Often the key to getting a deal done is finding a way for one or both parties to save some face.

The worst thing to happen in the Department of Justice lawsuit against American Airlines and US Airways is that the DoJ acted in a manner that immediately backed themselves into a corner.

Since that silly act, roughly 3/4 of the entire world has come out in support of the merger between the two airlines.  I’m pretty sure that Sri Lanka will be filing its amicus brief in support of the merger in a day or two (note:  that’s *humour* in that last line.)

A mediator has been assigned to this case and it is a way out for the DoJ.  With a mediator in place, a deal could be negotiated where the DoJ gets a token concession and is able to exit this lawsuit without appearing to have failed.

It’s failure that people fear the most in these things and lawyers have a big ego that goes against failure.  But this latest lawsuit may be one of the most unpopular acts the DoJ could have engaged in for 2013.

The mediator can help facilitate a deal but it also takes on the onus of having put a deal into place.  The DoJ can be seen as not giving in (entirely) and the airlines get their merger.

The deal that wins is that slots in Washington D.C. are given up and guarantees of service are made for a certain time period in other areas where competition is slim(er) as a result of  the merger.

My personal estimate of probability for a deal prior to the mediator being assigned was about 20%.  I would now raise it to 60%.

One item of note:  Were the DoJ to lose this lawsuit, it could lose all of the lawsuit.  Which means no slot giveups anywhere.  That’s a failure that would look very, very bad to any outside looking in at the DoJ.  There is some incentive for a deal.

Filed under: Airline News, Mergers and Bankruptcy by ajax
4 Comments »