IATA slams DOJ challenge of American-US merger

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IATA has slammed the US government's challenge of the American Airlines-US Airways merger, even as its director general Tony Tyler believes that "common sense will prevail" and that the merger will be eventually allowed to go ahead.

Calling the Department of Justice's (DOJ) arguments "unpersuasive", Tyler says the agency's reasons for challenging the merger were based on "faulty reasoning". The DOJ, along with district attorneys from various states, sued to block the merger citing competitive grounds on 13 August.

"DOJ seems to believe that a larger number of unhealthy airlines is better than a smaller number of healthy ones," says Tyler, speaking at a Wings Club luncheon in New York today.

He takes issue with the DOJ citing the profitability of ancillary fees for airlines as a reason behind challenging the merger. "In reality, IATA data show that ancillaries may be the difference between profit and loss for some airlines," says Tyler. "Without the additional revenue from these ancillary products, industry revenues would have been $10 below cost on a per passenger basis in 2012."

The DOJ challenge was unprecedented, after previous airline mergers, such as those involving United Airlines and Continental Airlines, sailed through. Speaking to reporters, Tyler says that he expects the merger will eventually be allowed to proceed.

"It would be extraordinary for any other outcome to occur," he says.

Tyler expresses concern for what he sees as an attempt by the US government to regulate the airline industry following years of deregulation. "It seems there's an undercurrent... it's like they think they can't rely on the industry to regulate the market," he adds.

American and US Airways are set to go to trial with the DOJ in the US District Court for the District of Columbia on 25 November. The trial is expected to last 10 days.