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Fed Shutdown Could Delay American Merger Trial

Fed Shutdown Could Delay American Merger Trial

For the first time in 17 years, the U.S. government is without an approved budget, putting the jobs of more than 800,000 workers in jeopardy and bringing many federal services to a grinding halt.

Among the services affected are those of the Justice Department, which has been preparing for a November 25 trial to adjudicate its lawsuit to block the American-US Airways merger on antitrust grounds.

The DOJ today filed a request with the court asking that the trial’s start date be delayed, blaming the shutdown’s effect on its ability to adequately prepare its case. A Reuters story quotes the Department’s filing as follows: “Absent an appropriation, the Department of Justice attorneys and employees are generally prohibited from working, even on a voluntary basis… This is creating difficulties for the Department to perform the functions necessary to support its litigation efforts.”

American and US Airways have consistently pushed for the earliest possible trial date, citing the outcome’s importance in American’s exit from bankruptcy, which is predicated on the merger proceeding as planned.

According to Associated Press coverage, there’s a possibility that the court would order the trial to keep to the original schedule, in effect authorizing the DOJ to spend as necessary to keep it lawyers working through the shutdown.

Antitrust Trial Timeline

If no agreement between the DOJ and the airlines is reached in the interim, the trial to adjudicate the DOJ’s suit to block the merger is set to begin on November 25, and is expected to last for around 10 days. Other related events scheduled to take place in the run up to the trial’s start:

September 30 – Exchange preliminary witness list
September 30 – Parties’ joint submission due
October 1 – Status hearing
October 25 – Close of fact discovery
October 25 – Plaintiffs’ expert disclosure
October 30 – Final deadline for requests for admissions to be served
November 8 – Defendants’ expert disclosures
November 15 – Supplemental and/or rebuttal expert reports
November 20 – Close of expert discovery

Merger Cheat Sheet

  • The new company would retain the “American Airlines” name and be based at American’s Ft. Worth headquarters.
  • US Airways chief Doug Parker will be the new CEO. American chief Tom Horton will be named chairman of the new board and remain in that position until the spring of 2014 when the company’s first annual shareholder meeting will be held. When Horton departs the board, Parker will assume his position as chairman.
  • American’s creditors would own around 72 percent of the new company; US Airways shareholders would get the rest.
  • Based on 2012 results, the new company would have generated $38.7 billion in revenue.
  • The merger is expected to generate around $1 billion in combined extra revenue and cost savings for the new company.
  • The new company will be valued at around $11 billion.
  • Combining the third- and fifth-largest U.S. carriers will create the world’s largest airline, in terms of passenger traffic.
  • Prior to any post-merger rationalization, the two airlines will have around 120,000 employees, 950 planes, 6,500 daily flights, and eight major hubs (American: Dallas, Miami, Chicago, Los Angeles, New York; US Airways: Phoenix, Philadelphia, Charlotte). Although the carriers promise to maintain all current hubs, Phoenix and Philadelphia are likely to be downsized in the post-merger “rationalization.”
  • The new American will be a member of the oneworld alliance, not the Star Alliance.
  • The merger is subject to review and approval by U.S. regulators. That wasn’t expected to be a problem since there is relatively little overlap between the two airlines’ networks.
  • The actual merger won’t happen overnight. United and Delta required five and seven months respectively to secure the necessary approvals for their mergers.
  • It was 22 months after their merger closed before United and Continental finally merged their frequent flyer programs. Expect a similar post-close interval before American and US Airways consolidate their programs.
  • Comparisons between American and US Airways’ current mileage programs are probably moot since there’s a high likelihood that an entirely new revenue-based program (like Southwest’s) will be introduced to replace both programs.
  • After the merger, 83% of U.S. domestic air traffic will be in the hands of just four airlines (American 26%, United 19.3%, Delta 19.2%, Southwest 17.3%).

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  • vivifiant

    What changes would the merger bring most likely to frequent AA flyers like me with 2.6 million miles and “eternal” AA platinum status?
    I fly mostly between the US and Europe and sometimes to S. America. Since I work with a small company I fly mostly in cattle class. Should I start looking for other airlines/programs?