Wednesday, March 28, 2012
Bank of America's Settlement on Predatory Lending
Bank of America on December 21, 2011 settled with the US Department of Justice, and agreed to pay $335 million for its Countrywide's discriminatory lending practices against more than 200,000 minority customers. The pattern and practice covered between 2004 and 2008. During that time, it had also steered more than 10,000 minority customers to subprime mortgage pool while giving the White customers of similar risks prime mortgages. However, December 21, 2011, settlement may not be the end of headache for Charlotte-based financial institution. State Attorney Generals are in the final stage of negotiation with the loan servicers on improper foreclosure practices. The bills may easily reach as high as $20 billion. The remnants of Countrywide agreed in June 2010 to pay $108 million to settle federal charges that the lender exorbitantly slapped fees on customers struggling to keep their homes.
EPA's New Rules on Coal Plants Pollution
The Environmental Protection Agency on December 21, 2011 issued new standards limiting the emissions of mercury and other toxic pollutants from the nation's coal- and oil-burning power plants. The standards, if become effective, will be the first such effective means to enforce strict rules on emissions of mercury, arsenic, acid gases and other poisonous and carcinigenic chemicals. The standrads have been taken almost 20 years to formulate. The standards are known as the Mercury and Air Toxics Standards.
Monday, March 26, 2012
Year-end Tax Compromise Torpedoed at the House
On December 17, 2011, the Senate passed a bipartisan, two-month compromise measure by 89 to 10 votes that would:
* Extend the payroll tax holiday
* Fund long-term unemployment benefit
* Speed up construction of Keystone XL pipeline
On December 20, 2011, the Republican-led House rejected the $33 compromise measure.
However, under pressure from constituents and Republican Senators alike House Republicans eventually buckled and agreed to a two-month extention of holiday of employee payroll taxes and long-term jobless benefit. On December 23, 2011, both House and Senate passed the compromise measure and within hours President Barack Obama signed it into law. The measure will extend through February 29, 2012:
* Current 4.2 percent Social Security Payroll taxes for 160 million workers.
* An average of $300 a week unemployment benefit for long-term unemployed.
* Current mode of payment to Medicare doctors, preventing a 27 percent cut in reimbursements.
The measure will also require President Obama to approve the construction of Keystone XL Oil Pipeline within 60 days unless he declares that the project will not serve the national interest. The measure has a price tag of $33 billion, and is to be financed by increasing the home loan guarantee fees charged to mortgage lenders by Fannie, Freddie and FHA by one-tenth of 1 percentage point starting January 1, 2012.
President Barack Obama on January 18, 2012 put a hold on the construction of Keystone XL Oil Pipeline for the time being.
On February 15, 2012, Congressional negotiators hammered out a deal to extend the payroll tax holidays, continue jobless benefit to long-term unemployed and stop reduction in Medicare reimbursement to providers beyond February 29, 2012 deadline through rest of the year. The cost for the measure is pegged at $150 billion, and to be partly funded by government auction of wireless spectrum and larger contribution of new federal employees to their pension fund. On February 17, 2012, Senate approved the measure by 60-36 votes minutes after House voted to pass 293 to 132 vote. As a compromise, Democrats conceded the time of long-term unemployment benefit from originally planned 99 weeks to between 63 and 73 weeks. President Obama on February 22, 2012 signed the $143 billion measure.
* Extend the payroll tax holiday
* Fund long-term unemployment benefit
* Speed up construction of Keystone XL pipeline
On December 20, 2011, the Republican-led House rejected the $33 compromise measure.
However, under pressure from constituents and Republican Senators alike House Republicans eventually buckled and agreed to a two-month extention of holiday of employee payroll taxes and long-term jobless benefit. On December 23, 2011, both House and Senate passed the compromise measure and within hours President Barack Obama signed it into law. The measure will extend through February 29, 2012:
* Current 4.2 percent Social Security Payroll taxes for 160 million workers.
* An average of $300 a week unemployment benefit for long-term unemployed.
* Current mode of payment to Medicare doctors, preventing a 27 percent cut in reimbursements.
The measure will also require President Obama to approve the construction of Keystone XL Oil Pipeline within 60 days unless he declares that the project will not serve the national interest. The measure has a price tag of $33 billion, and is to be financed by increasing the home loan guarantee fees charged to mortgage lenders by Fannie, Freddie and FHA by one-tenth of 1 percentage point starting January 1, 2012.
President Barack Obama on January 18, 2012 put a hold on the construction of Keystone XL Oil Pipeline for the time being.
On February 15, 2012, Congressional negotiators hammered out a deal to extend the payroll tax holidays, continue jobless benefit to long-term unemployed and stop reduction in Medicare reimbursement to providers beyond February 29, 2012 deadline through rest of the year. The cost for the measure is pegged at $150 billion, and to be partly funded by government auction of wireless spectrum and larger contribution of new federal employees to their pension fund. On February 17, 2012, Senate approved the measure by 60-36 votes minutes after House voted to pass 293 to 132 vote. As a compromise, Democrats conceded the time of long-term unemployment benefit from originally planned 99 weeks to between 63 and 73 weeks. President Obama on February 22, 2012 signed the $143 billion measure.
Saturday, March 17, 2012
Southwest to Buy Boeing 737MAX
On December 13, 2011, Southwest Airlines became the first carrier to have firm order of buying first batch of new, fuel-efficient variant of 737, 737MAX, from Boeing. Although American Airlines, now in bankruptcy proceeding, had on July 20, 2011 filed orders to buy 737MAX from Boeing, the difference is that Southwest's orders are firm. On December 13, 2011, Boeing Commercial President Jim Albaugh and Southwest CEO, President and Chairman Gary Kelly during a press conference unveiled plans for the Dallas-based carrier to buy 208 aircraft with ticket value of $19 billion. The plan includes 150 firm orders of 737MAX and 58 firm orders of current generation 737 aircraft. The new version may start entering into Southwest fleet by 2017. Southwest also placed options to buy an additional 78 current version and 150 new version of 737. Southwest and its Airtran subsidiary have 699 airplanes altogether as of September 30, 2011:
Type Quantity Avg Age (years)
---------------------------------------
717-200 ..... 88 .... 10
737-300 ..... 165 .... 20
737-500 ..... 25 .... 20
737-700 ..... 421 .... 7
---------------------------------------
Type Quantity Avg Age (years)
---------------------------------------
717-200 ..... 88 .... 10
737-300 ..... 165 .... 20
737-500 ..... 25 .... 20
737-700 ..... 421 .... 7
---------------------------------------
Tuesday, March 6, 2012
MF Global Filed for Bankruptcy
After a disastruos bet on Europan debt market, MF Global on October 31, 2011 filed for bankruptcy protection, and its head, Jon Corzine, a former New Jearsey Governor, resigned on November 4, 2011. An estimated $1.2 billion is missing from customer account. Farmers, ranchers and small business owners have put their money with MF Global to hedge against risks, only to burn in the growing inferno of European debt crisis. To insulate firms such as MF Global from foreign debt crisis, Commodity Futures Trading Commission on December 5, 2011 voted to finalize rules that would limit what firms could do with customers' money.
According to a report carried by The New York Times and published by The Dallas Morning News on December 29, 2011, MF Global began transferring money from customer account on October 27, 2011 to a middleman. The firm used roughly $200 million of customer money to replenish an overdrawn account at JP Morgan Chase in London on October 28, 2011. The transfer of money to the middleman, Depository Trust & Clearinghouse Corp., a day before raised eyebrows to federal investigators.
According to a report carried by The New York Times and published by The Dallas Morning News on December 29, 2011, MF Global began transferring money from customer account on October 27, 2011 to a middleman. The firm used roughly $200 million of customer money to replenish an overdrawn account at JP Morgan Chase in London on October 28, 2011. The transfer of money to the middleman, Depository Trust & Clearinghouse Corp., a day before raised eyebrows to federal investigators.
Sunday, March 4, 2012
America Is A Graying Nation
U.S. Population 2000 2010 Change
Total .. 281,421,906 .. 308,745,538 .. 9.7%
65 and older .. 34,991,753 .. 40,267,984 .. 15.1%
65-69 .. 9,533,545 .. 12,435,263 .. 30.4%
70-74 .. 8,857,441 .. 9,278,166 .. 4.7%
75-79 .. 7,415,813 .. 7,317,795 .. -1.3%
80-84 .. 4,945,367 .. 5,743,327 .. 16.1%
85-89 .. 2,789,818 .. 3,620,450 .. 29.8%
90-94 .. 1,112,531 .. 1,448,366 .. 30.2%
95-99 .. 286,784 .. 371,244 .. 29.5%
100 and older .. 50,454 .. 53,364 ..5.8%
Source: The Dallas Morning News (December 1, 2011); U.S. Census Bureau
Total .. 281,421,906 .. 308,745,538 .. 9.7%
65 and older .. 34,991,753 .. 40,267,984 .. 15.1%
65-69 .. 9,533,545 .. 12,435,263 .. 30.4%
70-74 .. 8,857,441 .. 9,278,166 .. 4.7%
75-79 .. 7,415,813 .. 7,317,795 .. -1.3%
80-84 .. 4,945,367 .. 5,743,327 .. 16.1%
85-89 .. 2,789,818 .. 3,620,450 .. 29.8%
90-94 .. 1,112,531 .. 1,448,366 .. 30.2%
95-99 .. 286,784 .. 371,244 .. 29.5%
100 and older .. 50,454 .. 53,364 ..5.8%
Source: The Dallas Morning News (December 1, 2011); U.S. Census Bureau
AMR and AA File for Bankruptcy
On November 29, 2011, AMR Corp and American Airlines Inc. filed for Chapter 11 in a U.S. bankruptcy court in New York City. The 85-year-old pioneer of computer reservation systems and frequent-flier programs followed the footstep of other legacy carriers such as US Airways Inc. (2002 and 2004), United Airlines Inc. (2002), Delta Air Lines Inc. (2005) and Northwest Airlines Corp. (2005) in its pursuit to cut labor and pension costs. CEO and Chairman Gerard Arpey resigned on November 29, and President Tom Horton was elevated to those two positions.
As part of Chapter 11 reorganization, American also provided the following operational and strategic outlines:
* No change in passenger tickets, flight frequency (other than normal tweaks), rewards program and customer service.
* Financing, during bankruptcy proceeding, through more than $4 billion in unrestricted cash and short-term investment it has on hand instead of debtor-in-possession financing.
* No change in the future purchase of 460 new aircrafts from Airbus (260) and Boeing (200) as announced on July 20, 2011.
* No change in the so-called Cornerstone Strategy unveiled in 2010 stressing five hubs--Dallas-Fort Worth, Miami, Chicago, Los Angeles and New York--in its network.
* The proposed divestiture of American Eagle put on hold as the carrier reorganizes through the bankruptcy process.
History of American Airlines
----------------------------
* 1930: American Airways was incorporated.
* 1934: American Airways became American Airlines
* 1939: American began trading on the New York Stock Exchange.
* 1942: American began a catering business, Sky Chefs, for passenger meals.
* 1948: Coach service was introduced as an economical alternative.
* 1957: The American Airlines Stewardess College opened , offering world's first flight attendant training.
* 1959: American offered the first non-stop, coast-to-coast service, with Boeing 707.
* 1970: American got its first Caribbean service by buying Trans Caribbean Airways.
* 1979: American undertook major route expansion after the deregulation of airline industry, and moved its headquarters from New York to Fort Worth.
* 1981: American introduced AAdvantage, the first frequent-flier program.
* 1982: AMR Corp. was formed.
* January 2001: American announced that it would buy Trans World Airlines.
* September 11, 2001: Changed the landscape of airline and travel industry.
* March 2003: American narrowly avoided bankruptcy.
* November 29, 2011: American Airlines and parent AMR filed for bankruptcy protection.
Source: The Dallas Morning News; The Associated Press; American Airlines
Being unable to get any labor contract concession from American management, American's three unions--Allied Pilots Association, Association of Professional Flight Attendants and Transport Workers Union on April 20, 2012 agreed with US Airways for the latter to acquire the bankrupt airline. The agreement came three days prior to American's move to a New York bankruptcy court to void all existing labor contracts under Section 1113 of the federal bankrutcy code. The agreement reached with the Tempe, AZ-based airline was touted by the unions as landmark deal that would save 6,200 of the 11,500 union jobs to be eliminated as announced by the Fort Worth-based carrier on Feb 1, 2012. As part of the merger deal, the new airline will be called the American Airlines and based out of Fort Worth, retain membership in the Oneworld alliance, and keep in place a massive jet purchase order--200 Boeing and 250 Airbus--placed in July 2011.
On April 23, 2012, AMR Corp. lawyers pressed in the US Bankruptcy Sean Lane's Manhattan court to void all existing labor contracts.
After all the drama, backroom maneuvering and wrist-twisting, American Airlines and AMR Corp. CEO and Chairman Tom Horton and US Airways CEO Doug Parker divulged on February 14, 2013 the worst-kept business secret in recent history that both of their airlines were merging in a deal that:
* would create the largest airline in the world
* was estimated $11 billion, based on US Airways Group's closing stock price of $14.66 on February 13, 2013
* would be headquartered in Fort Worth
* would have 28 percent stakes owned by US Airways shareholders and 72 percent stakes owned by AMR creditors
* would help the combined company, a new American Airlines, offer more than 6,700 daily flights to 336 destinations in 56 countries
* was estimated to generate an annual revenue of $38.7 billion
* would steer Doug Parker and his team to driver's seat as the US Airways CEO would become the CEO of the combined company and Tom Horton would assume the role of non-executive Chairman for limited time (less than a year)
* would combine American's four hubs--DFW, MIA, LAX and ORD--and two primary markets, LaGuardia and John F. Kennedy International and Ronald Reagan Washington National, with US Airways' three hubs: Charlotte, Philadelphia and Phoenix Sky Harbor International.
On April 11, 2013, U.S. Bankruptcy Judge Sean Lane rejected the compensation package for American CEO Tom Horton as part of its merger deal with US Airways. However, Judge Lane gave go-ahead to the merger deal itself. On May 10, 2013, Judge Lane signed off the deal formally devoid of Horton's pay package.
On June 4, 2013, Bankruptcy Judge Sean Lane approved AMR Corporation's Disclosure Statement that detailed an exit plan from bankruptcy. Now, unsecured creditors will vote on this disclosure statement by late summer. The judge this time approved Tom Horton's $19.88 million severance as part of approval of Disclosure Statement.
On July 12, 2013, the US Airways' shareholders overwhelmingly approved the merger.
On August 1, 2013, AMR Corporation released the results of votes cast by its unsecured creditors and shareholders over the past couple of weeks. The results showed overwhelming approval for the airline's plan to merge with the US Airways and exit bankruptcy.
On August 5, 2013, European Union's regulatory arm European Commission approved AMR Corporation's merger with US Airways after two major concessions were extracted from them: the combined airline would (1) give up one daily take-off and landing slot for Heathrow-Philadelphia market; (2) continue feeding traffic to the new airline which would pick up slot in that route. EC's Competition Commissioner Joaquin Almunia expressed happiness on August 5 by the turn of the events as they would lead to "ensure choice and quality of air services for the passengers on this route".
On August 13, 2013, in a possible fatal blow to the almost-complete merger storyline, US Department of Justice, joined by six states--Texas, Arizona, Florida, Tennessee, Pennsylvania and Virginia--and the District of Columbia, filed anti-trust lawsuit in a DC court to block the proposed $12 billion merger. The lawsuit filed in the court of the US District Judge Colleen Kollar-Kotelly blasted the proposed merger to be anti-competitive for the industry and bad for consumers as it would have all the recipes of raising air fares and dropping services in many routes.
In recent years, US opposed several high-profile mergers, citing anti-trust concerns, and were mostly successful in breaking up them. They include:
*2001: $4.3 billion merger between UA and US Airways (merger dropped)
*2004: $9 billion acquisition of PeopleSoft by Oracle (Oracle won in court)
*2011: $288 million HR Block-TaxAct merger (US won in the court)
*2011: $11 billion merger of Nasdaq-NYSE merger (Nasdaq dropped the hostile takeover bid)
*2011: $39 billion merger of ATandT-T-Mobile merger (Companies vowed to fight in court, but dropped the merger plan after FCC disapproved it too)
On August 15, 2013, a day when AMR officials thought of having a clear outcome for exiting the bankruptcy with a re-org plan that included merger with the US Airways as the main driver until the USDOJ, six states and the DC torpedoed it with an anti-trust lawsuit two days ago, US Bankruptcy Judge Sean Lane asked American, its creditors committee and others to file their briefing by August 23, 2013 arguing why he should go ahead with the re-organization plan in the backdrop of government's avowed stand to block the merger so that a hearing might be held on August 29, 2013. Lane also heard argument about $19,875,000 severance package for AMR Chairman Tom Horton as the US Trustee Tracy Hopes-Davis opposed the package on the ground that it violated the bankruptcy rules. The nearly $20 million reward for Horton was crafted as part of the merger deal that would help Horton stay in the merged company as non-executive Chairman for a year before stepping down.
American Airlines and US Airways filed a brief before the US Judge Colleen Kollar-Kotelly on August 22, 2013, asking the anti-trust trial to begin on November 12, 2013 or as soon as thereafter, while the US DOJ asked the trial to begin February 10, 2014 or as soon as thereafter. The federal government, six states--including Texas--and District of Columbia filed an anti-trust suit before Judge Kollar-Kotelly on August 13, 2013 to block the merger.
Judge Colleen Kollar-Kotelly on August 30, 2013 gave American Airlines and US Airways what they had wanted all along: a speedy trial of DOJ's anti-trust lawsuit blocking the merger. The trial will now start on November 25, 2013.
On September 5, 2013, Michigan joined the DOJ anti-trust lawsuit filed on August 13, 2013 to block the merger of American Airlines and US Airways. Texas, Arizona, Florida, Tennessee, Pennsylvania, Virginia and the District of Columbia joined the federal government in the original lawsuit.
On September 13, 2013, Bankruptcy Judge Sean Lane approved American Airline's re-organization plan, with the merger with the US Airways a key part of it. However, he followed up on the following day (September 14) with a written statement that barred the severance package awarded to American CEO Tom Horton as part of the deal. Lane said that if the proposed merger went through, the merged company was free to award Mr. Horton the desired severance package. Judge Lane barred the severance package citing the US Bankruptcy Code of 2005.
With the US DOJ-led anti-trust lawsuit scheduled to start on November 25, both American and US Airways on September 23, 2013 extended their merger completion timeline by a month from December 17, 2013 to January 18, 2014.
On October 1, 2013, Texas Attorney General and gubernatorial candidate Gregg Abbott, appearing beside American CEO and Chairman Tom Horton at the D/FW Airport, announced that Texas was quitting the anti-trust lawsuit filed by the US DOJ on August 13, 2013 to block the American-US Airways merger. Abbott, who had faced a barrage of criticisms and political brickbats over his decision to join the Justice lawsuit, cited the settlement--continuing the service to 22 Texas cities, maintaining the headquarters in Fort Worth and continuing the big connecting hub at D/FW--he had reached with Horton for quitting the DOJ anti-trust lawsuit. However, none of the settlement terms are significant as American and US Airways have already stated to retain the service and presence of their combined carrier on the Texas map during the time of their merger announcement in February.
Also on October 1, 2013, US District Judge Colleen Kollar-Kotelly rejected the US DOJ prosecutors' request to delay the trial slated to start on November 25, 2013 due to partial government shutdown.
On November 12, 2013, U.S. DOJ reached a settlement agreement with American and US Airways that would avert a lengthy court battle. Although many in the industry saw the settlement as Fed retreating from an earlier aggressive attitude towards the merger, Justice Department's chief antitrust lawyer William Baer called the concessions obtained from the combined airline substantial that would protect consumers by opening more slots for low-cost airlines at seven congested US airports, including Dallas Love Field. Judge Colleen Kollar-Kotelley approved the settlement on November 12, 2013, afternoon. Now the deal goes to Bankruptcy Court Judge Sean Lane, who will hold a hearing on November 25, 2013 to assess whether the settlement arrived is aligned with American's proposed re-organization plan out of bankruptcy. American also asked Lane during the day to dismiss an anti-trust lawsuit filed by two San Francisco lawyers--Joseph Alioto and David Cook--during the same November 25, 2013, hearing. Under the settlement, the combined airline will divest all 104 of American's current slots, 52 round trips, at Washington DC's Reagan International Airport as well as 34 slots at New York's LaGuardia Airport. The settlement also requires the combined airline to give up two gates at five other airports: Dallas Love Field; Los Angeles International Airport; Chicago O'Hare International Airport; Boston Logan Airport and Miami International Airport. In LaGuardia and Reagan, the slots are controlled by landing and take-off rights rather than gates. In Dallas Love Field, although American and American Eagle withdrew from the airport in June 2009, they still retain rights to two gates. The settlement news sent the American's OTC stock to $13.50 before settling down at $12 on November 12, up by 26.1%. The US Airways stock closed at $23.52 on November 12. As of November 12, 2013, the value of the merger stood at $16.5 billion, up from the $11 billion when originally announced on February 14. Six states--Arizona, Florida, Virginia, Tennessee, Michigan and Pennsylvania--that had participated in the US DOJ-led anti-trust lawsuit received commitment, as part of settlement agreement, that the combined airline would retain services to long list of cities and airports in those states for at least three years, following the footprint of a similar deal that had been reached with Texas on October1, 2013.
On November 27, 2013, Bankruptcy Judge Sean Lane approved American's bankruptcy exit plan under the new criteria of November 12, 2013, anti-trust settlement with DOJ with respect to the carrier's merger with US Airways. Under the bankruptcy exit plan approved by Judge Lane on November 27, 2013, American will emerge from bankruptcy on December 9, 2013, and merge with U.S. Airways. Judge Lane also rejected a petition from a San Francisco lawyer, Joseph Alioto, for a temporary restraint order against the merger on the anti-trust ground. In early December, in another hearing, Judge Lane rejected Alioto's petition.
On December 5, 2013, Federal Aviation Administration allotted 22 of the 34 slots at New York's La Guardia Airport to Southwest and remaining 12 to Virgin. Southwest currently leases 10 slots from American. So, beside buying these 10 slots, it would buy another 12 slots, opening opportunity for adding six more daily flights at La Guardia.
On December 6, 2013, the last nail was put into the coffin for any hope to block the US Airways and American as a federal judge, Loretta Preska, rejected Alioto's appeal against Bankruptcy Judge Sean Lane's ruling.
On December 9, 2013, in a flurry of events that unfurled in quick succession, American Airlines, AMR Corporation and its various subsidiaries emerged from bankruptcy, merged with the US Airways, and the new company, American Airlines Group, began trading in the NASDAQ market under the ticker symbol of AAL. At the end of the day, the stock closed at $24.60.
On December 10, 2013, the American Airlines Group informed SEC in a filing that it was awarding departing American CEO Tom Horton $16.9 million in severance payments in cash and stock instead of $19.75 million originally proposed, but later tossed out by the bankruptcy judge on September 14, 2013.
After merger, the new airline, American Airlines Group, includes four regional subsidiaries:
Inherited from old AMR Corporation
(1) American Eagle Inc.
(2) Executive Airlines Inc.
Inherited from the old US Airways
(3) PSA Airlines Inc.
(4) Piedmont Airlines Inc.
Southwest and JetBlue Big Winner in Reagan Slot Allocation
On January 30, 2014, Southwest won the landing and take-off rights of 54 of 104 slots the combined American Airlines Group would divest at the capital's busy Reagan National Airport. Southwest will be able to provide 27 round-trip daily flights from Reagan. JetBlue, which currently leases 16 slots from American, will be allowed to buy these slots beside winning an additional 24 slots from American Airlines Group. This will help JetBlue to offer 20 round-trip daily flights from Reagan. The landing and take-off rights divestiture took place in the backdrop of November 12, 2013, settlement agreement of American and U.S. Airways with the U.S. DOJ. In early December 2013, Southwest and Virgin America each picked up 12 slots in La Guardia beside Southwest winning the right to buy 10 slots it was leasing from American.
Virgin Awarded Two Gates at Love
Virgin America was awarded two gates by the City of Dallas, owner of the Love Field Airport, as part of the American-US Airways merger-related antitrust settlement DOJ had announced on November 12, 2014. At present, out of 20 terminals at Love, Southwest operates from 16 terminals, United has right to two terminals and the remaining two are owned by American. The two owned by American will be transferred to Virgin.
As part of Chapter 11 reorganization, American also provided the following operational and strategic outlines:
* No change in passenger tickets, flight frequency (other than normal tweaks), rewards program and customer service.
* Financing, during bankruptcy proceeding, through more than $4 billion in unrestricted cash and short-term investment it has on hand instead of debtor-in-possession financing.
* No change in the future purchase of 460 new aircrafts from Airbus (260) and Boeing (200) as announced on July 20, 2011.
* No change in the so-called Cornerstone Strategy unveiled in 2010 stressing five hubs--Dallas-Fort Worth, Miami, Chicago, Los Angeles and New York--in its network.
* The proposed divestiture of American Eagle put on hold as the carrier reorganizes through the bankruptcy process.
History of American Airlines
----------------------------
* 1930: American Airways was incorporated.
* 1934: American Airways became American Airlines
* 1939: American began trading on the New York Stock Exchange.
* 1942: American began a catering business, Sky Chefs, for passenger meals.
* 1948: Coach service was introduced as an economical alternative.
* 1957: The American Airlines Stewardess College opened , offering world's first flight attendant training.
* 1959: American offered the first non-stop, coast-to-coast service, with Boeing 707.
* 1970: American got its first Caribbean service by buying Trans Caribbean Airways.
* 1979: American undertook major route expansion after the deregulation of airline industry, and moved its headquarters from New York to Fort Worth.
* 1981: American introduced AAdvantage, the first frequent-flier program.
* 1982: AMR Corp. was formed.
* January 2001: American announced that it would buy Trans World Airlines.
* September 11, 2001: Changed the landscape of airline and travel industry.
* March 2003: American narrowly avoided bankruptcy.
* November 29, 2011: American Airlines and parent AMR filed for bankruptcy protection.
Source: The Dallas Morning News; The Associated Press; American Airlines
Being unable to get any labor contract concession from American management, American's three unions--Allied Pilots Association, Association of Professional Flight Attendants and Transport Workers Union on April 20, 2012 agreed with US Airways for the latter to acquire the bankrupt airline. The agreement came three days prior to American's move to a New York bankruptcy court to void all existing labor contracts under Section 1113 of the federal bankrutcy code. The agreement reached with the Tempe, AZ-based airline was touted by the unions as landmark deal that would save 6,200 of the 11,500 union jobs to be eliminated as announced by the Fort Worth-based carrier on Feb 1, 2012. As part of the merger deal, the new airline will be called the American Airlines and based out of Fort Worth, retain membership in the Oneworld alliance, and keep in place a massive jet purchase order--200 Boeing and 250 Airbus--placed in July 2011.
On April 23, 2012, AMR Corp. lawyers pressed in the US Bankruptcy Sean Lane's Manhattan court to void all existing labor contracts.
After all the drama, backroom maneuvering and wrist-twisting, American Airlines and AMR Corp. CEO and Chairman Tom Horton and US Airways CEO Doug Parker divulged on February 14, 2013 the worst-kept business secret in recent history that both of their airlines were merging in a deal that:
* would create the largest airline in the world
* was estimated $11 billion, based on US Airways Group's closing stock price of $14.66 on February 13, 2013
* would be headquartered in Fort Worth
* would have 28 percent stakes owned by US Airways shareholders and 72 percent stakes owned by AMR creditors
* would help the combined company, a new American Airlines, offer more than 6,700 daily flights to 336 destinations in 56 countries
* was estimated to generate an annual revenue of $38.7 billion
* would steer Doug Parker and his team to driver's seat as the US Airways CEO would become the CEO of the combined company and Tom Horton would assume the role of non-executive Chairman for limited time (less than a year)
* would combine American's four hubs--DFW, MIA, LAX and ORD--and two primary markets, LaGuardia and John F. Kennedy International and Ronald Reagan Washington National, with US Airways' three hubs: Charlotte, Philadelphia and Phoenix Sky Harbor International.
On April 11, 2013, U.S. Bankruptcy Judge Sean Lane rejected the compensation package for American CEO Tom Horton as part of its merger deal with US Airways. However, Judge Lane gave go-ahead to the merger deal itself. On May 10, 2013, Judge Lane signed off the deal formally devoid of Horton's pay package.
On June 4, 2013, Bankruptcy Judge Sean Lane approved AMR Corporation's Disclosure Statement that detailed an exit plan from bankruptcy. Now, unsecured creditors will vote on this disclosure statement by late summer. The judge this time approved Tom Horton's $19.88 million severance as part of approval of Disclosure Statement.
On July 12, 2013, the US Airways' shareholders overwhelmingly approved the merger.
On August 1, 2013, AMR Corporation released the results of votes cast by its unsecured creditors and shareholders over the past couple of weeks. The results showed overwhelming approval for the airline's plan to merge with the US Airways and exit bankruptcy.
On August 5, 2013, European Union's regulatory arm European Commission approved AMR Corporation's merger with US Airways after two major concessions were extracted from them: the combined airline would (1) give up one daily take-off and landing slot for Heathrow-Philadelphia market; (2) continue feeding traffic to the new airline which would pick up slot in that route. EC's Competition Commissioner Joaquin Almunia expressed happiness on August 5 by the turn of the events as they would lead to "ensure choice and quality of air services for the passengers on this route".
On August 13, 2013, in a possible fatal blow to the almost-complete merger storyline, US Department of Justice, joined by six states--Texas, Arizona, Florida, Tennessee, Pennsylvania and Virginia--and the District of Columbia, filed anti-trust lawsuit in a DC court to block the proposed $12 billion merger. The lawsuit filed in the court of the US District Judge Colleen Kollar-Kotelly blasted the proposed merger to be anti-competitive for the industry and bad for consumers as it would have all the recipes of raising air fares and dropping services in many routes.
In recent years, US opposed several high-profile mergers, citing anti-trust concerns, and were mostly successful in breaking up them. They include:
*2001: $4.3 billion merger between UA and US Airways (merger dropped)
*2004: $9 billion acquisition of PeopleSoft by Oracle (Oracle won in court)
*2011: $288 million HR Block-TaxAct merger (US won in the court)
*2011: $11 billion merger of Nasdaq-NYSE merger (Nasdaq dropped the hostile takeover bid)
*2011: $39 billion merger of ATandT-T-Mobile merger (Companies vowed to fight in court, but dropped the merger plan after FCC disapproved it too)
On August 15, 2013, a day when AMR officials thought of having a clear outcome for exiting the bankruptcy with a re-org plan that included merger with the US Airways as the main driver until the USDOJ, six states and the DC torpedoed it with an anti-trust lawsuit two days ago, US Bankruptcy Judge Sean Lane asked American, its creditors committee and others to file their briefing by August 23, 2013 arguing why he should go ahead with the re-organization plan in the backdrop of government's avowed stand to block the merger so that a hearing might be held on August 29, 2013. Lane also heard argument about $19,875,000 severance package for AMR Chairman Tom Horton as the US Trustee Tracy Hopes-Davis opposed the package on the ground that it violated the bankruptcy rules. The nearly $20 million reward for Horton was crafted as part of the merger deal that would help Horton stay in the merged company as non-executive Chairman for a year before stepping down.
American Airlines and US Airways filed a brief before the US Judge Colleen Kollar-Kotelly on August 22, 2013, asking the anti-trust trial to begin on November 12, 2013 or as soon as thereafter, while the US DOJ asked the trial to begin February 10, 2014 or as soon as thereafter. The federal government, six states--including Texas--and District of Columbia filed an anti-trust suit before Judge Kollar-Kotelly on August 13, 2013 to block the merger.
Judge Colleen Kollar-Kotelly on August 30, 2013 gave American Airlines and US Airways what they had wanted all along: a speedy trial of DOJ's anti-trust lawsuit blocking the merger. The trial will now start on November 25, 2013.
On September 5, 2013, Michigan joined the DOJ anti-trust lawsuit filed on August 13, 2013 to block the merger of American Airlines and US Airways. Texas, Arizona, Florida, Tennessee, Pennsylvania, Virginia and the District of Columbia joined the federal government in the original lawsuit.
On September 13, 2013, Bankruptcy Judge Sean Lane approved American Airline's re-organization plan, with the merger with the US Airways a key part of it. However, he followed up on the following day (September 14) with a written statement that barred the severance package awarded to American CEO Tom Horton as part of the deal. Lane said that if the proposed merger went through, the merged company was free to award Mr. Horton the desired severance package. Judge Lane barred the severance package citing the US Bankruptcy Code of 2005.
With the US DOJ-led anti-trust lawsuit scheduled to start on November 25, both American and US Airways on September 23, 2013 extended their merger completion timeline by a month from December 17, 2013 to January 18, 2014.
On October 1, 2013, Texas Attorney General and gubernatorial candidate Gregg Abbott, appearing beside American CEO and Chairman Tom Horton at the D/FW Airport, announced that Texas was quitting the anti-trust lawsuit filed by the US DOJ on August 13, 2013 to block the American-US Airways merger. Abbott, who had faced a barrage of criticisms and political brickbats over his decision to join the Justice lawsuit, cited the settlement--continuing the service to 22 Texas cities, maintaining the headquarters in Fort Worth and continuing the big connecting hub at D/FW--he had reached with Horton for quitting the DOJ anti-trust lawsuit. However, none of the settlement terms are significant as American and US Airways have already stated to retain the service and presence of their combined carrier on the Texas map during the time of their merger announcement in February.
Also on October 1, 2013, US District Judge Colleen Kollar-Kotelly rejected the US DOJ prosecutors' request to delay the trial slated to start on November 25, 2013 due to partial government shutdown.
On November 12, 2013, U.S. DOJ reached a settlement agreement with American and US Airways that would avert a lengthy court battle. Although many in the industry saw the settlement as Fed retreating from an earlier aggressive attitude towards the merger, Justice Department's chief antitrust lawyer William Baer called the concessions obtained from the combined airline substantial that would protect consumers by opening more slots for low-cost airlines at seven congested US airports, including Dallas Love Field. Judge Colleen Kollar-Kotelley approved the settlement on November 12, 2013, afternoon. Now the deal goes to Bankruptcy Court Judge Sean Lane, who will hold a hearing on November 25, 2013 to assess whether the settlement arrived is aligned with American's proposed re-organization plan out of bankruptcy. American also asked Lane during the day to dismiss an anti-trust lawsuit filed by two San Francisco lawyers--Joseph Alioto and David Cook--during the same November 25, 2013, hearing. Under the settlement, the combined airline will divest all 104 of American's current slots, 52 round trips, at Washington DC's Reagan International Airport as well as 34 slots at New York's LaGuardia Airport. The settlement also requires the combined airline to give up two gates at five other airports: Dallas Love Field; Los Angeles International Airport; Chicago O'Hare International Airport; Boston Logan Airport and Miami International Airport. In LaGuardia and Reagan, the slots are controlled by landing and take-off rights rather than gates. In Dallas Love Field, although American and American Eagle withdrew from the airport in June 2009, they still retain rights to two gates. The settlement news sent the American's OTC stock to $13.50 before settling down at $12 on November 12, up by 26.1%. The US Airways stock closed at $23.52 on November 12. As of November 12, 2013, the value of the merger stood at $16.5 billion, up from the $11 billion when originally announced on February 14. Six states--Arizona, Florida, Virginia, Tennessee, Michigan and Pennsylvania--that had participated in the US DOJ-led anti-trust lawsuit received commitment, as part of settlement agreement, that the combined airline would retain services to long list of cities and airports in those states for at least three years, following the footprint of a similar deal that had been reached with Texas on October1, 2013.
On November 27, 2013, Bankruptcy Judge Sean Lane approved American's bankruptcy exit plan under the new criteria of November 12, 2013, anti-trust settlement with DOJ with respect to the carrier's merger with US Airways. Under the bankruptcy exit plan approved by Judge Lane on November 27, 2013, American will emerge from bankruptcy on December 9, 2013, and merge with U.S. Airways. Judge Lane also rejected a petition from a San Francisco lawyer, Joseph Alioto, for a temporary restraint order against the merger on the anti-trust ground. In early December, in another hearing, Judge Lane rejected Alioto's petition.
On December 5, 2013, Federal Aviation Administration allotted 22 of the 34 slots at New York's La Guardia Airport to Southwest and remaining 12 to Virgin. Southwest currently leases 10 slots from American. So, beside buying these 10 slots, it would buy another 12 slots, opening opportunity for adding six more daily flights at La Guardia.
On December 6, 2013, the last nail was put into the coffin for any hope to block the US Airways and American as a federal judge, Loretta Preska, rejected Alioto's appeal against Bankruptcy Judge Sean Lane's ruling.
On December 9, 2013, in a flurry of events that unfurled in quick succession, American Airlines, AMR Corporation and its various subsidiaries emerged from bankruptcy, merged with the US Airways, and the new company, American Airlines Group, began trading in the NASDAQ market under the ticker symbol of AAL. At the end of the day, the stock closed at $24.60.
On December 10, 2013, the American Airlines Group informed SEC in a filing that it was awarding departing American CEO Tom Horton $16.9 million in severance payments in cash and stock instead of $19.75 million originally proposed, but later tossed out by the bankruptcy judge on September 14, 2013.
After merger, the new airline, American Airlines Group, includes four regional subsidiaries:
Inherited from old AMR Corporation
(1) American Eagle Inc.
(2) Executive Airlines Inc.
Inherited from the old US Airways
(3) PSA Airlines Inc.
(4) Piedmont Airlines Inc.
Southwest and JetBlue Big Winner in Reagan Slot Allocation
On January 30, 2014, Southwest won the landing and take-off rights of 54 of 104 slots the combined American Airlines Group would divest at the capital's busy Reagan National Airport. Southwest will be able to provide 27 round-trip daily flights from Reagan. JetBlue, which currently leases 16 slots from American, will be allowed to buy these slots beside winning an additional 24 slots from American Airlines Group. This will help JetBlue to offer 20 round-trip daily flights from Reagan. The landing and take-off rights divestiture took place in the backdrop of November 12, 2013, settlement agreement of American and U.S. Airways with the U.S. DOJ. In early December 2013, Southwest and Virgin America each picked up 12 slots in La Guardia beside Southwest winning the right to buy 10 slots it was leasing from American.
Virgin Awarded Two Gates at Love
Virgin America was awarded two gates by the City of Dallas, owner of the Love Field Airport, as part of the American-US Airways merger-related antitrust settlement DOJ had announced on November 12, 2014. At present, out of 20 terminals at Love, Southwest operates from 16 terminals, United has right to two terminals and the remaining two are owned by American. The two owned by American will be transferred to Virgin.
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