I posted earlier today just after news broke that the DOJ was suing to block the merger of American Airlines and US Airways. I reminded that I have refrained from commenting on the merger for a few reasons, and that practice is going to continue. I have my reasons for this stance, some of which I’ve communicated, and some of which will remain private. Further, I will not be pontificating on whether I think DOJ was right or wrong about this. They’ve got a job to do, and in the end, it’s always possible that AA-US weren’t getting the message in negotiations with Justice and this is a great big shot across the bow.
One thing I will say is that I have seen a lot of backslapping and high-fiving around the blogs and boards today over this development and sighs of relief mainly on the part of folks worried about potential changes to their mileage program of choice in this. I say not so fast. There are some very real risks here assuming the DOJ is successful, not the least of which is the possibility of a labor meltdown at AA. Absent a merger, the impetus for the labor wars that were going on at AA prior to the union deals with Parker are still there. Further, there are network risks in that it remains unclear whether these two smaller airlines can compete against Delta and United sized airline networks. One semi-OK quarter during a busy summer does not say all that much about the future.
The two airlines have said they are going to fight this, and I can only assume that there are still some back door communications going on. How it turns out, I have no idea. It will be interesting to watch unfold for sure. I wouldn’t get too excited yet, no matter whose side you are on in this. Believe me, I’ll be watching with interest even if I’m not writing about it.
-MJ, August 13, 2013
There is already several instances of past and future evidence of collusion (see below) if you read the lawsuit which I have. The comments of Doug Parker has put his foot in his mouth to many times and the DOJ can’t ignore blatant collusion in any merger. This is not a negotiating tactic.
Did you see who the lead lawyer is from the DOJ for this lawsuit? William Bear. Google him and check out his track record for killing unfair mergers.
The juiciest bit to me was when 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 be returning planes to its fleet that had been mothballed during the recession. US Airways’ CEO complained about these aggressive maneuvers, stating to his senior executives that such actions were “hurting [the rival airline’s] profitability – and unfortunately everyone else’s.”
US Airways’ senior management debated over email about how best to get the rival airline’s attention and bring it back in line with the rest of the industry. In that email thread, US Airways’ CEO urged the other executives to “portray these guys as idiots to Wall Street and anyone else who’ll listen.”
Ultimately, to make sure the message was received, US Airways’ CEO forwarded the email chain—and its candid discussion about how aggressive competition would be bad for the industry—directly to the CEO of the rival airline. (The rival’s CEO immediately responded that it was an inappropriate communication that he was referring to his general counsel.)
Translation: Doug Parker pushes the envelope to get other airlines to not compete and maintain overall industry profitability.
…. and in Chicago?
There too, DP. 🙂
Drinks at FTU and I will tell all!
Aw, come on MJ… spill it! I’d love to know your thoughts on this! 😉