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Giant airline merger grounded in USA


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Giant airline merger grounded in USA

The US Justice Department, the District of Colombia and six states have joined forces to block the mega-merger of American Airlines and US Airways, which would have created the world’s biggest carrier.

The Justice Department said it would be a bad deal for the American consumer, leading to higher prices and less choice and competition. The merged company would, for example, control 69 percent of flights out of Washington.

The deal, worth over 8.25 billion euros, was announced in February and immediately attracted flak, but after ceding landing and takeoff slots in London and Philadelphia the EU granted approval.

Both companies’ shares fell on the news.

They could be in for a long and bruising courtroom battle against seasoned lawyers if they choose to keep fighting.

Several experts in competition law say that the aggressive stance taken by the Justice Department in the suit it filed in US District Court in Washington signals a sincere intention to block the deal, not just a mere negotiating ploy to get concessions before possible future approval.

Problem pairs

One sign that government lawyers are dead set on blocking the deal can be found in an appendix to its lawsuit, said Mark Ostrau, an antitrust lawyer in Mountain View, California.

The appendix lists 1,043 airline routes between cities where, according to the Justice Department, the combined company would have a presumptively illegal monopoly or near monopoly.

The routes between two cities – for example, Charlotte and Dallas – are known in the industry as “city pairs.” There may be too many troublesome pairs for American Airlines and US Airways to resolve in a settlement, and that is something government lawyers must have known when they put the list in their suit, Ostrau said.

“If you wanted something to resolve, you would not have listed more than 1,000 problematic city pairs,” he said.

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