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Wednesday, February 27, 2013

US Airways, American Airlines Defend Merger at Congressional Hearing

Woodrow Bellamy III

American Airlines and US Airways executives defended their proposed merger on Tuesday against lawmakers and critics who say the newly merged airline could raise fare prices.

The two airlines on Feb. 14 announced the $11 billion merger proposal, which would create the world’s largest airline.

Airline executives from both carriers testified before the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law on Tuesday saying the combined airline would bring cost and revenue synergies, which would ultimately benefit the flying customer. The airlines said they have "conservatively estimated that by 2015 revenue and cost synergies will outweigh cost dis-synergies by more than $1 billion.

“The majority of these revenue synergies are derived by combining two complementary networks that will offer consumers more service at more times to more places. And because this will be a merger of complementary networks, these benefits come with virtually no loss of competition,” said Gary Kennedy, senior vice president of American Airlines.

Lawmakers and critics charge the merger will raise fares as fewer and fewer carriers serve various cities. “From a broad competitive perspective, there is the issue of airline market share at individual airports, the overall market share held by major carriers, and the prospects and implications of future consolidation," said House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law Chairman Spencer Bachus (R-Ala.).

Both airlines are awaiting approval from Department of Justice (DOJ) antitrust regulators, the federal court overseeing American’s bankruptcy proceedings, company shareholders and regulators in Europe. Congress has oversight responsibility for ensuring thorough merger reviews are conducted by DOJ.

A Senate judiciary subcommittee will reportedly hold a hearing on the merger in March. More

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