DOJ closing statements from other airline mergers indicate that the methodology has been used in subsequent deals, including the Obama administration's approval of Delta's 2008 takeover of Northwest, United Airlines Inc.'s 2010 purchase of Continental Airlines Inc., and Southwest Airlines Co.'s acquisition of AirTran Airways in 2011. Although the Obama administration has nullified some antitrust policies of the Bush era, the United/Continental and Southwest/AirTran deals show that it has not repudiated policies laid out in the Heyer paper.
"They look at the direct benefits of improved service and put a dollar value on it," the airline source said. Using the same model, US Air and American calculated that the added flights and locations they will provide are worth $500 billion.
"This is a measurable effect of the merger, not something they are claiming to pass on at some point in future," the source said.
But another antitrust expert said US Air and American appear to have been caught off guard by a difference in the way the DOJ calculated the harm caused by the merger. When they announced the deal, the carriers stressed that the two airlines have very little overlap among nonstop flights. Under the traditional analysis of nonstop "city pairs," only 12 routes posed an antitrust problem and could easily be dealt with by divestiture to other airlines, they said.As it turned out, however, the DOJ also included routes with connecting flights in its analysis and declared that the airlines compete on thousands of routes. The change in analysis is likely to have been implemented because of US Air's "Advantage Fare" program in which it specifically competes against the major carriers' nonstop routes with lower-priced routes with connecting flights. "The characterization of US Air as planning to do away with the Advantage Fares makes a compelling case for government but they're going to have to establish that at trial," said Seth Bloom, president of Bloom Strategic Counsel PLLC and former antitrust aide to retired Senate Antitrust Subcommittee Chairman Herb Kohl, D-Wis. It appears US Air was caught off-guard just as AT&T (T) was when the DOJ moved to block its planned acquisition of T-Mobile USA in 2011. "The traditional way of looking