US govt challenges American-US Airways merger on competitive grounds

Washington DC
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The US Department of Justice (DOJ) has challenged the proposed merger of American Airlines and US Airways, citing the deal's potential to reduce competition and increase airfares in the USA.

"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," says Bill Baer, assistant attorney general in charge of the DOJ's antitrust division, in a statement.

The DOJ, joined by the district attorneys from Arizona, Florida, Pennsylvania, Tennessee, Texas, Virginia and Washington DC, filed suit challenging the proposed merger with the US District Court for the District of Columbia today.

The suit cites the combined carrier's control of 69% of the take-off and landing slots at Ronald Reagan Washington National airport as an example of the concentration that would result from the merger. It says that fares in the Washington DC area would likely increase and that there would be less air service as a result of the merger.

Comments by both Doug Parker, chairman and chief executive of US Airways, and Tom Horton, chairman and chief executive of American, that their respective airlines could succeed without the merger, appear to be backfiring on the deal.

"Both airlines have stated they can succeed on a standalone basis and consumers deserve the benefit of that continuing competitive dynamic," says Baer.

American and US Airways had hoped to close the merger by the end of the quarter, pending DOJ antitrust approval.

The US bankruptcy court is poised to confirm American's reorganisation plan, which is centred on the proposed merger, on 15 August.

American and US Airways were not immediately available to comment.