US government blocks American Airlines merger
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The planned merger between American Airlines and US Airways has been challenged by the US Department of Justice (DOJ).
The government unit, along with six US states and the District of Columbia, has filed a lawsuit aimed at preventing the deal, saying the merger would lead to “higher fares, higher fees and receiving less service” for the American consumer.
Texas-based American and Arizona-based US Airways are planning to form the world’s biggest airline group, operating more than 6,700 daily flights and carrying an estimated 190 million passengers per year. But this, according to the DOJ, would be unfair on the customer, leaving the US with just three main carriers, following the recent mergers of Delta and United with Northwest and Continental respectively.
“If this merger were to go forward, consumers will lose the benefit of head-to-head competition between US Airways and American on thousands of airline routes across the country – in cities big and small,” the DOJ said.
“They will pay more for less service because the remaining three legacy carriers – United, Delta and the new American – will have very little incentive to compete on price. Indeed, as our complaint shows, the management of US Airways, which will run the new airline, sees consolidation as a vehicle to reduce competition between the airlines and raise fees and fares.”
The DOJ cited several instances in which US Airways current fares are cheaper than the three so-called legacy carriers, and even cheaper than low-cost airlines like JetBlue.
“If this merger happens, US Airways’ aggressive discounting… will disappear,” it warned.
American and US Airways said they “intend to mount a vigorous and strong defence” to the lawsuit.
“We believe that the DOJ is wrong in its assessment of our merger. Integrating the complementary networks of American and US Airways to benefit passengers is the motivation for bringing these airlines together. Blocking this pro-competitive merger will deny customers access to a broader airline network that gives them more choices,” American’s parent company, AMR Corp, said in a statement.
“We will mount a vigorous defence and pursue all legal options in order to achieve this merger,” it added.
But following this legal challenge, it is now unlikely that the merger will close in the third quarter of 2013, as initially planned.
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