US Airways and American Airlines want to know two things from the Department of Justice.

First, they want to know the details of what the Justice Department did in evaluating four previous airline mergers in the past decade.  The DoJ doesn’t want to give up this information and says what they did in the past is not relevant.  Only the current market conditions are relevant.

It’s true that the law says that mergers must be based on the hear and now essentially.  However, how that evaluation is done is another story altogether.  The airlines will try to make the case that by changing the “how” of evaluating mergers affects they outcome.

And they would be right.  One item that has been glaring to all since this nonsense began is that the DoJ chose to evaluate airport pairs rather than city pairs and dismissed the market power of LCCs altogether in that evaluation.  I think that US and AA will (rightly) make the point that in changing how an merger was evaluated, they changed the perception of the effects and therefore the DoJs suit has no merit since it did not use accepted practices that have provided analysis for mergers for a substantial period of time.

In other words, evaluated with the methods and tools, the US/AA merger would pass scrutiny because of the market conditions that would be uncovered by these methodologies.

Second, US and AA want to know who the DOJ talked to in evaluating this merger.  The reasons here likely have to do with two things:  They want to know the source of bias in how the DoJ chose to evaluate this merger and I suspect they think that some other airline or airlines were attempting to torpedo the merger.

What’s that?  You are shocked?  Shocked that some other airline may be attempting to arrange a clumsy backdoor outcome in the airline industry?

I’ve thought about this for 3 days.  I think that US and AA are on to something here.  And I think that it is jetBlue and/or Delta who may be playing that game.  If I put money on things, I would guess that Delta likely spoke unfavorably using its recent experience in doing its deal with US Airways over New York City (La Guardia) slots.  I think that Delta used its experiences with the DoJ during that last deal to color the market dominance picture with the DoJ.

I also think that Dave Barger decided to take advantage of a moment to portray jetBlue as a poor, underfed, uncared for LCC who never has advantages over anything.  Mostly because jetBlue would love to have some dominance at Washington Reagan National.  Take note of the fact that CEO Barger recently opined that US/AA ought to be made to give up all the AA held slots at Washington Reagan National if a merger is allowed.

I do believe that Washington Reagan National should be required to be “opened up” a bit by slot givebacks by both airlines.

I also think that any airline with greater than 50% dominance at any slot controlled airport should be required to lease out or divest themselves of slots to get under that 50% control.

But, hey, I’m a radical compared to the DoJ.

There is a hint of clumsiness in how the DoJ has gone about this over and over.  And it does smell of influence.  I also expect that, by now, US and AA have been told off the record of such discussions by those closer to the DoJ investigation.  If there has been influence, we’ll find out in a short while.  The airline industry has never been known for its ability to finesse anything.

Filed under: Airline News, Mergers and Bankruptcy by ajax