American / US Airways merger hits stumbling block

13 Aug 2013 by GrahamSmith

The US Department of Justice has today filed an anti-trust lawsuit to stop the merger between American Airlines and US Airways.

The surprise move comes just two days before the $11 billion deal, which would create the world's largest airline, was expected to have been given final approval by a US judge.

It has already been approved in principle by a federal judge in March, by US Airways shareholders last month and by the European Commission last week (see online news, August 6).

The complaint claims passengers would see ticket prices increase as a result of the merger and that it would "substantially lessen competition" in the domestic US market.

The anti-trust suit was jointly filed by the Department of Justice, six US states and the District of Columbia.

US Attorney General Eric Holder said in the complaint: "By challenging this merger, the Department of Justice is saying that the American people deserve better.

"This transaction would result in consumers paying the price - in higher air fares, higher fees and fewer choices."

American Airlines had planned to use the merger to mark its exit from bankruptcy protection under US Chapter 11 laws, which allows it to reorganise and seek funding while being protected from its creditors.

Before granting its approval, the EC said it had concerns that the merger would create a monopoly on the route between London and Philadephia.

But the two airlines have agreed to give up one slot at both London Heathrow and Philadelphia if their merger goes ahead. They have also promised to make other "commitments".

If successful, the merged carrier will operate under the American Airlines name, and will be a member of the Oneworld alliance. US Airways is currently a member of Star Alliance.

AMR, the parent company of American Airlines, will take a 72 per cent stake in the new company, with US Airways owning 28 per cent.

The carrier will be headquartered in Dallas Fort Worth. The team-up is expected to deliver annual synergies of more than US$1 billion by 2015.

Graham Smith

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