US moves to block proposed airline merger

Lawsuit alleges $11bn merger between American Airlines and US Airways would mean higher fares and reduced service.

    The US Justice Department and several states have filed suit to block the $11bn merger between American Airlines and US Airways, saying it would cut competition in the industry.

    The move on Tuesday effectively dragged to a halt the long-pending merger to create the world's largest airline as American Airlines and its parent AMR Corp exit bankruptcy restructuring.

    The merger "would substantially lessen competition for commercial air travel in local markets throughout the United States and result in passengers paying higher airfares and receiving less service," the Justice Department said in a statement.

    This transaction would result in consumers paying the price, in higher airfares, higher fees and fewer choices.

    Eric Holder, US attorney general

    "Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure," US Attorney General Eric Holder said in a statement.

    "This transaction would result in consumers paying the price, in higher airfares, higher fees and fewer choices."

    The suit was joined by justice officials of six states and Washington, DC.

    It said that the two airlines compete head-to-head on more than 1,000 routes, and the merger would remove that competition.

    "Eliminating this head-to-head competition would give the merged airline the incentive and ability to raise airfares," the department said.

    It also said that the US airline industry was already "highly concentrated" and that after the merger four airlines would control more than 80 percent of the commercial air travel market.

    US Airways and American Airlines said in a statement that they would fight the move and "mount a vigorous and strong defense" of the merger.

    "We will mount a vigorous defense and pursue all legal options in order to achieve this merger and deliver the benefits of the new American to our customers and communities as soon as possible," they said. "We believe that the DOJ is wrong in its assessment of our merger, they said, referring to the Justice Department. 

    SOURCE: Agencies


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