Mediation might be a way out
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.
Who actually owns the slots? In other words who gains when they are again auctioned off?
Good question. By precedent, the airline(s) own the slots. In cases where the airline agreed to give up slots, a variety of arrangements have been made. Where they are sold, the airline reaps the benefit. In some cases, they’ve been leased out in long term leases. Southwest’s slots at EWR (Newark) are on long term leases from United (Continental).
But you should also read this:
http://flyingcolorsnews.com/?p=51
I firmly believe that slots should be owned by the government and auctioned off periodically for use.
my thoughts exactly. the DOJ is dead wrong in this as are the AG’S that signed onto it. they have a seriously flawed case and they knew it. this is a way for them to save some face, but, an ego is an ego. and from what i’ve seen, it may be a tough sell on both sides. it would be nice to have it resolved before years end. as a US employee, i would like to get things moving in a more positive direction.
I think both Doug Parker and Tom Horton are ready to deal to move on. I think they’ve both signaled this quietly as well. Both always knew that slots would have to be given up in those major markets and both know pretty closely what they can and can’t afford.