“People Deserve Better,” Says DOJ in Challenging Merger

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“By challenging this merger, the Department of Justice is saying that the American people deserve better,” said Attorney General Eric Holder, pictured.

Was it William Faulkner who wrote “the past is never dead, it’s not even past?” Well now it’s the U.S. Justice Department. They and the attorneys general of six states and the District of Columbia filed a lawsuit today to block the proposed merger of American Airlines and US Airways.

The Justice Department believes the deal reduces competition for “commercial air travel in local markets throughout the United States and result in passengers paying higher airfares and receiving less service.”

The $11 billion deal between the two airlines, which took American Airlines out of bankruptcy and would create the country’s biggest airline, was announced in February.

The other two major legacy carriers in the U.S. – Delta Air Lines and United Airlines – have both grown by mergers in recent years.

The complaint was filed in Federal District Court in the District of Columbia. The Justice Department said the merger “will leave three very similar legacy airlines – Delta, United and the new American — that past experience shows increasingly prefer tacit coordination over full-throated competition.

“By further reducing the number of legacy airlines and aligning the economic incentives of those that remain, the merger of US Airways and American would make it easier for the remaining airlines to cooperate, rather than compete, on price and service.”

“Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure,” Attorney General Eric H. Holder Jr. said in a statement. “By challenging this merger, the Department of Justice is saying that the American people deserve better. This transaction would result in consumers paying the price — in higher airfares, higher fees and fewer choices. Today’s action proves our determination to fight for the best interests of consumers by ensuring robust competition in the marketplace.”

The six states along with the District of Columbia are Arizona, Florida, Pennsylvania, Tennessee, Texas and Virginia.

Here’s a copy of the petition.

The Tarmac’s View: We’re applauding the Justice Department on this move.

[Photo: United States Department of Justice]

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Comments (Showing 14 of 14)

  • garydpdx at 5:21pm August 13, 2013

    While this is a surprise, US can still be effective by moving to OneWorld and codesharing with AA (and BA, etc.), then make a strategic investment in AA as part of a consortium to take it out of bankruptcy.

  • chinatraderjmr at 5:31pm August 13, 2013

    a day late and a dollar short. Where was the DOJ when UA & CO announced the mess they called a “merger of equals” Its too bad the DOJ has no hope of blocking this merger. It would have been nice to have SIX competing airlines instead of the upcoming cartel of THREE

  • Cathay Boy at 6:00pm August 13, 2013

    This is a stab in the back on American Airlines because AA was the only airline that didn’t take bailout money from the US Gov’t, i.e., didn’t accept the fact that Gov’t can control their internal management so they tried to get out of it on their own. Now DOJ is going after them in the merger when US DOJ had no problem with previous mergers. Pathetic.

  • duniawala at 6:07pm August 13, 2013

    I guess the DOJ finally woke up. Hope that they prevail.

  • travelsavant at 6:19pm August 13, 2013

    Pathetic attempt by DOJ! It’s OK for Delta & United but not AA & US Air? Talk about not allowing for fair competition. What would the DOJ do about AA if this merger falls through: go bankrupt?
    I do agree that with 3 major airlines, they will be less competitive, but DOJ can always monitor their pricing & fine them for price fixing…of course that requires actually doing their job which they haven’t in years.

  • BearX220 at 7:21pm August 13, 2013

    It’s a different environment now. Going from four major carriers to three is a lot worse than going from six majors down to five. DoJ has the right to assess the environment as it is now, not give every applicant the same shot.

    I do agree that DL/NW and UA/CO, particularly the latter, have been terrible advertisements for mega-mergers. If UA/CO hadn’t proven to be such a disaster things might have been different for AA/US. As it is, though, the government is practically duty-bound to look at the misery inflicted on the traveling public by UA/CO, read the pronouncements of AA and US execs about how excited they are re: raising fares and reducing competition, and act as they did.

  • Indelaware at 7:27pm August 13, 2013

    It is about time that the government stand up and govern. Allowing the AA/US merger would be most foolish. Once that is blocked, serrious thought should be made to breaking up btoh AA & UA, both of whom are too large.

  • ADSmithNRA at 7:53pm August 13, 2013

    Normally I HATE government interference in the free market, however as a US Chairman Preferred member I am holding out that this merger is killed for one single reason… I DO NOT want to lose Star Alliance as One World is a POS alliance.

  • Churnman at 8:16pm August 13, 2013

    Read that possible DOJ rep has reportedly already admitted they are “open for settlement talks”. could it mean $$$$$ + give up some gates = merger? hmmmm? Really isn’t about consumers is it?

  • schwarm at 8:38pm August 13, 2013

    If DCA were not the principle airport in question, I wonder if the DOJ would have cared or gotten involved at all.

  • AlwaysFlyStar at 8:48pm August 13, 2013

    I notice Arizona and Pennsylvania are both against the merger. I wonder why…

  • golfingboy at 9:59pm August 13, 2013

    Pennsylvania is against the merger as they know PHL will be a casualty of the merger.

  • Open Jaw at 11:30pm August 13, 2013

    This is just plain stupid. I don’t care if the US/AA merger goes through or not, but I can say without any doubt or reservation that Holder just wants to damage and destroy the US everyway he can. He hates everything about this great nation.

    If he really worried about higher fare and service reductions, he would have stopped the merger of CO with UA because these two airlines serviced many of the same routes. There is very little overlap with AA and US.

  • Asiaflyguy at 12:04am August 14, 2013

    i would rather have the DOJ come late to the party and stop another merger that will drive up prices and lower service than not come to the party at all. Better late then never.

    I am not sure this is Holder out for a vendeta to ruin the US, as 6 State Attornies filed the suit in federal court, so…

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