Mastodawn

Last week, William Young, an 82 year old federal judge appointed by Ronald Reagan, blocked the merger of #SpiritAirlines and #Jetblue. It was a seismic event:

https://storage.courtlistener.com/recap/gov.uscourts.mad.254267/gov.uscourts.mad.254267.461.0_6.pdf

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If you'd like an essay-formatted version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2024/01/22/anything-that-cant-go-on-forever/#will-eventually-stop

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Cory Doctorow Jan 22, 2024

Seismic because the judge's opinion is full of rhetoric associated with the surging #antitrust revival, sneeringly dismissed by corporate apologists as "#HipsterAntitrust." Young called America's airlines and "#oligopoly," a situation he blamed on out-of-control mergers. As @matthewstoller writes, this is the first airline merger to be blocked by the DOJ and DOT since deregulation in 1978:

https://www.thebignewsletter.com/p/antitrust-enforcers-block-the-jetblue

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Antitrust Enforcers Block the JetBlue-Spirit Merger

For the first time, the Antitrust Division stopped an airline merger, despite wailing from executives about industry woes. That's a historic win. It's also the end of the beginning for our movement.

BIG by Matt Stoller

Cory Doctorow Jan 22, 2024

The judge wasn't shy about why he was reviving a pre-Jimmy Carter theory of antitrust: "[the merger] does violence to the core principle of antitrust law, 'to protect] markets –- and its market participants -- from anticompetitive harm."

The legal arguments the judge advances are fascinating and worthy of study:

https://twitter.com/johnmarknewman/status/1747343447227519122

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John Mark Newman (@johnmarknewman) on X

Still reading but already an interesting opinion! Will add a few thoughts below... 🔽

X (formerly Twitter)

Cory Doctorow Jan 22, 2024

But what really caught my eye was @ddayen's #AmericanProspect article about the judge's commentary on the state of the #aviation industry:

https://prospect.org/infrastructure/transportation/01-19-2024-how-boeing-ruined-the-jetblue-spirit-merger/

Why, after all, have Spirit and Jetblue been so ardent in pursuing mergers? Jetblue has had two failed merger attempts with Virgin, and this is the *third* time they've failed in an attempt to merge with Spirit.

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How Boeing Ruined the JetBlue-Spirit Merger

The judge’s ruling in the case revealed all the deficiencies in the manufacturing and distribution of commercial air travel.

The American Prospect

Cory Doctorow Jan 22, 2024

Spirit, meanwhile, just lost a bid to merge with Frontier. Why are these two airlines so obsessed with combining with each other or any other airline that will have them?

As Dayen explains, it's because US aviation has been consumed by monopoly, hollowed out to the point of near collapse, thanks to neoliberal policies at every part of the aviation supply-chain.

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Cory Doctorow Jan 22, 2024

For one thing, there's just not enough pilots, nor enough air-traffic controllers (recall that Reagan's first major act in office was to destroy the air traffic controller's union).

But even more importantly, there are no more planes. #Boeing's waitlist for airplane delivery stretches to *2029*. And Boeing is about to deliver a lot *fewer* planes, thanks to its disastrous corner-cutting, which grounded a vast global fleet of #737Max aircraft (again):

https://prospect.org/infrastructure/transportation/2024-01-09-boeing-737-max-financial-mindset/

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Boeing 737 MAX Incident a By-Product of Its Financial Mindset

The door plug that ripped off an Alaska Airlines plane only exists because of cost-cutting production techniques to facilitate cramming more passengers into the cabin.

The American Prospect

Cory Doctorow Jan 22, 2024

The 737 disaster(s) epitomize the problems of inbred, merger-obsessed capitalism. As #LukeGoldstein wrote, the rampant defects in Boeing's products can be traced to the decision to approve Boeing's 1997 merger with #McDonnellDouglas, a company helmed by Jack Welch proteges, notorious for cost-cutting at the expense of reliability:

https://prospect.org/infrastructure/transportation/2024-01-09-boeing-737-max-financial-mindset/

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Boeing 737 MAX Incident a By-Product of Its Financial Mindset

The door plug that ripped off an Alaska Airlines plane only exists because of cost-cutting production techniques to facilitate cramming more passengers into the cabin.

The American Prospect

Cory Doctorow Jan 22, 2024

Boeing veterans describe the merger as the victory of the bean-counters, which led to a company that chases short-term profits over safety and even the viability of its business:

https://www.airliners.net/forum/viewtopic.php?t=213075

After all, the merger turned Boeing into the single largest exporter in America, a company far too big to fail, teeing up tens of billions from Uncle Sucker, who also account for 40% of Boeing's income:

https://www.thebignewsletter.com/p/its-time-to-nationalize-and-then

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Cory Doctorow Jan 22, 2024

The US government is full of ex-Boeing execs, just as Boeing's executive row is full of ex-US federal aviation regulators. Bill Clinton's administration oversaw the creation of Boeing's monopoly in the 1990s, but it was the GOP that rescued Boeing the first time the 737 Maxes started dropping out of the sky.

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Cory Doctorow Jan 22, 2024

Boeing's biggest competitor is the state-owned #Airbus, a joint venture whose major partners are the governments of France, Spain and Germany - governments that are at least theoretically capable of thinking about the public good, not short-term profits. Boeing's largest equity stakes are held by the Vanguard Group, Vanguard Group subfiler, Newport Trust Company, and State Street Corporation:

https://prospect.org/blogs-and-newsletters/tap/2024-01-18-airbus-advantage/

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The Airbus Advantage

Today on TAP: Why Europe’s mixed economy produces safer planes than America’s financialized capitalism

The American Prospect

Cory Doctorow Jan 22, 2024

As #MattStoller says, America has an airline that the public bails out, protects, and subsidizes but has no say over. Boeing has all the costs of public ownership and none of the advantages. It's the epitome of privatized gains and socialized losses.

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Cory Doctorow Jan 22, 2024

This is Reagan's other legacy, besides the disastrous shortage of air-traffic controllers. The religious belief in deregulation - especially deregulation of antitrust enforcement - leads to a deregulated market. It leads to a market that is regulated by monopolists who secretly deliberate, behind closed board-room doors, and are accountable only to their shareholders.

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Cory Doctorow Jan 22, 2024

These private regulators are unlike government regulators, who are at least nominally bound by obligations to transparency and public accountability. But they share on thing in common with those public regulators: when they fuck up, the public has to pay for their mistakes.

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Cory Doctorow Jan 22, 2024

It's a good thing Boeing's executives are too big to fail, because they fail *constantly*. Boeing execs who are warned by subcontractors of dangerous defects in their planes order those subcontractors to lie, or lose their contracts:

https://www.levernews.com/boeing-supplier-ignored-warnings-of-excessive-amount-of-defects-former-employees-allege/

As a result of Boeing's mismanagement, America's only aircraft supplier steadily has lost ground to Airbus, which today enjoys a 2:1 advantage over Boeing.

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Boeing Supplier Ignored Warnings Of “Excessive Amount Of Defects,” Former Employees Allege

Weeks before Alaska Airlines’ terrifying debacle, one of the aircraft’s manufacturers was accused of systematically ignoring safety problems.

The Lever

Cory Doctorow Jan 22, 2024

But it's not just Boeing that's the weak link aviation. US aviation is a chain entirely composed of weak links.

Take jet engines: #PrattAndWhitney are Spirit's major engine supplier, but these engines suck as much as Boeing's fuselages. Much of Spirit's fleet is chronically grounded because the engines don't run.

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Cory Doctorow Jan 22, 2024

The reason Spirit buys its engines from those loveable goofballs at Pratt & Whitney? The Big Four airlines have bought all the engines for sale from other suppliers, leaving smaller airlines to buy their engines from fat-fingered incompetents.

This is why - as Dayen notes - smaller US airlines are so horny for intermarriage. They can't grow by adding routes, because there are no pilots.

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Cory Doctorow Jan 22, 2024

Even if they could get pilots, there'd be no slots because there are no air traffic controllers. But even if they could get pilots and slots, there are no planes, because Boeing sucks and Airbus can't make planes fast enough to supply the airlines that don't trust Boeing. And even if they could get aircraft, there are no engines because the Big Four aviation cartel cornered the market on working jet engines.

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Cory Doctorow Jan 22, 2024

Part of Jetblue and Spirit's pitch was that they hand off the routes that they'd cut after their merger to other small airlines, like Frontier and Allegiant. But Frontier and Allegiant can't service those routes: they don't have pilots, slots, planes or engines.

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Cory Doctorow Jan 22, 2024

Spirit hasn't been profitable since 2019 and is sitting on $4b in debt. Jetblue was proposing to finance its acquisition with another $3.5b in debt. The resulting airline could only be profitable by sharply cutting routes and massively raising prices, cutting 6.1m seats/year. With a debt:capital ratio of 111%, the company would have no slack and would need a bailout any time anything went wrong.

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Cory Doctorow Jan 22, 2024

Not coincidentally, the Big Four airlines *also* have debt:capital ratios of about 100-120%, and they *do* get bailouts ever time anything goes wrong.

As #WilliamMcGee reminds us, it's been 14 years since anyone's started a new US airline:

https://twitter.com/WilliamJMcGee/status/1747363491445375072

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William J. McGee (@WilliamJMcGee) on X

3/6 It's left us in a place that's--yes--unprecedented. As in not since the earliest days in the 1910s. We've never had so few scheduled passenger airlines or so much concentration at the top with the Big 4 oligopoly controlling 80%+. And a 14-year gap without any new-entrants.

X (formerly Twitter)

Cory Doctorow Jan 22, 2024

US aviation is deeply cursed. But Boeing's self-disassembling aircraft show us why we can't fix it by allowing mergers: private monopolies, shorn of the discipline of competition *and* regulation, are extraction machines that turn viable businesses into debt-wracked zombies.

This is a subject that's beautifully illustrated in Dayen's 2020 book *Monopolized*, in the chapter on #HealthCare:

https://pluralistic.net/2021/01/29/fractal-bullshit/#dayenu

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Pluralistic: 29 Jan 2021 – Pluralistic: Daily links from Cory Doctorow

Joe Beehammer (🐝 🔨)Jan 22, 2024

@pluralistic what don’t Jack Welch have a hand in destroying?!

Chuck Jan 22, 2024

@pluralistic I knew enough about the industry to know it was the MD merger that destroyed Boeing quality, but didn't realize it was yet another group of Welch sycophants who flew McDonnell Douglass into the ground in the first place. That explains SO MUCH, and is one of those facts that is 100% unsurprising upon discovery.

Peter Bindels Jan 22, 2024

> ... Boeing into the single largest exporter in America, a company far too big to fail, ...

> Boeing's biggest competitor is the state-owned Airbus, a joint venture whose major partners are the governments of France, Spain and Germany ...

Why do you differentiate too-big-too-fail (ie, will be caught by the state if it would fail) versus state-owned (will be caught by the state if it would fail) ?

The only difference is that one doesn't try to have long term vision.

Lorq Von Ray Jan 22, 2024

@dascandy42 @pluralistic "Too Big To Fail" is also a euphemism for "Privatize the gains, Institutionalize the losses".

mmby Jan 22, 2024

@dascandy42 @pluralistic multiple governments owning Airbus doesn't mean they always agree

if some part of Airbus fucks up along the supply chain (e.g. skimping on QA) it can become a diplomatic issue

if some parts of Boeing fuck up, it can stay internal

Charlie Stross Jan 22, 2024

@dascandy42 @pluralistic Airbus is NOT state-owned; Airbus SE (formerly EADS) is a publicly traded corporation with shares traded on various EU stock exchanges.

(It's the product of several mergers, including government-owned corporations back in the day, but it's just as much a public corporation as Boeing, and has been since at least 2001.

Cory Doctorow Jan 22, 2024

@cstross @dascandy42 Three of Airbus's largest shareholders are Germany, France and Spain (this is explained in the context of the longer piece, but not the excerpt)

Peter Bindels Jan 22, 2024

@pluralistic @cstross Couldn't fit the whole explanation in the excerpts, hence the ellipses.

Alucard Jan 22, 2024

@pluralistic @cstross @dascandy42 these states own only 25% of the shares. (respectively 10,10 and 5).

Cory Doctorow Jan 22, 2024

@alucard @cstross @dascandy42 25% of a cap table is huge. Beyond huge. For reference, check Warren Buffett's share in the US Big Four airlines, widely understood to allow him to direct the operations of those firms.

matlag Jan 22, 2024

@dascandy42 @pluralistic Another big difference is where the money goes when profits are realized.

Chuck Jan 22, 2024

@dascandy42 @pluralistic

>The only difference is that one doesn't try to have long term vision.

Because that is a massive difference that's worth the distinction. In only one of those arrangements do people who aren't part owners have any real influence over the company's poor choices.

Noah Cook Jan 22, 2024

@pluralistic While I agree that you have identified multiple market failures and poorly-designed policies, this analysis seems a bit superficial. It ignores a number of market factors, as well as just plain difficult engineering challenges with engines (I think turbine blades are grown from single crystals).

But it has a similar flaw as the healthcare part you stuck in: you assume that the outcome is the desired result of the policies, rather than a pitcher hitting a batter with bases loaded

Two Tamarisks in a Trench Coat Jan 22, 2024

@pluralistic can y'all imagine the amount of in-flight monetization this merger could've resulted in?