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Wednesday, August 21, 2013

Industry Opposes DOJ's Attempt to Block AA-US Airways Merger

Woodrow Bellamy III

Airline industry groups are strongly opposed to the Justice Department's attempt to block a proposed merger between American Airlines and US Airways, which would create the world's largest airline. 
Last week, the Department of Justice (DOJ) filed a lawsuit to block the merger, claiming that the newly merged carrier would reduce competition and raise airfare ticket prices for consumers. Antitrust regulators claim that the merger would eliminate competition on more than 1,000 routes. 
But industry groups such as The Air Line Pilots Association (ALPA), Airlines for America (A4A) and Allied Pilots Association (APA) claim that not allowing the merger would put thousands of jobs at risks for both carriers, which are at a disadvantage currently competing against larger competitors. 
In a letter to Attorney General Eric Holder on Tuesday, Edward Wytkind, president of the Transportation Trades Dept., said the lawsuit against the merger is inconsistent with DOJ's inaction on recently merged carriers. 
"It is significant that the mega-carriers that American and US Airways must compete with are themselves the products of recent mergers consummated with the apparent blessing of DOJ," Wytkind writes. "The DOJ’s inaction when Northwest and Delta merged or when United and Continental combined is what led US Airways and American to seek a merger."
A4A has a similar position, stating that DOJ found that consumers actually benefitted from the last four major airline mergers. The group also claims that DOJ is wrong in stating that airfares will rise if the merger is allowed to occur. 
"Airfare remains an unmatched bargain as fares have not kept pace with inflation over time, and recent mergers have not changed that. Consumers win when airlines are strong, able to compete and reinvest in their business with new planes, products and destinations," a spokesperson for A4A said in an emailed statement. 
It seems the only industry group that is in favor of not allowing the merger is a travel consumer group, the Consumer Travel Alliance (CTA). Last week, CTA issued a statement applauding DOJ's action, because of a Government Accountability Office (GAO) report that notes the merger would eliminate competition on 1,665 overlapping connecting routes.
Both American and US Airways are pursuing action to fight the lawsuit. American Airlines faces an uncertain future if the merger is blocked, because the carrier's business plan to emerge from Chapter 11 bankruptcy is contingent upon merging with US Airways. 
According to a report from The Dallas Morning News, American Airlines general counsel Garry Kennedy says that the airline has "no Plan B," for pursuing an alternative path to exiting bankruptcy. Kennedy also told the newspaper that DOJ seems unwilling to negotiate a settlement for the lawsuit. 


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