It’s possible that some readers may have noticed my absence.  A Great Illness took hold of me.  Then a Great Ice Storm.

So, more tomorrow but a comment or three today:

OK, so, everyone got what they asked for.  It’s often been said that you should be careful what you ask for.

I think Doug Parker is off on the right foot in setting  a leadership tone for the new American Airlines.  I think the American Airlines employees will appreciate it both for the tone as well as the respect it shows to employees.  I don’t know what the response will be from the US Airways people but I hope it’s tasteful.

Tom Horton got paid off.  That part isn’t pretty but it was necessary, I think.  Now, he’s gotten his payoff, it’s time to go.  The sooner, the better.  I’ll also now say that I think Tom Horton rose above my expectations in all of this.  Although I didn’t care for his initial comments after the merger was announced, he did settle down and, more importantly, he did work earnestly to make the merger happen.  That was significant and meaningful and he should get credit for it.

I think it was a gracious and even pleasant gesture for Bob Crandall to come out for the birth of the New Company.  Seeing photos of Crandall, Horton and Parker at the beginning of the new company made me feel like this newly merged company has a very real chance at greatness.

For debtors, this is the best outcome anyone could get from a bankruptcy.  Be thankful for it.

On the subject of the new American Airlines livery . . . I will buy Doug Parker the best Mexican dinner I can find in the Dallas area if he will just make that ugly design go away and bring something that A) is good design and B) is less expensive to paint on the over 600 new aircraft coming to AA.

Filed under: Mergers and Bankruptcy by ajax
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The US Bankruptcy Court has approved American Airlines’ exit from bankruptcy and merger with US Airways.

Employees of both organizations:  Take a moment and enjoy what this means.

On December 9th, a new airline is being fashioned from two old airlines of which both have a very old, very long history.

I truly hope it is both successful and model for both service and price.  I honestly do.  I hope that the employees of both groups will enjoy higher wages, better working conditions and feel generally more beautiful and handsome.

But a word of caution too:  Don’t screw it up with greediness.

<whispering> I’m talking about you flight attendants in case you didn’t realize.  </whispering>

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UPDATE:  The judge will be issuing a ruling sometime between close of business today and close of business Wednesday.

Original Post:

There is a private antitrust lawsuit against American Airlines and US Airways being conducted by two private attorneys who have long instituted lawsuits against airline mergers.  In a hearing today in US Bankruptcy Court, Judge Sean Lane is hearing arguments for and against a Temporary Restraining Order against a merger as well as other arguments for and against whether or not he (Judge Lane) can approve the merger.

The plaintiffs in the private lawsuit certainly have the right to ask for a TRO but they also have a right to get denied as well.  Asking for a TRO at this late date is, at the minimum going to raise many eyebrows since a TRO is generally requested for emergency situations.  This merger has been on deck for a long, long time.

Not only do I think the TRO will get denied, I think we’ll see the plaintiff attorneys get walked around the courtroom on the facts behind their contention.  The truth is that while there are “plaintiffs” these attorneys represent, this lawsuit is their lawsuit.

Furthermore, a variety of competent parties have already been engaged on the merits of this antitrust trial by virtue of what played out in the Department of Justice lawsuit most recently.  Plaintiff attorneys are going to argue that issues go unaddressed and real harm is taking place which suggests that the Federal Judge in that lawsuit didn’t pay attention (and the record reflects the exact opposite) and that the Department of Justice isn’t a competent representative for the citizens of the United States.

The TRO won’t be approved and the merger will be approved.  The plaintiff attorneys will stand in front of cameras and microphones and decry the great harm happening to everyone.  Journalists will yawn, write their stories about today and the big news will be the merger is approved and ready to be consummated.

Count on it.

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I smell a small mouse in this mix.  That mouse, hardly a rat, is Virgin America.

From the Department of Justice announcement on the settlement of the lawsuit with US Airways and American Airlines:

“Rights and interests to two airport gates and associated ground facilities at each of  Boston Logan, Chicago O’Hare, Dallas Love Field, Los Angeles International and Miami International.”

I think that someone wants Virgin America to get access at the airports it has openly spoken of.  Virgin America is a service darling in that offers a superior inflight service experience combined with an LCC pricing scheme.

I think that some or all of these cities will find Virgin America getting the use of these at a pre-arranged price.  The DoJ will come off looking like a prince for getting Virgin America, arguably the smallest of LCCs right now, a place at the table.

But the airline, American Airlines, could care less. Virgin America isn’t big enough to introduce pricing power into those markets the way a larger, more established national airline could.  It’s a deal that, if it works out that way, does nothing to impact American Airlines and which does nothing to substantially introduce competition.

My guess:

I think Virgin America will acquire the gates and facilities in Los Angeles, Miami and Chicago.  Maybe Boston as well.

Virgin America already has a proper footprint at DFW airport.  So I do wonder who might be interested in those gates at Dallas Love Field.  It would be egregiously bad to award those to Southwest although I’m sure that Southwest would love to have them.

I actually believe that Southwest is constrained from getting those gates but readers are free to correct me.

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The Slot Race is about to begin.

Slot divestitures required in the settlement of the lawsuit between American Airlines / US Airways and the Department of Justice will be the laser focus of all airlines in the US.  Just two weeks ago, Southwest Airlines began publicly maneuvering to be at the front of the line for slots at both airports (NYC La Guardia and Washington DC Reagan National).  Yesterday, Delta announced it would be happy to take on the slots being given up.

jetBlue can’t be far behind nor Virgin America.

So far, I can’t identify exactly what the terms are of the settlement with respect to those slots.  I will offer an opinion on what should happen:

1)  Only airlines with a market share at those airports that represents less than 20% should be eligible to bid on those slots.  Why 20%?  There are currently 5 major national airlines in the United States and they’re becoming 4 airlines.  Falling below the 20% threshold invites new entrants and gives incumbents with a small footprint an opportunity to play in the game.

2)  Gate space at those two airports should be available consistent with the slots.  In other words, new entrants should be encouraged with the ability to get reasonable gate space.

3)  I would specifically bar Delta Airlines from competing for slots at both New York and Washington DC airports.  Delta and US Airways made their deal in a slot exchange in 2011.  That deal gave Delta 132 slots at NYC La Guardia and gave US Airways 42 slots (plus cash and a daily Brazil route authority from Charlotte) in Washington DC.  These two airlines have had their day at the buffet line.

With these assurances in place, I think we’ll see some new competition into and out of those airports.  Will it be good or ideal?  I have no idea.  Part of the outcome really depends on the eligible airlines being willing to not only acquire the slots but also being willing to use them effectively in the markets.

While it grates on me to say this, I do think that finding a way for Southwest to continue to build its presence in the New York City and Washington DC areas is a good idea.  This puts a national airline with a national network into play in those markets.

Allowing airlines such as WestJet or Spirit to operate a few pairs into and out of those cities doesn’t actually provide much competition at all.  Those airlines use and make a big profit from those slots without benefiting the consumer in the form of introducing real competition.

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The AA/US v DoJ settlement came more quickly than I expected and I am busier than usual at this time.

However, a few top level comments until I can sit down and do an analysis.

• I so far see the airlines giving up really nothing that they weren’t already prepared to give up for this deal.
• The gates they have to give up in the key airports does (potentially) remove barriers to entry for new airlines in those markets.
• Delta doesn’t surprise me in their loud, vocal expression that they would like to get those Washington D.C. slots.  (This was suggested to me by two sources as being an end game of Delta for weeks)
• I think it’s great that the Republican candidate for governor, Greg Abbott thinks this deal is a win for American Airlines.  Sadly, he didn’t originally and did very real damage as a result.  Blowing with the wind doesn’t impress me unless it’s an airliner.

More to come.

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Southwest Airlines wants to offers its unique perspective on competition in markets affecting the US Airways / American Airlines merger and particularly wants to talk about New York La Guardia and Washington DC Reagan National airports.

Surprised?

Southwest wants to offer that it doesn’t have competitive influence in those markets because it has too few slots.  This, of course, is to angle for an advantage in accessing slots at those airports that will almost certainly be given up in such a merger.

I like Southwest Airlines, I really do.  But this strikes me as a particularly craven move on their part.  The airline has not been willing to pay the market rate for such slots and it has lost opportunities to expand in those markets as a result.

Everyone senses a win coming up for these two airlines and most likely via a negotiated settlement between the Department of Justice and US Airways and American Airlines.  Now everyone wants a piece of the action.  One wonders just how many airline executives at Southwest, Delta and other airlines have been sticking their oars in to gain advantage.

Absolutely slots should be given up.  And those slots should go to high bidders.  If we’re not going to treat slots as a public commodity to be managed, then those who own them should at least get the greatest economic benefit from them.

If Southwest wants more slots, it needs to do a much better job analyzing the value and pony up the money.  It really is that simple.

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I have a friend who bought American Airlines stock at 50 cents per share. That friend asked me what on earth was going on that the stock rose to just over $10 per share.

These are strange days when an airline stock is actually worth quite a bit while in bankruptcy, on hold with a merger because of a lawsuit. Strange days indeed.

The answer is that there are settlement discussions going on with the Florida Attorney General and with the Department of Justice.

The talks with the Florida AG are to build momentum and whether or not a settlement is reached there is really immaterial.

The talks with the DoJ are serious and Attorney General Holder has come out with bluster stating that the airlines would have to sell assets to get a settlement. The airlines wisely declined to make a comment.

In the world of lawsuits, he who is quiet is usually the one who is winning.

American Airlines and US Airways are very quiet on this.

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American Airlines and US Airways have so many different parties clamoring to be their friends in court, I’m reminded of my daughter who has over 700 Facebook friends.

People writing supporting briefs doesn’t mean that American Airlines and US Airways wins by the volume of support. The law is the law is the law. And the law in this case is somewhat tightly constrained. Decisions in this case must be made on what market conditions are today, not what they were 5 years ago.

So, if it feels like the argument is won, it is not.

The win in the Department of Justice lawsuit against these two airlines comes from making an argument that centers on what today’s conditions are and, at best, supporting it with comparisons to market conditions that existed in the past.

In other words, you can’t argue that just because the DoJ didn’t file a lawsuit over the last 3 mergers, they shouldn’t now. That isn’t even an argument.

But you can argue that market conditions and competition isn’t materially different from what it was 5 years ago and when those mergers were allowed, outcomes favored more competition rather than less.

Likewise, the DoJ can’t just say “less airlines, more costs”. And arguing that air fares are up isn’t valid either. In fact, arguing that air fares are up and airlines are earning profits this year would be stupid argument. The industry will point out the tens of billions of dollars lost over the last 35 years in aggregate.

One good year does not make for a turnaround.

The DoJ must be able to prove that competition will be reduced AND as a result, the consumer will be harmed. Consumers are not harmed automatically from higher prices. In fact, over the last 5 years, since the start of the Great Recession, lots of items rose dramatically in price. Gasoline is one item that comes to mind. So did milk.

Air fares rose because airlines A) stopped trying to buy market share at any cost B) returned to operating each route as a profitable enterprise and C) consolidated to reduce costs.

A healthy, competitive airline industry that charges a higher air fare may well be in the consumer’s best interest.

Neither side has a sure win here. The airlines have more maneuvering room than the DoJ but the DoJ isn’t without some firepower and it doesn’t have as great a burden of proof as many think it does.

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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.

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There have been a number of airline industry watchers who have private and (sometimes) publicly expressed concern that American Airlines’ case with the DoJ on the subject of competition was hurt by American’s ability to turn a profit right now.

American Airlines has indeed earned a Q3 profit and it was a respectable one.

Delta Airlines had a Billion Dollar 3rd Quarter.  $1.6 Billion to be exact.

While you digest that news, consider that Delta doesn’t have the lowest costs around this town.

So, when we consider that the airlines of size (Delta and United) and what they’re able to produce for themselves in profit, consider the size of the warchest that that gives those two airlines.

And then explain how the much smaller American Airlines and US Airways are going to fare against those behemoths.

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There is now speculation that there might be talks going on between the Department of Justice and American Airlines and US Airways to settle the lawsuit the DoJ has brought against the two airlines.

The speculation is largely born out of the fact that Texas Attorney General Abbott got a “settlement” deal with the two airlines and was made happy.

The truth is that that settlement was window dressing.  The Texas AG got nothing past what AA had already offered in many discussions.  The offer was merely put on paper and signed.

I do not think there is a deal to be made with the DoJ and I think those hoping for it are ignoring the fact that the DoJ has backed itself into an ugly corner by even filing the lawsuit.  There were other choices they could have made in August.  One would have been to enter into negotiations for what the DoJ would think necessary to improve competition.  The fact that that was’t the next step speaks loudly to the intent of the DoJ.

Lawyers are people and the leaders of these lawsuits didn’t get where they are by changing their minds.  The amount of ego that would have to be swallowed by both DoJ Attorney General Holder and the lead Deputy AG Baer would be very large.  It’s hard to imagine either man swallowing such a change and it’s hard to imagine a deal that allows either to save much face in the process.

Look for a trial starting on November 25th.  I still think the airlines win this trial and I think that will be even worse for the DoJ.  The Department of Justice is free to shock and surprise me with a deal but if one comes about, it won’t substantially change the merger between the two airlines except for in Washington DC at Reagan National airport.

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American Airlines has turned in a very respectable 3rd quarter profit of $289 million and say they would have made much, much more if bankruptcy costs hadn’t gotten in the way.  I continue to respond that one time charges and bankruptcy costs happen and should be considered in results.

We’re nearing the second anniversary of American Airlines’ bankruptcy and it is good to see the profits and also see that a significant amount of money has been set aside for employee profit sharing.

It also makes me feel particularly bad for the US Airways employees because the delay in the merger has yanked away the economic benefits they would be experiencing as a result of the airlines’ success together.

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American Airlines has announced that it is adding two new routes from DFW to Hong Kong and Shanghai and has done so with great fanfare.

The Shanghai route will use American’s 777-200ER but the Hong Kong route will make use of AA’s newest 777, the 777-300ER.

When American Airlines ordered the 777-300ER a few years ago, it felt like a very, very good decision.  In fact, in some ways it simply defied imagination that AA was the US airline that finally decided to buy the -300ER (none had done so at that time and none have made such an order today.)

I’m a fervent believer that international routes will trend towards longer, thinner routes.  I do not believe that either the 747 or the A380 has a very strong place in the airline world today.  But I also think that the 777 fits neatly into that high capacity, long route structure that so many airlines are using to make big money from.

And American is clearly doing very, very well using the -300ER.  So well that one does wonder at the reticence to purchase being shown by both United and Delta.  Yes, each still has the 747-400 and I would argue that neither is well served by that aircraft.  Particularly in light of the age and the changing structure of routes.

So let’s celebrate something that you hear  very rarely from me:  Congratulations to American Airlines for a very wise decision.

Filed under: Airline Fleets, Airline Service, Airports by ajax
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The Transport Workers Union represents thousands of employees of American Airlines and US Airways (and several other airlines such as Southwest where they recently had an odd scene go down as well).  This union is under new management and they’re just itching to get in the way of themselves.

Most recently, the TWU filed to become a party to the lawsuit the DoJ has filed against the merger of American Airlines and US Airways.  The technical term is intervenor and it means that they want to become a part of the lawsuit as the plaintiff or defense.  In this case, they wanted to be the defense.

US Airways and American Airlines both filed objections to that stating that, in this case, the TWUs interests were fully aligned with the airlines’ and therefore didn’t need representation.  The DoJ objected as well.

The truth is that no one wanted them at the table because who needs a union coming in late to the party on an accelerated court schedule?  Who wants an airline union showing up to be involved in such a lawsuit under any terms.

No one.

So now the TWU wants to be an amicus to lawsuit so it can file it’s opinion.  This is likely to be granted as several other parties are already “interested friends of the court” in this trial.

The TWU has been under fire from other unions.  Most recently, the Teamsters attempted to grab a good portion of their membership away from US Airways and American Airlines and they barely fought them off.

It’s feeling threatened and insecure and its leadership wants to show it can play with the big boys.

The thing is, it can’t.  It can’t even keep its membership all that happy despite a very good deal negotiated for them in the merger.  The TWU is a hot mess and needs to go get its own house in order instead of interfering in issues it has little grasp of.

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United Airlines has announced routes into the fortress hubs of Delta just days after Delta announced flights into UA fortress hubs.  United is adding routes from both Los Angeles and San Francisco to Minneapolis / St. Paul and Atlanta.

Delta previous announced routes from Seattle (which is nearing “hub” status for Delta) to Los Angeles and San Francisco.

First, Los Angeles is actually no ones hub but it is a strong focus city for all.  Los Angeles serves as a major gateway city for airlines and just like New York City, everyone wants to be dominant there.  A few years ago, American Airlines spoke of Los Angeles being a part of its “corners” strategy.  More recently, Delta has been building its operations up there.

Los Angeles won’t be anyone’s hub because it isn’t suited to such operations.  It will, however act as a gateway city with significant focus city operations just as New York JFK and Newark airports serve the same role in that area.

There is a lot of first class and business class traffic in the Los Angeles area and everyone wants a larger piece of it.  Delta is ready to battle it out with United in that market and United is responding.

The two SuperLegacy airlines will trade more and more blows with each other but neither will gain advantage much over the other.  However, both will gain advantage over the smaller airlines in those markets such as American Airlines, US Airways and LCC carriers.

The one airline who can hold their own in those cities is Southwest Airlines.  They are the equal of UA and Delta from a domestic point of view.

These route announcements are just one more sign of the power the two largest airlines both have and which they will wield to gain advantage in the marketplace.

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Unions, particularly American Airlines’ APFA, are now putting pressure on other attorneys general in Florida, Virginia and Arizona to also engage in a settlement on the lawsuit filed by the DoJ.

So far, each is resisting.

I think that will change, perhaps.  Florida really hasn’t got a big stake in this lawsuit and their attorney general may feel the exceptional voice of APFA out of Miami in a short time.  Politically speaking, it’s not wise to go against pay raises for airline employees.  They come so infrequently that it is a major hot button.

Virginia is going to hold its position, I think.  But mostly because they do have a stake in air fair prices at Washington Reagan National.

Pennsylvania is exacting revenge on US Airways for what happened in Pittsburg, in my opinion.  That is a mistake as it could strongly affect how the merged American Airlines will treat Philadelphia in a merger.  But I think there is a deal to be had here and I think that this deal is Doug Parker’s to make.  The deal is to retain Philadelphia as a hub for a certain number of years with a minimum number of flights to be maintained.  Is that a problem?  No, that’s a good hub for US Airways and it should remain a good hub for the merged airline. It costs little to make that deal.

Arizona is protecting its stake as well and this time its with an attorney general who has a less than steller reputation.  The Arizona AG may well find exceptional political pressure applied here too.  Why?  Because pilots and flight attendants for US Airways are desperate for a pay increase and there are one hell of a lot of pilots and flight attendants in Phoenix.

Will the merged company retain its hub in Phoenix?  I think it will.  It has never been practical to operate a hub in Los Angeles or San Francisco.  Delta operates a profitable and beneficial hub in Salt Lake City.  United has Denver and Dallas is too far from the West Coast to be well positioned.  I think Phoenix stays although in a revised configuration.  Again, this is Doug Parker’s domain and he and his team should begin applying pressure and working with their unions to achieve a deal here.  I actually don’t think that the Arizona AG will  mind smiling and reversing his position if he sees his political fortunes dim with pressure.

Tennessee is just mad.  It’s mad about Memphis and that AG is actually politically isolated.  There is no deal here, in my opinion, but I also think their opinion and participation amount to nothing in the lawsuit.

Time will tell but right now the lawsuit proceeds, deals are being made and the US Department of Justice has little maneuvering room at present.  The DoJ will say that the fight is in the courtroom and isn’t a popularity contest.  They would be right about that but when your support abandons you over time, few people want to go into a courtroom and be your friend.

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2nd Update:  The Judge in this lawsuit has also decided that the Department of Justice won’t get its requested stay and has to litigate the case on time.  It’s not a good day for those serving as plaintiffs in this case.

UPDATE:  Greg Abbott has announced a “settlement” in which the Great State of Texas will get what it wanted by legal agreement.

In other words:  American Airlines put in writing the promises it has already made long prior to the lawsuit nonsense.  AA will continue to serve 22 communities in Texas for at least 3 years.

The fact that the press conference was held at American Airlines facilities speaks volumes about this “settlement.”  I would imagine that AA just barely let him call it a settlement for face saving purposes.

The Dallas Morning News says:  “Abbott denied that political considerations played a part in either joining the lawsuit when it was filed Aug. 13 or deciding to withdraw now.”

(more…)

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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.

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In an unrelated story about United Airlines in the New York City area, some interesting statistics were noted by the Dallas Morning News.

The two SuperLegacy carriers, United Airlines and Delta, have 24.7% and 21.3% market share respectively.  No giant surprise but let’s look at what the next two airlines are in that market:

jetBlue:  13.3%

American Airlines:  12.3%

Yes, jetBlue beats AA in that market.  Let’s look at the next two airlines:

US Airways:  4.4%

Southwest:  2.8%

If we combined American Airlines, US Airways and Southwest in the NYC marketplace, we would have an airline with just 19.5% share of the market.  Still less than Delta and still considerably less than United.

And be mindful of the fact that SWA isn’t even considered a player in the NYC market as they’ve been unable to obtain gates or additional landing slots at the airports.

Care to guess who comes after Southwest?  That would be British Airways and Air Canada.  Yes, two foreign carriers are next in line with shares of 1.4% and 1.2% respectively.

On the tail end are Spirit and Virgin America with about 1% of the market each.

So when we talk about how there is an imbalance in the marketplace, let’s be mindful of the fact that the top two largest airlines (United and Delta) combine to own nearly 50% of one of the most competitive markets in the world.

And if you combined both AA and US Airways, they would still be at a significant disadvantage with just 16.7% of the NYC market.

I don’t disagree that the combination’s dominance in Washington D.C. should require divestiture of slots by those two airlines.

But the economic pricing power that the two SuperLegacy airlines have today are so great that they will gain more share over time rather than less with the current market conditions.  More of that market share means even more pricing power which means even greater increases in air fares.

But, hey, far be it for me to introduce rational thought in the US Airways / AA merger argument.

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