DOJ Challenges American, US Airways Merger
The Department of Justice filed a civil antitrust lawsuit Tuesday, seeking to block the proposed $11 billion merger between US Airways and American Airlines’ parent AMR Corp. on Tuesday. Six state attorneys general and the District of Columbia joined the DOJ. The suit alleges that the merger would greatly lessen competition for commercial air travel in local markets throughout the U.S., and would result in passengers paying higher airfares and receiving less service.
The merger would create the largest airline in the world and, according to the DOJ suit, would result in four airlines controlling more than 80% of the U.S. commercial air travel market. The DOJ said that US Airways and American directly compete on more than a thousand routes where one or both of the carriers offer connecting service, and eliminating this competition would allow the merged airline the ability to raise airfares.
The merger would also result in the new airline having control of 69% of takeoff and landing slots at Washington Reagan National Airport, as well as having a monopoly on 63% of nonstop routes served out of the airport. The Department of Justice said that if the merger goes through, Washington, D.C.-area passengers would most likely see higher prices and fewer choices.
The Department of Justice’s complaint also states that the merger is likely to result in higher ancillary fees, such as checked bags and flights change fees.
The department’s complaint also claims that executives of both airlines have repeatedly stated that the carriers do not need the merger to succeed. The complaint characterizes US Airways executives’ “fear” of American’s standalone growth plan as “industry destabilizing” and that the airline worried that American’s growth plans would increase competitiveness within the industry.
Both American and US Airways have said that their merger will benefit consumers by creating a third large airline that can compete on a level playing field with the two largest carriers, Delta Air Lines and United Airlines. Both were formed through mergers in the past five years.
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