Six State And The D.C. Attorneys General Join The Federal Government In The Action

The U.S. Department of Justice has filed a lawsuit to block the merger of US Airways and American Airlines on the grounds that it would "substantially lessen competition for commercial air travel throughout the United States."  According to a statement from Assistant Attorney General Bill Baer, "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."

The suit was joined by the attorneys general of the states of Texas, American’s home state; Arizona, US Airways’ home state; Pennsylvania, home to one of US Airways’ largest hubs; Florida; Tennessee; and Virginia and Washington, D.C. – where both airlines operate.

In his remarks presented in a conference call Tuesday, Baer said "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.  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.

"If this merger were to go forward, consumers will lose the benefit of head-to-head competition between US Airways and American on thousands of airline routes across the country – in cities big and small.  They will pay more for less service because the remaining three legacy carriers – United, Delta and the new American – will have very little incentive to compete on price.   Indeed, as our complaint shows, the management of US Airways, which will run the new airline, sees consolidation as a vehicle to reduce competition between the airlines and raise fees and fares."

Baer cited a US Airways policy called "Advantage Fares," which he says would be dropped if the merger goes through. "As a bigger airline with many more hubs, there will be no incentive for the merged company to offer any of the discounts ... resulting in higher prices, less choice and fewer services for the more than two million travelers who today benefit from the program.  How do we know it?  We know this from the internal analyses and the planning documents put together by American in considering the likely effects of this merger."

ALPA released a statement Tuesday countering the DOJ's claims. "Today’s action by the Department of Justice (DOJ) has interfered with the steady progress that the airline industry has made to achieve an economically rational yet vigorously competitive industry. This merger has broad support by labor groups, investors on Wall Street, the Pension Benefit Guaranty Corporation (PBGC), and other stakeholders.

“The Justice Department’s move isn’t rooted in the economic reality facing the aviation industry and its workers, one of the most fiercely competitive industries in the global economy. Moreover, the DOJ appears to have completely overlooked the need for U.S. carriers, such as American and U.S. Airways, to position them to compete in the international marketplace against powerful—often government-supported—foreign airlines," the statement reads.

“By filing this lawsuit, the DOJ has completely ignored decades of instability in the airline industry that has caused many carriers to go out of business, communities to lose service, and employees to lose jobs," ALPA continued. "Now that the industry is finally making strides toward economic stability and creating a balance among the major U.S. carriers, the DOJ has moved to interrupt that progress.

“This industry is one of the most competitive in the global economy. The market share of a combined American–US Airways company would be roughly equivalent to the size of United and Delta. This is hardly anticompetitive.”

FMI: www.doj.gov, www.alpa.org