Feds Challenge American Airlines/US Airways Merger

Posted by Seth Miller on August 14, 2013 at 3:34:52 PM EDT | Post a Comment
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There was one major potential roadblock remaining in the process of American Airlines and US Airways completing their proposed merger: The United States Department of Justice. The DoJ flexed their muscle on Tuesday, announcing that they are joining with 6 states and the District of Columbia in a lawsuit seeking to block the proposed merger on anti-trust grounds. The DoJ believes that the proposed merger will have a much broader-reaching impact than the airlines have suggested, ultimately resulting in higher fares and less service for passengers.

The lawsuit claims that the merger will "substantially lessen competition for commercial air travel in local markets throughout the United States," despite the fact that the two airlines only overlap on 12 point-to-point routes. That they, like most other airlines, carry far more connecting passengers than point-to-point customers is a large part of the concern on the part of authorities. Similarly influencing their view, undoubtedly, are comments made in the recent past by airline CEOs noting that consolidation has allowed them stronger control over pricing and the ability to increase both the fares and fees passengers are paying.

The airlines have vowed to vehemently fight the suit. American Airlines noted in a statement that "integrating the complimentary networks of American and US Airways to benefit passengers is the motivation for bringing these airlines together. Blocking this procompetitive merger will deny customers access to a broader airline network."

The states included in the suit include Texas (home of American Airlines), Arizona (home of US Airways), Florida, Pennsylvania, Tennessee, Virginia, and the District of Columbia. All of these states (save Tennessee) have a large operating presence from at least one of the two airlines; their joining the effort can quite reasonably be seen as working to protect the employees and related businesses in their jurisdictions. The European regulators approved the deal with minimal restrictions just a couple weeks ago, but the overlap of the two in serving Europe is much lower than the overlap in domestic markets.

It remains to be seen if this is just a negotiating move where the AA/US group will have to cede some markets, slots or other assets to gain approval, or if the DoJ intends to fully halt the action. At the very least, it means a few extra months for the companies, their employees, and their customers to wait and see what happens.

Photo credits: Mike2focus/Dreamstime.com

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