Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- China bans Boeing, US parts imports in tariff war April 15, 2025
- Boeing welcomes COMAC competition as Asia-Pacific demand soars April 15, 2025
- How good is the C929? April 14, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 17. April 11, 2025
- Uncertainty plagues airline, aerospace, lessor industries over tariffs April 10, 2025
DOJ “a day late and a dollar short” on merger concerns
The US Department of Justice’s lawsuit to block the merger of American Airlines and US Airways displays a concern that comes a little late.
As far back as the Reagan Administration, DOJ had ample opportunity to take aggressive action to block mergers. It’s concerned now about hub concentration? The Northwest Airlines-Republic Airways merger eliminated competition at the Detroit and Minneapolis hubs, where both carriers competed. The TWA-Ozark merger eliminated Ozark’s hub at St. Louis.
The new American would control 69% of the slots at Washington Reagan National Airport, and this is a concern? Consider:
- American is the only hub carrier now at DFW Airport.
- Southwest Airlines monopolizes Dallas LUV Field and nearly so at Houston Hobby Airport and Chicago Midway.
- United Airlines dominates Houston Bush Intercontinental Airport and Newark Airport.
- Delta Airlines controls Detroit, Minneapolis and Atlanta airports with a lop-sided market share.
And so on.
There are actually few directly overlapping routes and no competitive hubs between US Airways and American.
DOJ is concerned about job losses? Even the unions support this merger.
DOJ is concerned about the effect on consumers? Welcome to the club. All the previous mergers mentioned above were detrimental to consumers, but these cleared DOJ.
If United-Continental and Delta-Northwest were OK, this merger is, too.
Video interviews with Emirates’ Clark, Delta’s Anderson
Two video interviews popped up this morning with key leaders of airlines: Tim Clark, president of Emirates Airlines, and Richard Anderson, CEO of Delta Air Lines. Each is more than 25 minutes.
Emirates’ Tim Clark:
[youtube http://www.youtube.com/watch?v=VjHePahW7Os&w=560&h=315]
.
Delta’s Richard Anderson via Bloomberg News is here.
US ExIm financing under attack again; killing it would aid Airbus
US Export-Import financing is under attack again by Delta Air Lines and Republicans.
We understand why Delta is opposed. It believes that ExIm financing of Boeing aircraft to competitors puts it at an economic disadvantage.
But fees charged by ExIm made financing more costly and “market rate,” a move intended to remove the financing advantages. Some airlines, in fact, chose alternative financing as a result.
Delta claims ExIm hasn’t taken into account the impact on losing American jobs. We find this a stretch, since Boeing out-sources thousands of jobs with its industrial partnerships (particularly on the 787) and supply chain contracts. At one time, we seem to recall Delta out-sourced jobs to non-US locations.
Be that as it may, at least Delta has its self-interest at stake and one can’t truly fault the airline for this. But the Republicans are another matter. Although ExIm finances a variety of US industries, Boeing is the prime beneficiary and some Republicans claim this is nothing more than corporate welfare.
ExIm, which has been around since the Great Depression, provides financing that is similar to European export credit support offer to Airbus customers. If Republicans succeeded in killing ExIm (or if Delta does), then Airbus will have a clear advantage.
This falls into the category of “what are they thinking??”
Separately:
LCC airline news: AirAsia bid draws scrutiny; WestJet goes upscale; M&A potential
There are two items of note for low-cost carriers that we find interesting:
- AirAsia’s bid to buy Batavia Air looks like it is to become a political football, according to this article in the Wall Street Journal.
- Canada’s WestJet is adding premium coach class to its long-standing single-class service. We find this one particularly interesting.
Then there is this analytical piece from Seeking Alpha about a variety of potential mergers.