responses to The Latest News in the American and US Airways Merger

  1. c29flier says:

    Brett – Your commentary about the government asking for a delay due to the shutdown is a bit snarky. I work for a government agency that’s been affected by the shutdown and we regularly work with DOJ. In my context, DOJ is the law firm who represents a client (my agency) in court, usually defending a decision by the agency. DOJ’s request was probably one of literally thousands that were filed in US District Courts across the country on that Monday, September 30th. The delay was granted in every case that I work on. I am also involved in a US Supreme Court case, but we we didn’t bother requesting a delay in that case because the court has already scheduled oral arguments for early December.

    Due to the size and economic implications of the AA/US merger, it’s not surprising that the court rejected DOJ’s request.

    Don’t be surprised, however, if the court itself, on it’s own motion (also known as “sua sponte” in Latin/legal jargon) delays the trial due to fallout from the shutdown affecting the court’s operations from a financial perspective. The US court system is literally running on crumbs right now, and they’re about to run of out money, too. So, no matter how fast the judge wants the case to move along, it may soon end up being out of the judge’s hands – at least for a time.

    • CF says:

      c29flier – Only a bit snarky? ;) Yes, it shouldn’t have been a surprise that the delay was requested since that’s standard procedure it appears. I’m also not surprised the delay was denied. But it’s interesting that you think this could cause court-related delays separately. I would be surprised. This is such a big case with so much at stake, I would imagine it would get high priority. So the system would really have to crumble for this to get delayed. I (and I assume you) really hope that doesn’t end up happening for the sake of the entire court system.

      • c29flier says:

        Brett – How many cases have you been involved with during your career as a lawyer? I’m guessing that it’s somewhere around the same number of times I’ve analyzed an air travel market. Perhaps it might be wise if you stuck to the things you know, and I’ll stick to the things I know. You’ll be surprised. :-)

  2. With all the bad things wrong in this country the DOJ wants to spend time of a AA/US merger?

    • I think the DOJ wanted to delay things due to the tea party’s shut down of the government, but the judge said no to that. From my understanding it was more along the lines of the judicial branch overruling the legislative branch which hamstrung the executive branch’s DOJ.

      • FrankV says:

        Nick

        Give us a break with the shots on the Tea Party. They have no place in this blog or in the running commentary. It is absolutely unnecessary for you to bring your political biases into play.

        Yes, there is a government shut down.
        Yes, there has been widespread failure of the two party system
        Yes, there is plenty of blame to go around.

        No, I don’t want to read your politicizing here. Go post something on MSNBC, they live for that stuff.

        Frank
        p.s. — before you erupt, please note that I did not call you any name, and did not take any political cheap shots. Please do the same.

        • Frank,

          With the exception of taking a shot at the tea party, my comment is relevant to the DOJ’s response to the US/AA merger. It stands as an understanding of the procedural dance that was played and why the DOJ is still working on this case, but might not be working on others.

          Nick

  3. EMT says:

    I used to like reading this blog, before you stated covering this merger. You seem to take pride in the bias with which you cover this story, and the masterful spinning that you do on every little bit of news. You’ve become the fox news of US-AA merger coverage. Your approach is unprofessional.

    • EMT, The Cranky Flier an opinion blog. Where has CF been unprofessional? He’s stated his opinion, broken down the government’s positions in a reasonable manner and shown where they’re flawed. What more do you want?

    • CF says:

      EMT – That’s quite an unfair comparison to Fox News because of one enormous difference. I don’t pretend to be presenting news when it’s actually opinion. I’ve said it many times. If anyone is coming here for straight news, they’re in the wrong place. This is an opinion blog, and if you come here, you’re going to get my opinion. If you don’t like that, there are plenty of other places to go.

  4. Jon M says:

    The only reason the merger should be shot down is the awful, unimaginative and repugnant new paint job.

    • Who knows if the new AA paint job will stay? AFAIK, Parker didn’t seem too enthused by the new paint job.

      I wonder if the AA birds will start going into a modified US Airways colors (a la UA/Continental) and the newly painted birds will just be slowly repainted.

    • CF says:

      Jon M – The merger is the best chance of seeing that paint job disappear. It was standalone American that rolled out the new branding, and I’d say it’s quite likely that it goes away if the merger goes through. Otherwise, unless there’s new enlightened management that doesn’t want to waste that much money on paint, it’s not going anywhere.

      • Oliver says:

        If AA wants the merger, why would they then keep spending money on repainting the jets?

        • CF says:

          Oliver – I think originally it was put out there as a little dagger before the merger went through. The timing was too strange for it to be anything else. Now, I’m guessing it’s momentum. But either way, it’s a huge waste to do this until after the merger is settled. Regardless of what happens, there shouldn’t be a hurry. If they want to hurry on anything, it should be interior improvements.

          • Well the one reason to hurry this was the delivery of A320 series planes which AFAIK must be painted. Has AA been painting planes in the new livery beyond new deliveries and heavy checks?

          • sjc user says:

            Nick,

            I think I’ve seen some older planes that were repainted when I was up at SJC. AFAIK, they do not send the Airbus out to SJC yet, so they were probably repainted 738’s.

            I do say, I don’t mind most of the design, but that tail is just awful. It doesn’t say anything kind of like Delta’s flying colors (which was a lot better looking though).

        • Shane says:

          United is an excellent example of keeping the painting contractors in business and changing paint jobs for not much reason. Although I think they finally have a unified paint job for the first time in about 20 years. When I was in Miami last week, it was painful seeing all of those tails with the new paint. Also kind of gives you a headache. When they are all lines up, if you look at the right angle and kind of squint your eyes, you can see an image of the space shuttle or cats or something.

          • Shane, if anything its the exact opposite. They’d have kept the painting contractors busy if they updated all the fleet at one time and had a unified paint job. I don’t know how the old pmUA management handled the painting, but I wouldn’t be surprised if they just repainted as planes came up for their heavy checks.

            DL and the new UA have been keeping the paint shops busy by repainting the whole fleets in relatively short order.

          • Shane says:

            Nick, I would agree except that Delta re-painted the planes and was done in a year or two. When they purchased Northwest, they kept their livery so that they only had to paint less than half the fleet. United kept painting planes for something like 20 years without stopping. And when they merged with Continental, they changed the livery so they could prolong the painting a few more years. That’s real economic stimulus!

          • Shane, even if an airline doesn’t change their livery they still have to paint planes. Part of the maintenance process every few years includes stripping off all the paint and repainting the airplane. United probably changed their livery through this process, whereas Delta repainted everything in an expedited fashion.

            The CO/UA repainted the pmUA side of the of the fleet, but changed the livery to look like the pmCO livery so they could slap new titles on the pmCO birds.

          • David M says:

            If you count the Express fleet, United still doesn’t have a unified brand image. I saw a blue tulip EMB-120 climbing out of SAN this morning. I think there’s still at least one grey EMB-120 flying around, too.

          • FrankV says:

            I’m thinking back to when NW acquired Republic — It took them a long time to just paint over the titles, then they decided to go with the Bowling Shoe livery, and then they discovered that Red paint fades in the sun, and is an environmental nightmare. Seems like it took them forever to get the fleet repainted, and I’m (almost) willing to be that Delta got at least one bird in Republic colors.

    • glen says:

      Keep the merger……. kill the paint!

      • James S says:

        There are now almost 150 aircraft in the new colors. 5-8 planes are repainted every week, plus new deliveries. The pace of repainting has sped up now that the summer schedule is over. The 777 fleet will likely be completely repainted by year’s end.

        By the time the merger actually goes through (if it’s approved) there will be a very significant number of AA planes wearing the new scheme. The new management team is going to have much more pressing issues to deal with.

        • If anything getting a cohesive brand quickly is one of the lessons that DL/NW, UA/CO, and to some extent WN/FL have taught. I expect there will be a fairly aggressive program to get the AA/US fleet into one color scheme.

          I remember reading a letter from US Air’s chairman in that one of the challenges they faced was a completely disorganized brand. I remember that he said they had five different colors of seat belts. (PSA probably contributed four of those.)

          Sooner Parker and crew can reduce the tendency for folks to “see” pmAA or pmUS the better.

  5. AA’s Horton probably doesn’t want the merger to happen unless he gets his payoff. It would be funny if he was one of the people the DOJ talked to.

  6. Arubaman says:

    Mr. Cranky…Is it true that Horton has agreed to forego his $20 million golden parachute to grease things along?

    • CF says:

      Arubaman – Not really. Horton agreed to pull the payment out of the bankruptcy reorganization because the judge wasn’t having it, so that’s likely what you heard. But there’s nothing stopping Horton from getting the payment separately. If the merger goes through, he’ll get his payment. It just won’t be a part of the bankruptcy case.

      • Arubaman says:

        Clever, eh? Perhaps a final vestige of Legacy greed(?)…….Why do you think this hasn’t settled yet, Governmental intransigence, Parker’s ego, or both?

        • CF says:

          Arubaman – Well, I’ve written my thoughts before about why it won’t be settled now that there’s a lawsuit. I really can’t figure this out entirely. My best guess is that DOJ is trying to make a statement here and it wants to push forward regardless. Hopefully, rational thought will take over and they will agree to a settlement, but DOJ has made it hard for itself to accept one thanks to the broadness of the complaint.

          • Arubaman says:

            Well, let’s keep in mind most lawsuit settlements occur just before going to court. So there is still time to posture, not unlike what we see going on in DC at the moment. Someone will eventually blink or the other side will somehow save face. All of it being sound and fury signifying nothing. We will either have one airline or two. Regardless, fares and fees will continue to rise as the current crop of Senior Managements have done what their post-Deregulation forefathers were unable to accomplish; that is, they have essentially re-regulated the industry, not along geographic areas, but rather around hub cities.

        • I still believe there will be some kind of settlement. As was pointed out above, settlements can occur almost anytime while the case is open. Settlements have been known to occur after the trial is over the judge has taken the case under advisement or the jury has begun deliberations. Both sides risk a lot leaving a matter of this importance in the hands of one person.

  7. DOJ says the merger will cut service and increase fares and fees. How naive. Do they really believe the separate airlines wouldn’t do the same?\\ I think it is some DOJ people trying to justify their positions by doing something-anything.

  8. George says:

    Just a few thoughts on a lot of the comments, Cranky-you’re right, it is an important matter, but if DOJ runs out of money-they will shut down. Legally when the workers are told to go home, they can not do any Government work under any circumstances. I know this because I wiork for the government, and our money runs out in mid November, and we will go home. Another factor is if the money problem is solved today-it will take about 2 weeks to get back to normal. Some posters today, and previously complained, screamed, etc on why is DOJ doing this. Answer-it’s their job. A lot of folks on this board don’t like it-but DOJ has the duty to make a ruling on matters like this-and they don’t like it, for whatever reason. One thing no one on this board has mentioned or maybe remembers is this is the fourth time DOJ in this century hasn’t liked something to do with US Air. Rember early in the Bush administration US tried to merge with both DL and latter(? earlier?) with UA. DOJ killed both of those-admitally the DL would have been a hostile takeover. Remember the Slot Swap-DOJ said no intially. Finally if the merger dies-it dies-the world will not end. My guess is AA would colapse-not due to size-they are already the 5th largest carrier in the world, and are currently over 2/3rds the size of todays DL and UA, but rather due to bad management. US-say what you will about Parker-but the man is a survivor and has kept US going-I’ll bet if the merger dies-Parker will establish a MidWest hub. My money is on STL-plenty of unused gates, runway capacity, and a good O&D market

    • The US merger with DL never got to a full blown DOJ review. DL’s creditors and employees shot down that proposed merger.

      There were two possible of US/UA mergers you’re thinking of. There was a 2000 attempted merger of US/UA where US would’ve been bought by UA. The DOJ blocked that. In 2010 there were discussions of a US/UA merger, but those got curtailed, and they might’ve been a way for UA to push CO into merging with them.

    • If DOJ runs out of money due to shutdown issues, it seems only fair that they should have to drop the case. The rest of the world shouldn’t have to wait for Washington to get its act together.

      Or is this just too much common sense to have any relevance to my dimwitted neighbors in the house and senate office buildings just a few blocks up my street?

      • c29flier says:

        I’m not sure I get the “common sense” aspect of your comment? DOJ does not control whether congress and the president can agree on a CR or the debt ceiling. The reality is that the shutdown impacts normal government activities, one of which is running DOJ’s anti-trust division. It’s also going to affect the court that’s hearing this case, likely to the point where the court will reschedule the trial. If not, it will be something of a miracle. Yes, it’s a big case, but the airlines will survive just fine for another quarter (they’re both profitable, despite AA being in BK). So what if the trial is delayed for a month because the government shut down for the first time in nearly 20 years for (what looks like it’s going to be) at least three weeks?

        Taking your analysis to the next step, all of the Federal criminal cases currently pending should be promptly dropped, as well? How about the guy our special forces recently captured in Libya who is suspect of masterminding the bombing of our embassies in Africa in the late 1990s? I guess we’ll have to just ship him back to Libya because DOJ should drop that case, too? :-)

      • Shane says:

        I believe if the shutdown continues, the courts will run out of money also by mid-November. No judge, no prosecution, no proceedings.

        • The interesting question is if the courts run out of money can US/AA argue that their right to speedy justice is being infringed upon, and ultimately force the DOJ to drop the case and/or the court to provide summary judgement for US/AA?

  9. Tony says:

    The retirerd employees of American are getting screwed….Their passes and priority is being ignored…after 41 years of flying, why should I have to come AFTER U.S. Air employees who are on the job for a year or two….How is that fair after I gave loyal service for so many years

  10. Pingback: American and US Airways Give Up Very Little to Gain Merger Approval - >> The Cranky Flier

Leave a Reply

Please use your real name or nickname instead of your company name or keyword spam.