U.S. Justice Department Moves to Block US Air-AMR Merger

 - August 13, 2013, 12:12 PM
The merger of US Airways and American Airlines parent AMR would create the largest air carrier in the world.

The U.S. Department of Justice, six state attorneys general and the District of Columbia filed a civil antitrust lawsuit on Tuesday challenging the proposed $11 billion merger between US Airways and American Airlines’ parent corporation, AMR.  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 U.S. and result in passengers paying higher airfares and receiving less service.

The Department of Justice’s Antitrust Division, along with the attorneys general, filed a lawsuit in the U.S. District Court for the District of Columbia that seeks to prevent the companies from merging and to preserve the existing head-to-head competition between the firms that the transaction would eliminate.

“By challenging this merger, the Department of Justice is saying that the American people deserve better,” said U.S. Attorney General Eric Holder in a statement.  “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.”

American and US Airways compete directly on more than a thousand routes where one or both offer connecting service and engage in head-to-head competition with nonstop service on routes worth about $2 billion in annual route-wide revenues, according to Justice Department estimates. Eliminating that direct competition would give the merged airline the incentive and ability to raise airfares, the department said in its complaint.

“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.”

According to the department’s complaint, the merger would result in four airlines controlling more than 80 percent of the U.S. commercial air travel market. Meanwhile, the “new” American would control 69 percent of takeoff and landing slots at Washington Reagan National Airport, giving it a monopoly on 63 percent of the nonstop routes served out of the district’s most centrally located commercial gateway.

On August 6, the European Commission approved the proposed merger.