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Lawsuit to Block AA and US Airways Merger Will Start Nov 25th
The proposed merger of American Airlines and US Airways will face a lawsuit from the federal government. The trial will start Nov. 25th. The U.S. Justice Department had preferred to start the case in March, where they would have gatheredmore evidence for the case, but the airlines pushed back and asked for the case to start sooner. According to American Lawyer, U.S. District Judge Colleen Kollar-Kotelly commented that a case that started in March is “too far off,” and so the case will start this fall.
The two airlines were planning on joining to create the world’s biggest airline, but were interrupted by the Justice Department and six states as they sued the airlines in efforts to block the deal. The plaintiffs claimed that the reduction of competition in the airline industry would lead to higher prices for consumers. They also said that the airline would be too dominant at Reagan National Airport outside Washington and on “too many routes around the country.”
The initial hearing was “mainly procedural, aimed at establishing timetables for reviewing documents and other preparations for trial. “At this time the two airlines argued that their merger would “increase competition” but I find that interesting. When in history has reducing the number of competitors in the market increased competition? That seems rather contradictory. Yet American Airlines and US Airways cited that Delta and United Airlines both grew through recent mergers. Attorney Richard Parker, who represents US Airways Group Inc., expects to review other competitors’ documents and financial statements in order to assess that the industry has robust competition. He will attempt to make understood that the merger between the two airlines will not materially affect competition.
The Justice department will counter with their expectation on the price impact as well as other fees and ticket price changes. They expect prices to rise, in spite of wht the airlines claim. The Government wants transparency on how the airlines –after the merger- will lower prices and make consumers save money. The Justice Department also notes that this period shows record profits at both airlines, thus proving that the airlines don’t need to merge in order to survive.