American And US Airways Get The Day They Want In Court
It’s been a bit of back and forth between DOJ and American Airlines/US Airways in relation to the lawsuit DOJ filed to block their merger. The airlines wanted to start in November while the DOJ wanted to start the trial in February (but was willing to compromise for the sake of the judge’s schedule and move to March).
The judge ruled today in favor of the airlines and a November start date. I saw it first on View From the Wing, and then went digging for more info. Terry Maxon writes an aviation blog for the Dallas Morning News and has had tons of coverage so far. But, someone else from their Washington bureau was covering today’s news. There are a couple of snippets to share from today after court. First, the DOJ response:
“We appreciate the court’s careful consideration of the scheduling issues and will be ready to present our case on Nov. 25, 2013,” Peter Carr said.
Then, a statement from American (probably a joint American/US Air statement, but not sure):
We are confident in our case and eager to get to Court. We are pleased to have a trial date that will enable us to resolve this litigation in a reasonable timeframe. We want the opportunity to compete together to enhance competition with the largest airlines in the U.S. – United, Delta and Southwest – and a number of fast-growing low-cost carriers. We look forward to making the case for the new American Airlines beginning on November 25.”
And, then, just to be sure, quotes from Doug Parker, the CEO of US Airways:
Parker, standing outside the courthouse on a bright, humid Washington day, said the Justice Department is “totally wrong” when it said in court earlier that past decisions on mergers will play no role in this case.
“There were several mergers passed pursuant to standards that were applied,” he said. “If they were applied here, we would win. We wouldn’t be here. There wouldn’t be this case here. We think they are changing the rules here and we think that this is just plain wrong. That will be part of what we are saying in court.
“We are going to take them on on their own terms — oh yes we are. But we are also going to talk about why the world changed and why they are applying a different set of rules,” he said.
Then, a quote from a video interview:
Next, Parker is asked if the DOJ is wrong to say it shouldn’t matter in this case whether the DOJ has approved previous mergers.
Short answer: The government is wrong, very wrong.
Someone really needs to pull Doug aside and let him know that there’s no public vote after the trial to see who won. None of his comments really do anything but distinguish him as bombastic and outspoken at a time when neither is necessary.
Shifting gears, what does this mean for the merger? When I wrote yesterday, I handicapped no merger as the most likely scenario, followed closely by some sort of settlement with DOJ, then followed by a merger after winning a trial.
Now that the airlines have gotten the trial date they want, I think they have a bit more leverage with the DOJ, shifting my thoughts a bit.
I believe the most likely outcome now is a settlement. DOJ knows it has go to trial in November. I’m sure they’re not scared but it certainly wasn’t too their advantage in negotiations to have the earlier date. And, there will be some pressure from lobbyists and some congressman on behalf of the merger. None of these indicates the strong likelihood for a deal, but a deal has to be a more likely scenario after today’s decision. So, I’d say the negotiated settlement is the most likely option right now.
I believe a loss at trial for the airlines ultimately blocking a merger is the second most likely outcome. Lastly, the airlines prevailing at trial is the least likely. They may not like that DOJ is using a different measuring stick for this merger as compared to previous airline mergers, but that’s their impetus to do so. I don’t think there’s a great chance they can win at trial.
We know Doug wants a merger, so it’s time for him to tone down the comments and try to negotiate with DOJ instead of leaving his dream merger in the hands of a judge. I’m not rooting for the merger. I’m a bit indifferent, though I prefer the American Airlines I have today. As a stand alone airline they may cause more disruption than the market can handle but we’re nowhere near writing that chapter yet. I’ll be looking for signals that the two sides are moving closer to a settlement in October.
Related articles
- Another Merger Update, Plus News & Notes For Thursday, August 29th, 2013
- American Airlines & US Airways File Motion For Speedy-ish Trial; Poking Belly Of Bear?
- The First Words From American/US Airways On The DOJ Lawsuit
- Dissecting The AA/US Response TO DOJ On Trial Scheduling
I don’t know much about M&A, but are they even discussing settlement options? What might a settlement look like, i.e. what concessions would each side even be willing to make?
Sam, there have been some small bread crumbs here and there that DOJ is open to a settlement. It would almost surely involve slots at DCA. But, with all the hubris so far, it probably needs to involve something else meaningful. That’s the difficult part. They could agree to other competitive measures that are unlikely to happen and then the DOJ could choose to ignore enforcement.
I don’t see them coming up with a list of airports where they hand slots over, especially considering most of the airports where they’re dominant have slots available.