DOJ versus US Airway’s Doug Parker

DOJ Trust-Buster vs Famed Airline Titans

August 14, 2013

Is the marriage between US Airways & American Airlines dead now that the DOJ’s Antitrust Division has filed a lawsuit to stop the merger.  All seemed to be going as planned after receiving the blessing of the Pilots, workers, a bankruptcy judge, and just last week, the  EU Competition Commissioner.  Albeit, the EU extracted some concessions, primarily the Philadelphia-London route.   It seemed that if AA/US would agree to give up slots at DC’s Reagan National and a few other places, US approval would be coming soon.  It is likely that the only people not surprised is Doug Parker who has previously lost battles for Delta and United.

Clash of Personalities
To me the interesting story unfolding is between the three men involved and below is a primer on each person.titans

William J. Baer - The Asst. Attorney General of DOJ’s Antitrust Division has a history of enforcing antitrust law and his appointment to the DOJ was held up for a year by GOP Senators.  He previously served at the FTC when the Staples/Office Depot was blocked and Exxon/Mobile was forced to make substantial concessions.  Just this year, he extracted big concessions in the Anheuser-Busch/Grupo Modelo, won the price-fixing case against Apple & a group of publishers.  He is a winner.

Tim Horton – The President & CEO spent 17 years at American Airlines before leaving for 4 years to be AT&T’s CFO and Vice Chairman.  Horton’s early years at American were American’s golden years where they were the first to launch a frequent flyer program, introduce a hub system and led the industry in innovations.  Horton was part of the so-called American Airline’s Brat Pack.  Three other former brat-packers are current airline CEOs including Virgin America, Spirit and none other than Doug Parker, US Airway’s CEO.  Horton returned to American in 2006 and was appointed CEO the day they filed for bankruptcy.

Doug Parker – An alumni of Albion College, Parker graduated a year ahead of myself.  I knew who he was but didn’t “know” him but I have watched him from afar.  After working at American, he moved to Northwest and than America West. In 2001, he became President & CEO of America West.  In 2005, his company bought US Airways while US Airways was in bankruptcy in a transaction that kept the US Airways name but maintained the America West management team.  In 2006, he launched a hostile bid valued at nearly $12 billion for Delta, while Delta was in bankruptcy.  However, Delta’s creditors chose to reject the offer and later merged with Northwest airlines.  In 2008, there were persistent rumors US Airways would merge with American or United but nothing  happened.  In 2010, it was reported a deal with United was imminent, but then the United-Continental merger was announced.  Finally in 2012, Parker got his mega merger he wanted, American Airlines agreed to a deal valued at $14 billion.  Yesterday, the DOJ sued to block the merger.

All 3 of the above personalities will likely be clashing for awhile.  It should be interesting to see how things unfold.

NOTE  The opinions expressed below are of the authors and Exito has no comment on mergers:
Let me be clear, I’ll go on the record and state that any consolidation in the airline industry will lead to higher fares and fees.  However, I wonder if that is really a bad thing in the long run  Although I love low prices, do we really want to see the never-ending bankruptcy merry-go-round and ever expanding graveyard of failed airlines?  Every bankruptcy or failed airline is shock to our economy with long-term repercussions.  In my opinion, the money we save on tickets today will end up costing all of us more in the long run.  So I believe the merger should proceed with some concessions to insure competition.  And let’s not forget that American Airlines is currently operating under bankruptcy protection so how will stopping this merger affect American Airlines.  Will they eventually be forced to close their doors? or worse be bailed out by the taxpayers?

– John Slocum, Chief Marketing & Strategy Officer

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