Department of Justice Fights to Block American-US Airways Merger
The Department of Justice, joined by six states and Washington, D.C., filed an antitrust suit this morning in efforts to halt the proposed merger between American Airlines and US Airways.
The lawsuit comes as a shock to many in the industry, given that airline analysts had not foreseen major complications to the merger when it was announced in February. The T+L Trip Doctor team reported then that the formation of the world’s largest airline would inherently decrease competition and increase ticket prices, specifically to destinations such as Dallas, Miami and Philadelphia. Experts also predicted possible cuts in service to Phoenix, although aviation analysts did not foresee any major objections. This belief was cemented when the merger gained approval from European regulators just last week.
Four of the six the states joining the Department of Justice in calling foul play are, unsurprisingly, those with the airports most affected by the proposed merger: Arizona, Florida, Pennsylvania, and Texas. Washington D.C.—where the merged airline would control 69% of flight traffic from Reagan National Airport—also signed on, along with Tennessee and Virginia.
In a written statement, U.S. attorney general Eric Holder claimed “there is no reason to accept the likely anti-competitive consequences of this merger,” especially since CEOs of both airlines have been quoted saying that their companies can survive on their own.
Concluding that the merger would leave only four airlines controlling over 80 percent of the country’s commercial air travel, the suit filers contend that the mega-airline would “substantially lessen competition,” allowing just a few big players to control what millions of Americans pay for flights.
“By challenging this merger, the Department of Justice is saying that the American people deserve better,” said Holder in a statement that has made the rounds on Twitter. “Today’s action proves our determination to fight for the best interests of consumers by ensuring robust competition in the marketplace.”
We’ll be watching to see how the case proceeds.
Peter Schlesinger is a Research Assistant at Travel + Leisure, and a member of the Trip Doctor news team. You can follow him on Twitter at @pschles08.
Photo by Reuters, Corbis/ David Neal Jr.