US department of justice seeks to block US Airways-American Airlines merger

13th Aug 2013
US department of justice seeks to block US Airways-American Airlines merger

The United States department of justice has filed a civil antitrust lawsuit challenging the proposed $11 billion merger between US Airways and American Airlines’ parent corporation, AMR Corp. 

The department said that the merger, which would result in the creation of the world’s largest airline, would substantially lessen competition for commercial air travel in local markets throughout the United States and result in passengers paying higher airfares and receiving less service.

American Airlines is presently in Chapter 11 bankruptcy protection, with the merger seen as vital to its successful rehabilitation.

The department’s Antitrust Division, joined by six state attorneys general and the District of Columbia, filed a lawsuit in the US District Court for the District of Columbia, which seeks to prevent the companies from merging and to preserve the existing head-to-head competition between the firms that the transaction would eliminate. 

“Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure,” said attorney general Eric Holder.

“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.”

Last year, business and leisure airline travellers spent more than $70 billion on airfare for travel throughout the United States. 

In recent years, major airlines have, in tandem, raised fares, imposed new and higher fees and reduced service, the department said.

American and US Airways compete directly on more than a thousand routes where one or both offer connecting service, representing tens of billions of dollars in annual revenues. 

They engage in head-to-head competition with non-stop service on routes worth about $2 billion in annual route-wide revenues. 

Eliminating this head-to-head competition would give the merged airline the incentive and ability to raise airfares, the department said in its complaint.

According to the department’s complaint, the vast majority of domestic airline routes are already highly concentrated. 

The merger would create the largest airline in the world and result in four airlines controlling more than 80 per cent of the United States commercial air travel market.

The merger would also entrench the merged airline as the dominant carrier at Washington Reagan National Airport, with control of 69 percent of the take-off and landing slots. 

The merged airline would have a monopoly on 63 percent of the non-stop routes served out of Reagan National airport. 

As a result, Washington, DC, area passengers would likely see higher prices and fewer choices if the merger is allowed, the department said in its complaint. 

Blocking the merger will preserve current competition and service, including flights that US Airways currently offers from Washington’s Reagan National Airport.

The complaint also describes how, in recent years, the major airlines have succeeded in raising prices, imposing new fees and reducing service.


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