American-US Merger: Department of Justice Tries to Prevent World's Biggest Airline From Happening

The U.S. government does not want the American-US merger to happen. The Justice Department and attorney generals from six states and Washington, D.C., are challenging the merger of American Airlines and US Airways, saying the $11 billion partnership would lead to higher airfares and less service for customers.

The merger between the two companies would create the world's largest airline and would lessen competition for air travel but a complaint was filed against it in U.S. District Court in Washington, CNN reports.

The airlines will not go down without a fight. They vow to defend the deal and follow through with all legal options to get the merger to move forward.

"We believe that the DOJ is wrong in its assessment of our merger. Integrating
the complementary networks of American and US Airways to benefit passengers is the motivation for bringing these airlines together. Blocking this procompetitive merger will deny customers access to a broader airline network that gives them more choices," the companies said according to CNN.

The Justice Department is concerned about the local markets. For example, the merged airline would control 69 percent of takeoffs and landings at Reagan Washington National Airport and 63 percent of the outbound nonstop routes.
The DOJ also argues that the two airlines would charge higher fees for baggage and flight changes if they were to merge.

Several states joined the antitrust lawsuit including Texas, where American is based, Arizona, where US Airways is based, Florida, Pennsylvania, Tennessee and Virginia.

Some find the lawsuit to be surprising as the Justice Department had allowed other airlines to merge such as Delta and Northwest and United and Continental. These mergers were done as the airline industry was losing money and the mergers were seen as a way to save it.

However the airline industry is now doing well and is making billions due to higher fares and the $6 billion that was collected in fees for 2012 alone.
The DOJ doesn't believe the merger between US Airways and American is necessary and would even leads to benefit cuts for travelers. The lawsuit cites internal documents that might point to this information.

For example, US Airways had an Advantage Fares discount program, which would probably be eliminated after the merger. Without this merger, other airlines would have to continue to match the airline's discounts to compete.

American Airlines had been operating under Chapter 11 bankruptcy protection since 2011 and has been trying to get approval from antitrust authorities and shareholders for the merger so it can get out of the protection. The airlines were hoping for the merger deal to be complete by the end of September.

Earlier this month, the European Union approved the merger as long as the airline agreed to give up slots to allow new competition in a route between Philadelphia and London.