Will a New Lawsuit Derail the American Airlines - US Airways Merger?

american airlinesUPDATE: Here is a longer extract of the Justice Department's statement on the lawsuit.

The Justice Department and six state attorneys general have sued to block the merger of American Airlines and US Airways, The New York Times reports. The complaint, which was filed on Tuesday in the Federal District Court in the District of Colombia, said the merger “will leave three very similar legacy airlines – Delta, United and the new American – that past experience shows increasingly prefer tacit coordination over full-throated competition.”

Bloomberg reports that American’s competitors, such as JetBlue and Southwest Airlines, had questioned whether the new merger would provide American too much control over Reagan National Airport in Washington, DC. Takeoff and landing rights at Reagan are limited by U.S. regulators, a restriction shared by only three other U.S. airports. After the proposed merger, the new combined airline would control 67 percent of daily departures from Reagan.

The proposed merger has received criticism from the travel industry, but the Justice Department’s move is the first serious regulatory challenge. Earlier this month, the European Commission granted approval for the merger under the EC Merger Regulation. In July, opponents of the merger, led by antitrust lawyer Joseph Alito, filed a lawsuit in federal district court in San Francisco to block it, arguing that the merger would leave four airlines – United, Delta, Southwest and the new combined airline – controlling 90 percent of the U.S. domestic airline industry.

The concern over a lack of competition stemming from the merger comes at the same time as the air travel industry is set to undergo another series of changes due to the International Air Transport Association (IATA)’s proposed Resolution 787 on the New Distribution Capability (NDC). Industry groups, such as the American Society of Travel Agents (ASTA) and the Business Travel Coalition (BTC), have warned of the resolution’s potential impact on price transparency in air travel.

"If approved by DOT, Resolution 787 - also called IATA's New Distribution Capacity - will impact every travel industry segment and all participants in the value chain for generations to come, " BTC Chairman Kevin Mitchell said at the end of July.

The Travel Technology Association has argued that the NDC would raise the cost of flying by inhibiting consumers’ ability to effectively comparison shop between airlines.

The IATA has responded that, by collecting personal information on air travelers, airlines will be able to offer better, personalized benefits and amenities. Resolution 787 is still awaiting approval from the Department of Transportation.

What do you think of the proposed merger, and the Justice Department’s attempt to block it? Let us know on our Facebook page or in the comments below.

 

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