Government Intervenes in US Airways and AA Deal

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The Justice Department and multiple U.S. State Attorneys General want to block an $11 billion dollar merger between US Airways Group Inc. and American Airlines’ parent company AMR Corp.

  

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Ultimately the deal would reduce competition and effectively form something of a monopoly for the two companies, and also it would give more leverage to the remaining carriers. The Justice department believes that “the reduction in competition for commercial air travel in local markets would result in passengers paying higher airfares and receiving less service.”

Assistant Attorney General Bill Baer commented that Americans spent more than $70 billion on domestic air travel in 2012. He went on to note that if the merger were to take place, airline tickets would increase in price, as would the price for checked bags and flight changes. He notes that the results of the merger would be “hundreds of millions of dollars of harm to American consumers.” Assistant Attorney General Baer also added that US Air “competes vigorously” through discounting its tickets and that certainly after the merger no such price discounting will be seen. He continues to comment by noting that the remaining three carries, United, Delta and the New American, would have no incentive to compete price-wise.

The Sherman Act of 1890 outlawed the restriction of competition. Section 2 prohibits monopolies, or attempts and conspiracies to monopolize. Preventing airlines from having a stranglehold on this market is clearly fundamentally in keeping with the law. Though the Justice Department is open to proposals, as of now, they have issued an injunction on the merger.