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DOJ's Merger Complaint Is Weak, Say American/ US Airways Lawyers

CHARLOTTE ( TheStreet) -- Attorneys for US Airways (LCC) and American (AAMRQ) say they weren't surprised that the Justice Department filed suit to block the airlines' merger, but they are surprised the case is so weak.

The anti-trust division of the Justice Department, which filed suit Tuesday to block the merger, conducted a seven-month investigation before filing, said Paul Denis, an antitrust attorney for US Airways, during a conference call with reporters on Wednesday.

"You're never surprised when you're in an investigation that long that ends up in the government challenging," Denis said. "We were surprised that the complaint was not stronger. We expect the government to put on a better case than we've seen in this complaint."

The attorneys, two for US Airways and one for American, mocked the 56-page complaint. One said "If it takes 50 pages to tell your story, it's actually not that good a story." Joe Sims, who represents American, added: "This is kind of a kitchen sink complaint. It looks like they pulled up every vegetable in the garden and put it in the sink there."

In any case, Sims said, "It's not really all that relevant to what happens now. They have to go into court and not give an argument, not tell a story. They have to put on evidence."

The DOJ argues that the merger is bad for consumers, who would have to pay more for air travel if the number of airlines diminishes. Supporting evidence in its complaint included emails from airline executives saying a merger would lead to higher fares and fees, as well as statements by executives of both airlines saying that the airlines could stand alone and prosper without a merger.

But according to Sims the, combined airline would have lower costs and be able to pass those on to customers. In addition, the attorneys said, passengers in cities served by the two airlines would benefit from having more available destinations as well as more frequent flights to some destinations.

"The outcome of this merger when it is approved and when we close is very pro-competitive," said Rich Parker, also representing US Airways. "You get [airline] number four and number five joining to create a company of comparable size to United (UAL - Get Report) and Delta (DAL - Get Report)."

As far as what executives said, the complaint has "a lot of chatter about various things said over the time, none of which have anything to do with the merger," said Denis. "What this case is going to be about will not be emails or what somebody said three steps removed," he said. "What this case will be about is competitive reality of today's airline industry."

The airline attorneys noted the government does not necessarily win every anti-trust case it files. "There aren't many of these cases," said Sims. "We are dealing with a small sample size. Some are settled by settlements. The fact is that once you go through litigation, the government has won one time."

Asked about the possibility of a settlement, Parker responded "We're always prepared to listen to any ideas the Department of Justice may have to resolve this, but we're working hard getting ready for court."

The Justice Department, six attorneys general and the District of Columbia filed its civil antitrust lawsuit on Tuesday in U.S. District Court for the District of Columbia. The participating attorneys general represent Arizona, Florida, Pennsylvania, Tennessee, Texas, Virginia and the District of Columbia.

Except for Tennessee, each of the states has a hub operated by one of the two airlines. But California, Illinois, New York and North Carolina, also the sites of hubs operated by one of the two, stayed away.

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

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

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