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Last updated: August 14, 2013 12:16 am
Plans to create the world’s largest airline by sales hit a potentially fatal complication on Tuesday when the US’s Department of Justice sued to block the $11bn merger of US Airways and American Airlines’ bankrupt parent, saying it would push up fares.
The suit could force US Airways and AMR Corporation to unpick a merger they have been negotiating for more than a year and one they had been confident of completing next month.
The DoJ’s wide-ranging complaints about the deal’s potential effects also highlighted an apparent shift in the attitude of the DoJ itself to consolidation in the US airline industry, which it has generally approved in recent years.
The DoJ’s move contrasts with the more relaxed stance of the European Commission, which this month approved the merger with minor conditions, citing the continued stiff competition on transatlantic routes.
Bill Baer, assistant attorney-general for the DoJ’s antitrust division, said it was possible that one of the parties might come up with a better way to preserve competition than a straightforward block on the move.
But he went on: “I think the best idea at the moment is a block on the merger.”
US Airways and AMR Corporation, which has been in Chapter 11 bankruptcy protection since November 2011, responded to the DoJ’s move by saying they would mount a “strong and vigorous” defence of their plans.
US Airways was to leave the Lufthansa-led Star Alliance and joined the Oneworld Alliance, led by Europe’s International Airlines Group and American. IAG’s British Airways and American have a co-operation agreement on transatlantic routes, which US Airways would have joined.
The new, merged company would have combined American, the US’s third-biggest airline by sales, with number-five ranked US Airways to create the nation’s biggest carrier.
The DoJ said the merged company would have been one of just four big airlines – alongside Delta, UnitedContinental and Southwest Airlines – that would have operated 80 per cent of US domestic flights.
Eric Holder, attorney-general, said the American people, to whom air travel was vital, deserved better.
“This transaction would result in consumers paying the price – in higher airfares, higher fees and fewer choices,” he said.
Asked why the DoJ was blocking the merger when it had approved a series of previous airline deals, Mr Baer said the department had learnt from the effects of previous airline combinations.
“There’s an underlying concern here that, if you’re going to have just three legacy airlines, they don’t want to compete,” Mr Baer said. “They want to fly where they fly without competition.”
However, the airlines said in a joint statement they believed the DoJ’s assessment was wrong.
“Integrating the complementary networks of American and US Airways to benefit passengers is the motivation for bringing these airlines together,” they said.
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