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Seems like the DoJ may have succumbed to political lobbying.
The actual agreement between the ailines and the DoJ is a crock.
If you look at the actual language...it isn't worth the paper/pixels it is printed/displayed on. AA can use any minor deterioration in the financial viability of a hub to begin dehubbing it.
Rises in fuel prices, increases in employee wage rates, beginning of a recession. The settlement is as soft as jelly. Indeed. The "settlement" is a toothless surrender document from the DOJ.
Almost anything that doesn't deliver to the merged AA's satisfaction can be cut -- including hubs and routes specified in the agreement - even if profitable. No waiting for up to 5 years required.
The biggest loser in US Airways-American deal? You. - The Term Sheet: Fortune's deals blogTerm Sheet
Originally Posted by FWAAA![]()
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Why did the DoJ cave? They'll deny it forever, but when nearly 100 members of Congress, mostly Democrats, plead with the President to call off the dogs and let two companies merge, and when the unions representing almost 90,000 employees at the combined airline lobby and plead for the merger, it was bound to happen.
The actual agreement between the ailines and the DoJ is a crock.
If you look at the actual language...it isn't worth the paper/pixels it is printed/displayed on. AA can use any minor deterioration in the financial viability of a hub to begin dehubbing it.
Rises in fuel prices, increases in employee wage rates, beginning of a recession. The settlement is as soft as jelly. Indeed. The "settlement" is a toothless surrender document from the DOJ.
Almost anything that doesn't deliver to the merged AA's satisfaction can be cut -- including hubs and routes specified in the agreement - even if profitable. No waiting for up to 5 years required.
The biggest loser in US Airways-American deal? You. - The Term Sheet: Fortune's deals blogTerm Sheet
... "The settlement allows the New American to break its promise to maintain service levels at its hubs and cancel those flights to smaller cities if it feels that there has been a material adverse change, "in demand, the competitive environment, or New American's cost to comply." This so-called MAC clause is extremely vague and can be triggered at the sole discretion of management. So say oil prices go above $100 a barrel -- that could possibly be a trigger as it impacts the "cost to comply." Say Southwest starts a new route to Phoenix -- that could constitute a change in the "competitive environment" of the entire hub."