The decision by the U.S. Department of Justice (DOJ) and Attorneys General of six states to challenge the proposed merger of US Airways and American Airlines has divided the airline and travel industry.
Reflecting the split in substantive viewpoints, the American Antitrust Institute (AAI) and the Business Travel Coalition (BTC) - both opposed to the merger - joined forces to release "Frequently Asked Questions" (FAQs) on the legal challenge to the proposed merger.
"A number of questions have arisen in the wake of the DOJ’s lawsuit to stop the merger, AAI said. "The FAQs are designed to provide airline consumers and industry stakeholders with a straightforward explanation of the many complex antitrust issues associated with the merger,” explained AAI’s Vice President, Diana Moss.
"The action to block the merger is a significant effort by state and federal enforcers to safeguard airline competition and consumers for years to come," added Moss.
The merger has been forcefully defended by the two airlines and a large number of advocates.
The FAQs cover a number of topics involving the merger, ranging from the effect of the merger on competition and consumers, to the litigation process. (The FAQs can be downloaded at http://btcnews.co/1dpyBRo.)
Questions asked and answered by the FAQs include:
- Why would the DOJ block this airline merger and not previous airline mergers?
- How can DOJ and the airlines be so far apart in their estimates of how much the proposed merger will affect competition?
- Why can’t problems with the proposed merger be resolved by slot divestitures at Reagan Washington National airport?
- Won't American fail without the merger?
- Won’t Southwest Airlines and other low-cost carriers ensure competition and keep the big legacy carriers, including a merged US Airways-American, in check?
- Why did the government address airline “ancillary” fees in the Complaint, and how is the move to challenge the merger related to other regulatory issues involving fees?
The AAI-BTC paper on the US Airways-AA merger notes that competition enforcers have updated their merger analysis to reflect dramatically changed markets.
“There is greater emphasis on system-wide consequences from reduced competition and from coordinated effects, that can include tacit agreements among airlines to reduce service and capacity, raise fares and fees, change consumer-facing policies and lower quality,” stated BTC Chairman Kevin Mitchell.
"When there were nine major carriers in 2005, it made sense to focus analysis substantially on non-stop overlapping markets,” said Mitchell. “But when evaluating going from five to four major airline systems, connecting services become more prominent in their price disciplining role."
The states opposing the airline merger include: Arizona, Florida, Tennessee, Texas, Pennsylvania and Virginia and the District of Columbia.
The American Antitrust Institute (www.antitrustinstitute.org) is an independent Washington-based non-profit concerned with competitive issues.