American US Airways Integration: A new role for Regulators?

American US Airways Integration: A new role for Regulators?

Interesting developments continue in the merger efforts of American Airlines and US Airways: According to the Washington Post, the U.S. Department of Justice and several states have just sued to block the proposed merger of American Airlines and US Airways, arguing that the new $11 billion airline would reduce competition for commercial air travel in key markets, and may fail to realise customer benefits through integration.Read the full story below:

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/13/heres-why-the-justice-department-blocked-the-merger-of-american-and-us-airways/

We at BTD have always believed that acquisition and integration should be considered together as a single activity delivering the same goals, so I’m pleased to see the US Department of Justice adopting the same approach for American and US Airways. It’s all too easy for marriage partners to sell a story of benefits for the customers and the wider market, when in most cases everyone knows that the only benefits the deal must achieve are those for the business and its shareholders. Another common mistake the regulators have clearly picked up on is the unstated cost of ownership post-close, including likely over-spends on systems and process integration (e.g. in reservation, ticketing and loyalty programmes); and the potential for these increased costs to be passed on to the consumer. (You can read more on this at https://btd.consulting/uncategorized/able-to-buy-or-ready-to-own-the-true-cost-of-ma). An outside-in view of benefits to the market needs to be balanced – truly balanced – by the inside-out view of true costs of integration and long-term ownership; something most eager acquirers tend to ignore.

Clearly the US regulatory community is not prepared to do so any longer. Will EU and other regulators soon follow suit? Something we and our clients will be taking more seriously in future.