Supreme Court justice denies application to stay airline merger

[JURIST] US Supreme Court [official website] Justice Ruth Bader Ginsburg on Saturday denied an application [text, PDF] to stay the merger of US Airways and American Airlines [corporate websites] without issuing an opinion. The group of consumers filed the application based on similar antitrust claims already brought and settled [JURIST report] by the US Department of Justice (DOJ) [official website]. Specifically, the individuals claimed this merger would violate sections 7 and 16 of the Clayton Antitrust Act [text]. To support this claim, plaintiffs argued, among other things, that the merger:

Would result in the largest airline in the United States and the world. ... The four top airlines will control more than 90% of the market. The four top airlines will have more than 90% of the market in terms of total operating revenue. ... The combined American-US Airways has 12 overlapping non-stop routes, 7 of which will result in a monopoly. Of the other 5 non-stop, overlapping routes, the combined airline will control between 50%-75% of those markets. ... Several studies have shown that increased dominance at airports leads to higher fares and creates competitive barriers to entry.
Plaintiffs attempted to seek this stay in both the pending Chapter 11 bankruptcy of American Airlines and in the US Court of Appeals for the Second Circuit [official website], but were denied. This emergency appeal was given to Ginsburg who has authority on such matters arising from the Second Circuit. The airlines have stated that they intend to carry out the merger as early as December 9.

The DOJ filed [JURIST report] a similar lawsuit in August. This came after a report [text, PDF] was released in June detailing the potential problems surrounding the merger. 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 an effort to go back to a time when prices were lower—a situation which he concluded was "unsustainable."

 

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