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U.S. challenges US Airways-American Airlines merger

By control on August 13, 2013

The U.S. Department of Justice and some states filed a civil antitrust lawsuit Tuesday challenging the proposed merger between US Airways and American Airlines.

The DOJ said the US$11-billion merger, which would create the largest airline in the world, would “substantially lessen competition for commercial air travel” in the U.S. As of press time, stock prices fell for both US Airways and AMR Corporation, the parent company of American Airlines.

The participating states in the lawsuit are Texas, Arizona – where American Airlines and US Airways are headquartered, respectively – Florida, the District of Columbia, Pennsylvania, Tennessee and Virginia.

“Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure,” Attorney General Eric Holder said. “By challenging this merger, the Department of Justice is saying that the American people deserve better. This transaction would result in consumers paying the price – in higher airfares, higher fees and fewer choices. Today’s action proves our determination to fight for the best interests of consumers by ensuring robust competition in the marketplace.”

The DOJ’s Antitrust Division, along with the states’ attorneys general, filed a lawsuit in the U.S. District Court for the District of Columbia.

“The department sued to block this merger because it would eliminate competition between US Airways and American and put consumers at risk of higher prices and reduced service,” said Bill Baer, assistant attorney general in charge of the Department of Justice’s Antitrust Division. “If this merger goes forward, even a small increase in the price of airline tickets, checked bags or flight change fees would result in hundreds of millions of dollars of harm to American consumers. Both airlines have stated they can succeed on a standalone basis, and consumers deserve the benefit of that continuing competitive dynamic.”

AMR Corporation announced Aug. 5 that it had received approval from the European Commission for the proposed merger.

The American-US merger would result in four airlines controlling more than 80 percent of the U.S. commercial air travel market.

The complaint describes how, in recent years, the major airlines have raised prices, imposed new fees and reduced service.

“The merger of these two important competitors will just make things worse –exacerbating current airline industry trends toward reduced service, increasing fares and increasing passenger fees,” Baer said.

The DOJ said without the merger, US Airways and American will continue to provide competitive constraints on each other and other airlines.

American Airlines is operating in bankruptcy. If the merger is stopped, American is likely to exit bankruptcy as a “vigorous competitor, with strong incentives to grow to better compete with Delta and United,” the DOJ said. The complaint also says executives of both American and US have repeatedly said that they do not need the merger to succeed.