American-US Merger: Justice Department Lawsuit Filed to Stop Union

Tuesday, 13 Aug 2013 05:50 PM

By Morgan Chilson

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The U.S. Justice Department filed suit Tuesday to stop the proposed merger of American Airlines and US Airways, citing decreased competition and increased prices on certain routes.

“We filed the lawsuit today because we determined that the merger – which would create the world’s largest airline and leave just three legacy carriers remaining in the U.S. – would substantially lessen competition for commercial air travel throughout the United States,” said a Justice Department release of a prepared speech given by Assistant Attorney General Bill Baer. “Importantly, neither airline needs this merger to succeed. We simply cannot approve a merger that would result in U.S. consumers paying higher fares, higher fees and receiving less service.”

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Bloomberg News reported that the Justice Department suit highlighted routes from Dallas and Charlotte, N.C., as those that made the merger “presumptively illegal.” An index tracking airline concentration showed that flights between Charlotte-Dallas and Dallas-Philadelphia showed an index value that was four times the limit for a market to be “highly concentrated.”

The Chicago Tribune, calling the Justice Department suit “surprising,” said industry experts assessed the lawsuit as possibly putting the airlines at a competitive disadvantage and that it was an “unprecedented” move.

Henry H. Harteveldt, a travel industry analyst, said he couldn’t remember when the Justice Department had sued to stop airlines from merging, the Tribune said. More usual would be for the Department of Transportation to discuss issues that are then worked out between the airlines and the government, and Harteveldt pointed out that it would have made more sense for the Justice Department to jump in when the mergers started about five years ago.

The Chicago Tribune said American Airlines CEO Tom Horton wrote to employees, “We and US Airways will vigorously defend our position. While we do not yet know how long the court process will run, it will likely take a few months.”

In addition, Horton wrote that the company knew it had to get regulatory approval and that they had been communicating with the Justice Department to make sure they knew what to expect.

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Related stories:

EU Approves American Airlines, US Airways Merger

Justice Department Probing American, US Airlways Merger

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