The Department of Justice (DOJ) filed an antitrust lawsuit on Tuesday challenging the proposed merger of US Airways and American Airlines. The lawsuit was filed by the DOJ, six state attorneys and the District of Columbia, and challenges the $11 billion merger, which would create the largest airline in the world. The merger would substantially lessen competition for commercial air travel in US markets and would result in consumers paying higher airline fees and receiving less service, the lawsuit states.
The Department of Justice’s Antitrust Division and the attorneys general are seeking to preserve the existing competition between US Airways and American Airlines, which compete directly on more than one thousand routes, “representing tens of billions of dollars in annual revenues,” the DOJ reports. Eliminating that competition would give the proposed giant corporation the “incentive and ability” to raise airfares, the complaint alleges.
“If this merger goes forward, even a small increase in the price of airline tickets, checked bags or flight change fees would result in hundreds of millions of dollars of harm to American consumers,” said Bill Baer, Assistant Attorney General in charge of the DOJ’s Antitrust Division. “Both airlines have stated they can succeed on a standalone basis and consumers deserve the benefit of that continuing competitive dynamic.”
In addition to creating the largest airline in the world, the US Airways/American Airlines merger would result in four airlines controlling over 80 percent of the US commercial air travel market.
The DOJ’s complaint cites examples from airline mergers in recent years that succeeded in raising prices, imposing new fees, and reducing service. The document contains several quotes from public statements by US Airways executives regarding the past success of raising fees as a result of reduced competition in the US market, including when President Scott Kirby pointed out that past mergers have allowed for “three successful fare increases” that airlines were “able to pass along to customers.”
The DOJ has approved three airline mergers in the recent past: Delta Air Lines and Northwest Airlines in 2008, United Airlines and Continental Airlines in 2010, and Southwest Airlines and AirTran Airways in 2011. The last time they challenged a merger of two major air carriers was in 2000, when US Airways announced its proposed union with United Airlines.
“The Department of Justice made the right decision in challenging this merger,” said Peter Mougey, a shareholder and Securities Litigation attorney with the Levin, Papantonio law firm. “Antitrust laws were put in place to protect consumers by preventing massive, conglomerate corporations from monopolizing the market. Eighty percent of the US commercial air travel market being controlled by only four airlines as a result of this merger would do a great disservice to the American public.”
Alisha is a writer and researcher with Ring of Fire. Follow her on Twitter @childoftheearth.