The U.S. Justice Department and attorneys general for six states, including the District of Columbia, have challenged the proposed merger between AMR Corp., the parent company of American Airlines, and US Airways, saying the combined airlines would result in higher airfares and lower service for passengers.
In a news release, the Justice Department said the proposed $11 billion merger “would substantially lessen competition for commercial air travel in local markets throughout the United States.”
Justice’s antitrust division has field a lawsuit in the U.S. District Court for the District of Columbia to prevent the companies from merging. Participating in the suit are attorneys general from the home states of American and US Airways: Texas, Arizona, Virginia, Tennessee, Florida, Pennsylvania, and D.C.
“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,” Justice’s Bill Baer said in a statement. “If this merger goes forward, even a small increase in the price of airline tickets, checked bags or flight change fees would result in hundreds of millions of dollars of harm to American consumers. Both airlines have stated they can succeed on a standalone basis and consumers deserve the benefit of that continuing competitive dynamic.”
Justice is concerned about the more than 1,000 routes where the two carriers currently compete head-to-head and what might happen to service and prices on those routes once a merger is consummated. The agency is also concerned about the number of airlines that would be left after the merger — four major airlines, it said, will control more than 80 percent of the U.S. market.
“The merger of these two important competitors will just make things worse –exacerbating current airline industry trends toward reduced service, increasing fares and increasing passenger fees,” Baer said.
Earlier this month, both carriers received the go-ahead from the European Commission for the merger, but asked for a few concessions including releasing a daily slot pair at London Heathrow Airport. It found that the combined airline would face sharp competition on most routes into Europe.
"The commission could clear this transaction in the first phase given the commitments offered by the parties which address the competition concern we identified on the London-Philadelphia route," EC Commissioner Joaquín Almunia said in a statement at the time. "The commitments include a corresponding slot at London Heathrow as well as far-reaching feeder arrangements to induce entry by a new competitor on the route. We are therefore satisfied that the competitive dynamics will be maintained so as to ensure choice and quality of air services for passengers on this route."
The Justice Department news is a blow for the merger, which was set to be completed by the end of the year. This summer, American Airlines Cargo’s Kenji Hashimoto expressed confidence that the deal would go through without issue.
“I think it’s telling that we said in February, we’re going to aim for the third quarter, and we’re still saying that,” he told American Shipper
in May. - Jon Ross