November 13, 2013

Blue moon time? I agree with Greg Abbott, on AA/US Airways merger

Even though I'm sure his reasons on this particular issue are different than mine.

The issue at hand was the proposed merger of American Airlines and U.S. Airways. Here's Abbott's reasoning explained by him.

First, as of Oct. 13? It looked like the two airlines' financial reasons for wanting the merger, at least for now, don't even currently exist.

And now, as of Nov. 12? There is a settlement, and I don't totally like it. AA didn't have to give up any gates at DFW. The two at Love are a throwaway. Four-eight gates at DFW would have been different.)

I agree that it's probably not a good consumer issue in general. The two have a lot of route overlap. Plus, with respective hubs in Dallas and Phoenix, flying anywhere in the Southwest will price up.

And, speaking of Southwest Airlines, re this issue:
1. It's not always that much cheaper than legacy airlines;
2. It would undercut whatever the merged airline would charge on route by just enough to tantalize customers;
3. Therefore, it's not some magic answer, certainly not from the consumer point of view, and neither from the reality world of how "the market" works, contra a Tom Pauken, even more in the ozonosphere than Abbott.
4. Per the story about the settlement, Love Field is not a "destination" airport in Dallas, as the north-side burbs, from northwest to northeast, on the Dallas side of the Metroplex, continue to grow further and further away from downtown.
5. Southwest will never fly out of DFW, at least not "never" for the next 20 years. So, we have to expect Jet Blue et al will keep DFW rates lower. But, without some gate surrenders, it's harder for them to do that.

As for concerns about American's future? Er, their most recent earnings say that, for right now, they look healthy enough. (They've also got enough money to blow to bother changing from old to new logos at the American Airlines Center in Dallas.)

Beyond that, corporations usually make deals, like in airline mergers, spinning off some routes. Maybe selling routes, and gate space, at both DFW Airport and Sky Harbor in Phoenix, to the likes of ValuJet, for example. Or selling space at Charlotte.

I was against United-Continental's merger for somewhat the same reasons as this one. Denver and Houston are close enough together as primary hubs, plus there was enough route overlap, to raise at least some concerns. But, just because Dear Leader's Transportation Department and Justice Department signed off on that merger doesn't mean it should sign off on this one.

Delta-Northwest had somewhat greater separations. So, it wasn't quite as worrisome.

That said, "Ask the Pilot" guru Patrick Smith agrees with airline industry financial analysts that the merger won't be that big a hit to the consumer wallet.

Anyway, here's Abbott's nutgraf:
But don’t take my word for it; take the word of the airlines: The president of US Airways — the company American is trying to merge with — said that consolidation among airline competitors helped pave the way for airlines to hike fares. He later noted that it’s “impossible to overstate the benefit” of mergers in giving airlines the ability to impose new fees. He also said that they were “able to pass along to customers” “three successful fare increases” because of mergers and consolidation in the airline industry.
See, it's really just that US Airways President Scott Kirby got caught with his pants down and Greg Abbott is running for governor and the Metroplex is Texas' largest urban area.

Were it not for that, Abbott wouldn't give a rat's ass about the merger, as if he really cares for consumer issues. After all, did he do anything about the United-Continental merger? Nope.

In short, I don't like the merger either, but for authentic reasons, not Abbott's bull. And I'm not alone, The Patriot-News out of Harrisburg, Pa., does a great job of laying out what's wrong with the merger. Add in that these are already two of the crappier airlines overall, and the likely result is an even crappier one.

But, here in Tejas? Given that Abbott let the previous sleeping merger dog lie, I agree with American representatives: This is special targeting.

But, the Allied Pilots Association, which represents American, or the Air Line Pilots Association could have made similar comments for the merger of United and Continental, if they had managed to get a new labor deal like Allied's already getting from American. Also, it's not like American, at least pre-bankruptcy, or U.S. Airways, has a history of being more friendly to pilots unions' than United or Continental. U.S. Airways actually has a bad reputation. As for American, it could still expand by merging with a semi-major regional partner, like, say, Frontier.

Beyond that, the merger will, WILL, will, I said, result in non-union job losses from duplicated middle management positions. There's no guarantee how many of them will be lost in Dallas, and how many in Phoenix, is all. So, this "save jobs" thing may just be hot air.

Well, pilots, I bet if your union started giving money to Abbott's campaign, he'd change his tune.

In fact, a former senior board member of Continental, on the board of the merged UnitedContinental, shows just how true that is.

Additional thoughts.

1. Contra the Fort Worth Business Press, I don't think this will help consumers.

2. Contra many people, I don't see this as a jobs-saver any more than United-Continental, as I noted above.

 3. Supporting the merger just because Wendy Davis does and Greg Abbott doesn't is poor reasoning. That's like an Obamiac supporting his stance on NSA snooping because Dear Leader does and Rand Paul doesn't. If you agree with Davis on the merits of the issue, fine. I don't. And, if she does, where was she on United-Continental? Sure, she had a lower profile then, but she was a state senator then. Did she speak up one way or the other?

4. If Abbott is blatantly pandering, is Davis doing the same on a smaller scale and a different way? Abbott's pretending to be a consumer advocate, which isn't that true. Davis is actually looking out for DFW interest. Those interests may not be the same as the rest of the state on this issue, and in fact probably aren't. They're almost certainly not the best national interests. And, even if US Airways' maintenance center moves from Pittsburgh to the Metromess, there still will be other jobs lost in DFW from this merger. Also, since that Pittsburgh center is only 5 years old, expect Steel City to be aggressive on clawbacks of any economic incentives it offered back then.

5. This all said, the feds' late intervention in this merger smells about as fishy as does Abbott's. This is the only major anti-merger stance Holder as AG has taken besides AT&T/T-Mobile. Well, DOJ did do a bit on MillerCoors/Grupo Modelo, but not a lot. But, that technically wasn't anti-merger.

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 Basically, there's a fair amount of pandering here by Holder, Abbott and Davis alike. Holder's pandering, as backed by his boss, is likely due in part to the ongoing revelation about NSA snooping.

A possible second reason might be that Charlotte's a major U.S. Airways hub, North Carolina is a swing state, and 2014 midterm elections are ahead. But, that's a stretch. Obama's cared no more about his party's position in Congress, realistically, than any other president of the last 40 years.

Beyond that, I can't figure any other reasons.

And, if Dear Leader were really concerned, he'd address what's really wrong with the American airline industry, starting with the Transportation Security Administration's gropefests.

Abbott's is even clearer, as noted. He wants to be seen as a consumer advocate of some sort.

Davis? Her angle is probably shoring up union support, should she be running for governor. A pilots' union isn't a typical union, but it is a union, and one with active voters, too.


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