US government seeks to block American-US Airways merger

The Justice Department and a number of state attorneys general are challenging the proposed $11 billion merger between US Airways Group Inc. and American Airlines' parent company, AMR Corp. (Aug. 13)

By Gregory Karp  In a surprise move Tuesday, the U.S. Justice Department sued to block the $11 billion merger of American Airlines and US Airways, which would create the world's largest airline.

The hookup had been viewed by many as a culmination to a wave of major-carrier consolidation that has helped put major U.S. airlines on more sound financial footing.

However, the Justice Department said it would harm competition and U.S. consumers, as just four airlines would control more than 80 percent of the U.S. commercial air travel market.
"The department sued to block this merger because it would eliminate competition between US Airways and American and put consumers at risk of higher prices and reduced service," Bill Baer, head of the Justice Department Antitrust Division, said in a statement. "Both airlines have stated they can succeed on a standalone basis, and consumers deserve the benefit of that continuing competitive dynamic."

The department took action against this merger, yet recently let go other combinations between major airlines.

Industry experts said the move was out of step with past practices and would potentially leave US Air and American, which is emerging from bankruptcy, at a competitive disadvantage.

Travel industry analyst Henry H. Harteveldt called the suit "unprecedented." He couldn’t recall a time when Justice had sued to block an airline merger. Typically, the Department of Transportation raises objections that are worked out between the government and the airlines.

"The time for the DOJ to act was five or six years ago when this wave of mergers started," he added.

Via: Chicago Tribune

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