Will it fail?

Opinions about the merit of the Department of Justice lawsuit against US Airways and American Airlines and their merger are all over the road.  Some believe this is the end of the merger and most often those appear to be the opinions of people who operate outside the airline industry.

Others believe that US Airways and American Airlines have a real opportunity to win against this suit if they stay the course.

The concern in the greater world is that when the Department of Justice goes “all in” on a lawsuit like this, it typically kills a merger no matter how much companies involved protest they’ll fight this.  There is real evidence to support that.  One excellent example is the merger that was proposed between AT&T and T-Mobile.  Ironically, that merger got killed by the same Assistant Attorney General.

I do think that the intent on the part of the DoJ was to kill the merger without necessarily having to actually prove their case.  In other words, I think the DoJ believes that by filing the suit alone, they will stop the merger and achieve their goals.  It has been a successful strategy.

Furthermore, the DoJ is asking for a February trial date (or later) whereas American Airlines and US Airways are seeking an early November trial date.  This smells like the DoJ believes that if they delay this trial long enough, they’ll achieve their goals by default.

I do not think that a judge will look favorably on the government’s desire for a February trial date unless they literally cannot do it sooner by trial calendar.  I think this is underlined when the defendants in the suit signal they are ready to go to trial and do have a strategy.

There is a rule in trials that tends to say that he who is prepared best wins.  As a son of a lawyer, brother of a lawyer and with other lawyers in my family, I can say that I have noticed this to be very true.

So, I suspect that the DoJ is having a bad moment in as much as they are likely not prepared to go to trial.  I think they made a flawed analysis and I strongly suspect that not only were they not prepared for a trial, I also think that the broad commentary made upon their claims by a wide swath of subject matter experts has probably shown them that they really don’t have a strong case.

They don’t even have a strong case at Reagan National.  And if they lose this case, they may lose *all* the marbles rather than achieve some givebacks on that airport.  Why?  Because many other major airports are similarly dominated.  If the dominance that the merged airline would have at Reagan is an anti-trust problem, then the DoJ should have gone after several other airlines over their dominance at other airports.

Remember that many of the very people you would consult and have testify on this merger are the very ones who shamed the DoJ for their flawed analysis.  The DoJ is likely to find it very hard to find credible testimony in support of their action.

And both US Airways and American Airlines actually should be prepared to fight this case in November.  As a function of the due diligence they were already engaged on for the merger, they likely have all the data and facts necessary for an overprepared trial.  All they need to do is organize the data and schedule witnesses.

DoJ would probably like to spend a year doing discovery before being ready.  But they filed and publicly treated their lawsuit as “ready to go”.  It’s an ugly corner to be in.

Remember that part of the DoJ’s thoughts include the idea that each merger should be evaluated on its own criteria.  Perhaps that is what they even really think.  However, courts operate on precedent and absent a wholesale change in conditions, they tend to stick to precedent.  The Delta / Northwest, Southwest / Airtran and United / Continental mergers all provide current, relevant precedent.  Precedent is against the DoJ in this one and largely because of their previous approvals.

So, while some give this merger small chances now, I actually think that, in some ways, DoJ may have made this *more*profitable as a merger than it would have already been if they had just asked for some slots at Reagan National.

 

 

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One Response to “Will it fail?”

  1. Much as I think AMR must die (and they really must), a far larger portion of me thinks the DoJ needs to be taken out and whipped with a hickory switch until their ass is raw and bleeding, and if AMR is the instrument of that, then so much the better. For *FAR* too goddam long, the DoJ has acted as if A.) their shit doesn’t stink, and B.) the Laws of the Land don’t apply to them, starting wth Atty General Eric “I Can Do As I Damn Well Please” Holder and trailing right on down the list.

    If DoJ gets ass-fucked over AMR/USAir, so much the better. I couldn’t possibly be happier.

    -R
    (…with sand in the vasilene…)

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