Why Today’s American/US Airways Merger Developments Don’t Change Anything Legally But Could Still Influence the Outcome of the Case

Today’s American Airlines-US Airways merger news started with the government asking the trial court in the anti-trust case to stay the proceedings due to the government shut down.

As a pure layman that seemed like the government’s best argument yet to push things off. The government after all has long wanted a much later trial, which would likely mean they’d win by default (since large companies can’t really remain in limbo indefinitely)Nonetheless the judge wasn’t persuaded and proceedings move on.

Then come 3pm Eastern the Texas attorney general announced that this office would be pulling out of the government’s anti-trust suit which seeks to block the merger. When I first heard that a press conference had been scheduled with the Attorney General that seemed the only possible outcome. But what persuaded Texas to withdraw?

Texas got a written agreement that the airlines would do three things they’ve said they would do:

  • The airline remains headquartered in the Dallas Fort Worth area
  • DFW airport remains a large hub
  • The airline will serve 22 airports in Texas

The Texas airports are:

  • Abilene Regional Airport
  • Austin-Bergstrom International Airport
  • Brownsville/South Padre Island International Airport
  • Corpus Christi International Airport
  • Dallas/Fort Worth International Airport
  • East Texas Regional Airport
  • Easterwood Airport
  • El Paso International Airport
  • Houston William P. Hobby Airport
  • Houston George Bush Intercontinental Airport
  • Jack Brooks Regional Airport
  • Killeen-Fort Hood Regional Airport
  • Laredo International Airport
  • Lubbock Preston Smith International Airport
  • McAllen-Miller International Airport
  • Midland International Airport
  • Rick Husband Amarillo International Airport
  • San Angelo Regional Airport
  • San Antonio International Airport
  • Tyler Pounds Regional Airport
  • Waco Regional Airport
  • Wichita Falls Regional Airport

I asked American how long they’ve agreed to serve all of the above airports and I was told that it’s a three year agreement. In other words, the airlines didn’t really give up anything.

It’s great optics, though it might help even more if it was other than American’s home state falling back in line. And it’s a loss to the Department of Justice on a day the Court already handed them a scheduling loss – they must proceed with the trial during the government shutdown.

But in terms of influencing the final outcome of the anti-trust trial, it means very little.

Taken together, though, American’s and US Airways’ efforts in the court of public opinion — such as sending union employees to lobby Members of Congress — could mean something, not in terms of the legal outcome of the trial but in terms of the bargaining position that the Department of Justice might take in settlement negotiations.

If enough pressure is exerted, if the case becomes enough of a liability for Congressional appropriators or for members of House Oversight with its myriad investigations of the DOJ (and especially for members of the same party that controls the Department of Justice), it could shift the parameters of what the Department of Justice would accept in the form of a settlement.

At the same time, just as the European Union’s approval of the deal doesn’t weigh on DOJ considerations, a state’s concerns being so easily mollified won’t speak to the concerns being voiced by the federal government. And the news today bears no consequence whatsoever for the legal merits of the case… just for the optics. Optics do matter.


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About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. You must have some tea leaves stuck on your lenses and can’t see very clearly as no person of rational thought would want to hear your View from the ‘Right Wing’. Save your DOJ bashing for a pre-law right wing extremist forum. If I want this kind of dribble I’ll watch Faux News (pronounced ‘Fox’ by their fearful viewers who are addicted to utter shite).

    END TRANSMISSION – Now get your Twerk on Gary.

  2. @Walcott – what is right wing about this post? I said I found DOJ’s argument today their most persuasive yet. Where am I bashing them?

  3. While I’m sure Doj would have been happy with a delay, they needed an order from the court to allow their lawyers to stay on the case through the shutdown. The request for delay was only half hearted.

  4. @Walcott, you contribute nothing but irrelevant whining and name calling. If you don’t like the blog, don’t read it, or start your own, but don’t waste everyone’s time with your political ranting on a blog about travel.

    I still think there will be a settlement in the case. Both sides will get part of what they want and the merger will happen.

  5. I am hopeful that the merger does not go through. The decline of service at UA is an indicator of the benefits that come with consolidation with too few airlines. we are getting to the point of oligarchy within the US internal market. Time step back.

  6. Too bad the DoJ appears to have lost some ground in both instances but, I remain convinced they will prevail on the merits of their suit,

  7. It does seem like the access this blogger gets from his affiliation with AA promotions department contribute to his favoring the merger. Whether or not actual conp goods are exchanged.

  8. @jane – there’s an interview I gave that I’ll be linking to later in the week where I explain that I do NOT favor the merger, as I have written in the past. I personally benefit as a 100k flyer on American since US AIrways is the dominant airline at my home airport. But frequent flyers do not benefit from mergers (though the United MileagePlus redemption program did get better after the Continental merger, though the rest of the airline got worse). I definitely think a standalone American would be better. I don’t see the merger as absolute doom, but I do have a preference for no merger.

    I don’t think I have any ‘affiliation with AA promotions department.’ I talk to AA media folks the same as I talk with media folks with other travel providers.

  9. The Texas Attorney General is running for governor. He was under serious and widespread pressure in Texas for siding with Eric Holder and opposing this merger. The settlement removes a political barrier to Atty. Gen. Abbott’s election chances.

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