DOJ Sues to Block AMR-US Airways Proposed Merger

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Aug. 13 (Bloomberg) -- Bloomberg's Megan Hughes offers details on the Justice Department's suit seeking to block the proposed merger of AMR and US Airways, saying the combination would violate U.S. antitrust law and would not be in the best interest of consumers. She speaks on Bloomberg Television's "Market Makers."

Live from bloomberg headquarters in new york, this is " market makers." the justice department wants to block the proposed merger between american airlines and us airways saying it will lead to less competition and higher prices.

Prosecutors have the london whale on a leash and he is helping them build a case against his ex-colleagues.

Larry ellison says without steve jobs, apple is doomed.

You are watching" market makers." we will begin this hour with the newsfeed.

The biggest business stories of the day -- regulators have subpoenaed goldman sachs and j.p. morgan over there metals warehouses.

Metal users have complained over long waitingperiods and high prices.

Retail sales rose in july for the fourth straight month.

The commerce department said june sales were higher than previously reported.

The facebook chief operating officer sheryl sandberg sold about $91 million of facebook shares after the stock went over its 38 dollar ipo price.

Facebook is up 41% this year.

The deal that would create the largest airline is now the focus of an antitrust lawsuit from the justice department.

This is american airlines with us airways and they say it should be blocked.

The government alleges the deal would lead to less competition in the industry and higher prices for consumers.

Let's go over to megan hughes in washington.

We know this is the justice department along with six states and dc that filed this lawsuit arguing the deal should be blocked and it violates i take trust laws and would lead to higher prices.

We knew this merger would create the largest carrier.

In this filing, the department questions the extent of control in a number of markets including reagan national airport in washington which is highly prized by airlines.

The merged airline would account for more than 60 % of departures from reagan.

Us airways says it is about 25% of all seats in the washington market but the significance of this lawsuit -- this is a break from the pattern we have seen.

The department has allowed six unprofitable airlines to merge over the last five years in an ever to cut costs and and losses.

We are seeing them draw a line saying this is what it would do to customers.

There are huge stakes for american airlines.

It is filing -- it filed for bankruptcy in 2011. the merger was announced and was supposed to be the last step in the reorganization, allowing it to exit corporate section.

The european commission gave the merger the go-ahead earlier this month subject to conditions.

There were concerns about a london to philadelphia route.

They opened that up to more competition.

A u.s. anchor to judge had a hearing set for august 15. airline executives had expected that to be the final step for this deal to be done.

It is a major wrench in the plans but in the lawsuit, the justice department says they believe american airlines will be able to stand on its own.

You mentioned some states are involved?

Right, you've got texas where american airlines is headquartered, arizona where u.s. airways is headquartered, florida, pennsylvania, texas, pennsylvania, and dc in the complaint, the justice department said american and us airways compete directly a more than 1000 routes where they offer connecting services.

That is tens of billions of dollars of revenue and they engage in head to head competition with nonstop service on routes worth about $2 billion in revenue.

The department of justice said they would have incentive to raise airfares in many of those hub cities.

American airlines and us airways merger blocked by u.s. antitrust lawsuit.

Bill ackman has lost the latest round in his battle with j.c. penney.

He stepped down this morning from the board after calling for the chairman's ouster last week.

You can call it a humbling turn.

Do you remember when bill ackman and jcpenney was on the same side when he brought in ron johnson as ceo and was invited to sit on the board?

This is what he told me in 2011. i expect this to be one of the best investments i have ever made as they take what are very good assets.

The company either owns its real estate or leases it.

You will see a transformation in what they sell in the store and how they operate and how they deal with customers.

I am excited about that.

Longer-term, it is a big operational turnaround.

Wax jcpenney may turn out to be one of his best investments but it has got to go a long way.

He audit in the mid--- 20's and it is now trading around $13. . one of the critical considerations is who will run the place.

The chairman is looking for a new ceo.

Mike ulman is staying and place as an antrim but it highlights the importance of human capital.

During the interview was before a crowd at one of the business clubs in new york city.

One of the members of the audience asked bill ackman about the importance of human capital.

Weekend higher anyone at jcpenney because of the new ceo and new number two.

People want to work for ron johnson and michael francis.

I have learned over 20 years in the investment business that people make animal norm is different for i -- make an enormous difference.

There are lots of talented people in the company that will follow their lead.

Bill act on his right, people make in a norm is difference.

You have to have the right people.

We welcome bill george back to the show.

He is from the harvard business school.

He is the former chairman and ceo of medtronic.

Thank you for taking time out to be with us.

Talk to us about what you see going on at jcpenney.

What about bill ackman's decision to step down from the board?

It is about time.

It shows the pitfall of having an activist with short-term goals on a company's board that has been in a state of decline for two decades.

You cannot turn a retailer around in that.

Of time.

He put a lot of pressure on ron johnson and the board to move very fast and try to get it turned around.

It does not work.

They abandoned customers and lost 30 % of their customer base and ulman is trying to get it back.

The only thing i agree with is that leaders make a big difference.

Ron johnson is not a bad person but he will not turn that lays around.

-- that place around.

Bill act and has a lot of egg on his face on this one.

I think they have a tough row to hoe.

Note ceo worth his salt will, on that board when they are having a board dispute like this.

These board disputes lead to no good things.

I am very concerned.

This is the same ill and that try to take over the target board in 2009 and thanked goodness he didn't. -- this is the same bill ackman that tried to take over the target or in 2000 and thank goodness he didn't. robert n for bromley of goldman sachs is now and a senior associate -- robert kaplan says he believes that bill ackman stepped down from the board because he has a fiduciary conflict and he is probably fixing for a proxy fight in the spring if jcpenney does not begin to do what he wants.

Who you agree?

I have no idea what he will do next.

The best thing he can do is to cap his losses and move on.

Nothing good will happen at jcpenney as long as they have this dispute.

They will never get a decent ceo.

They've got a long-term turnaround.

Look at any lampert.

He has been trying to turn sears around for seven years and they have fewer customers.

I do not see good things happening in the short term.

That board has to set its sights on a long-term turnaround, bringing back the customers they lost and steadily upgrading.

Right now, they cannot compete with their peers and they are not competing with target and retailers like that either.

Is there any merit to the demands that bill ackman was making before he resigned?

Like bringing in a new chairman?

I think there is merit in having a long-term ceo.

I don't believe they should go back into companies unless they are the founder like howard schultz.

There is not a lot of merit in all of bill ackman's demand.

I think he was trying to salvage his ego on the losses.

Contrast that with best buy which was having its own board dispute with addiction else.

The first and the new ceo does is to resolve the situation with shelves and it takes them eight months and meanwhile, he is revamping management.

He is not trying to turn it around overnight and he has put in place a strong story.

It is clearly on a path to recovery.

That's what you have to do step i step improvement.

Get a good online franchise, spruce up your stores, strengthen the management team but you cannot do it with a war in the board room.

That is the problem with a short-term activist when you have long-term problems.

Why is it so hard to turnaround retailers?

Because public image of jcpenney reflects a certain niche in the market.

They cannot make it into a high- end store overnight.

You have to do it overnight -- you have to do it long-term.

They are still serving the low end customer at target but they are steadily upgrading and bringing middle-class and upper- middle-class men and women into the stores.

You have to do it in a step-by- step method.

Johnson tried to do that but you cannot leapfrog over your existing customer base.

You've gotten the guest -- an existing customer base and you have to move up but you cannot abandon the old and retail.

If you do, you will lose it all and that's what is at risk at jcpenney.

Bill george is with the harvard business school.

When we come back, the surfacing of the london whale.

The former jpmorgan traitor is cooperating with prosecutors's going after his former colleagues.

Also, antisocial ceo's - we will see how bad bosses are when it comes to social media.


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