Video: Former American CEO Robert Crandall reacts to DOJ merger challenge

No doubt that by now you’re aware that they Department of Justice has decided to challenge the merger between American and US Airways.

Former American Airlines CEO Robert Crandall was interviewed on CNBC yesterday, and he was both surprised and critical of DOJ announcement.

Here’s some of what he had to say:

The government, as it so often does is compounding an earlier error, and if they didn’t want consolidation in the airline industry they never should have approved Delta/Northwest or United/Continental.

When they approved those things, they made a third major merger inevitable because Delta and United are now so big…that neither US Airways nor American can compete effectively with them…they are not sufficiently ubiquitous, they are not sufficiently sized.

…as a consequence, what the government is doing here is reducing competition, not increasing it. If I had been the King of Spain, I would never have approved any of these mergers, but if the first two are approved, the third one has to happen if we’re going to have three effective major competitors.

Anyway, here’s the video.

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I was in a meeting yesterday when I received a tweet from a friend alerting me to the news that the DOJ had decided to challenge the merger.

My reaction?  Complete shock.

Not so much that the DOJ had decided to oppose a merger, but they they had waited until now to make the announcement; the bankruptcy court is supposed to hold a hearing today and it’s been widely expected that the judge would approve American’s reorganization plan and okay the merger.

What was your reaction?  We’re you surprised by the news?

Comments

  1. Just a quick note on the timing of the Justice Department announcement. The Hard-Scott-Rodino pre-merger approval process is a complex one, specially if the merger is as big and complex as this one. The timing parameters are set by law, including when the DOJ is permitted to request information. During what is called a “second request” the DOJ probably engaged in complex economic/antitrust analysis, depositions, evaluation of thousands of documents, memos, presentations, e-mails, etc. That evaluation included a Task Force of several dozens Attorney Generals.

    Both USAir and American were part of the process and their “top-notch” antitrust lawyers knew or should have known that this was coming all along when the DOJ engaged in very broad confidential investigation. THis complain was “new” to us as a public, but not the parties.

    I am a corporate lawyer/aviation geek and from what I can read in the complaint all I can say is that this merger is in a deep hole.

    BTW: To us, as AAdvantage members, we should be outraged by some of the comments of USAir executives in their internal e-mails.

  2. When some of the evidence used is screenshots from ITA showing a comparison of next day flight prices, you know they have no idea what they are doing. I think this is only a bump in the road and AA/US will just have to give up some slots at DCA before merging.

  3. I was shocked (pleasantly so, but still shocked) when I found out about this. I think the merger is pretty much dead (although I wouldn’t be totally surprised if it went through somehow). The DOJ wouldn’t have filed a lawsuit that they don’t think they can win, and if Dougie were willing to make enough concessions to satisfy DOJ, he would’ve done so by now.

  4. Why are we questioning the wisdom of the DoJ. The DoJ has access to all the email the NSA has been reading and thereby knows what is best for us.

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