DOJ Sues To Stop American & US Airways Merger
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MIAMI (CBSMiami) – The U.S. Justice Department and several state attorneys general, including Pam Bondi, have filed a lawsuit to block the proposed merger between American Airlines and US Airways.
American, which has a hub at Miami International Airport, would have combined with US Airways in the $11 billion merger to create the largest airline in the world. The creation of the largest airline is precisely what the government is targeting about the merger.
The DOJ said the combination of the companies would reduce competition for commercial air travel in several markets and would likely result in higher airfares for less service. The lawsuit seeks to prevent the companies from sealing the merger to preserve competition.
“This merger would be anti-competitive and harmful to consumers, with 20 percent of the problematic flight routes affecting Florida. By filing this lawsuit, we hope to save consumers from potential multi-million dollar increases in prices and fees,” state Attorney General Pam Bondi said in a statement.
As originally proposed, the carrier was to keep the American Airlines name, but would be run by US Airways CEO Doug Parker. American’s CEO, Tom Horton, will serve as chairman of the new company until mid-2014.
The deal was first reported on after creditors forced American to consider a merger rather than remain independent. The airline entered bankruptcy protection in late 2011 and was left behind as several other major airlines merged including Delta and Northwest along with United and Continental.
If American’s merger with US Airways was to go forward, American, United, Delta, and Southwest could control roughly three-quarters of U.S. airline traffic.
The deal would have given the new American more than 900 planes, 3,200 daily flights and about 95,000 employees, not counting regional affiliates.
Just five years ago, American was the world’s biggest airline. It boasted a history reaching back 80 years to the beginning of air travel. It had popularized the frequent-flier program and developed the modern system of pricing airline tickets to match demand.
American ranked 14th out of 15 airlines in government rankings for on-time performance in 2012 (US Airways was fifth). Only United had a higher rate of complaints (but US Airways was barely better than American).
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