US antitrust officials challenge airline merger

[JURIST] Antitrust officials for the US Department of Justice (DOJ) [official website] on Tuesday filed a lawsuit in the US District Court for the District of Columbia [official website] seeking to block the proposed $11 billion merger between US Airways and American Airlines' parent company, AMR Corporation [corporate websites]. The lawsuit challenges a merger that would have created the world's largest commercial air carrier and would have put 86 percent of US air travel in the hands of four big airlines. In a statement [press release, PDF] released by the DOJ, US Attorney General Eric Holder [official website] argued that the merger would substantially lessen competition for commercial air travel in local markets throughout the US and result in passengers paying higher airfares and receiving less service:

Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure. 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. 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 and US Airways said they would fight the lawsuit in court rather than seek a compromise that might lead to a settlement. In a joint statement American Airlines and US Airways said, "[i]ntegrating the complementary networks of American and US Airways to benefit passengers is the motivation for bringing these airlines together ... blocking this pro-competitive merger will deny customers access to a broader airline network that gives them more choices."

In June the Government Accountability Office [official website] released a report [text, PDF] warning that the new airline would be the only carrier providing nonstop service on seven of the 12 routes where they currently compete. The report also said that the merger also would reduce competition on 1,665 other domestic routes and create new competition in just 210 routes. Talks of a merger began last year when US Airways began to pursue bankrupt American Airlines. The merger was seen as a natural fit in an aviation landscape that had evolved and dramatically consolidated since the industry was deregulated by Congress in 1978. In a hearing of the Senate Committee on Commerce, Science and Transportation Senator John Rockefeller IV [official website] noted that during that time "consolidation was a necessary evil—no industry sector could sustain year after year of multibillion-dollar losses." Roy Kienitz, who served as undersecretary for policy at the Department of Transportation argued that, "the airline industry spent much of the last decade going bankrupt. As a consequence, we had a period where people got to fly for a price below what it cost to provide the service. But this cannot last. Something has to give." Kienitz also noted that he is concerned the effort to block the merger is rooted in a effort to go back to a time when prices were lower—a situation which he concluded was "unsustainable."

 

About Paper Chase

Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible format.

© Copyright JURIST Legal News and Research Services, Inc., 2013.