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Justice Department Sues to Block US Airways/American Merger

CHARLOTTE ( TheStreet) - In a move that has stunned the airline industry, the U.S. Department of Justice said it has filed a law suit to block the planned merger of US Airways (LCC) and American (AAMRQ.PK).

Shares of bankrupt American, which trades primarily on the expectation of a return in the merger, were down 45% to $3.22 in late afternoon trading. Shares of US Airways were down 12% to $16.52.

The Justice Department, six attorneys general and the District of Columbia filed a civil antitrust lawsuit on Tuesday challenging the proposed merger.

The merger "which would result in the creation of the world's largest airline, would substantially lessen competition for commercial air travel in local markets throughout the United States and result in passengers paying higher airfares and receiving less service," the Justice Department said in a prepared statement.

The opponents filed the suit in the U.S. District Court for the District of Columbia. The participating attorneys general are from Arizona, Florida, the District of Columbia, Pennsylvania, Tennessee and Virginia.

"Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure," said Attorney General Eric Holder. "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 airfares, higher fees and fewer choices. Today's action proves our determination to fight for the best interests of consumers by ensuring robust competition in the marketplace."

Bill Baier, assistant attorney general in charge of the DOJ antitrust division, said "The department sued to block this merger because it would eliminate competition between US Airways and American and put consumers at risk of higher prices and reduced service.

"If this merger goes forward, even a small increase in the price of airline tickets, checked bags or flight change fees would result in hundreds of millions of dollars of harm to American consumers," he said. "Both airlines have stated they can succeed on a standalone basis and consumers deserve the benefit of that continuing competitive dynamic."

American and US Airways compete directly on more than a thousand routes where one or both offer connecting service, representing tens of billions of dollars in annual revenues, the department said. It also said the merger would "entrench the merged airline as the dominant carrier at Washington Reagan National Airport, with control of 69% of the take-off and landing slots."

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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