Who Says DOJ Will Settle in AMR/US Airways Merger? Not Charlie Leocha

CHARLOTTE, N.C. ( TheStreet) -- Despite all the chatter that a settlement is near in the case involving the planned merger of US Airways ( LCC) and American ( AAMRQ), Charlie Leocha sees it differently.

Leocha heads the Consumer Travel Alliance, a non-profit consumer advocacy group, and has been among the primary voices opposing the merger. He doesn't think the case is headed for settlement, although he concedes "that may be wishful thinking on my part."

The Justice Department has sued to block the merger, with the trial scheduled to begin Nov. 25 in U.S. District Court in Washington. The two sides have said they are talking about a settlement.

"My feeling is that the DOJ will extend a possible settlement to American and US Airways, but I think it will be more than the airlines are willing to take," Leocha said Monday. "I think the case is going to go to trial. I don't have anything really to base that on, other than my general sense over the last six months, in conversations with the DOJ." He thinks DOJ would ask that US Airways be limited to 50% of the slots at Washington Reagan National Airport, too big a concession for the airlines to make.

The Justice Department has spoken with various airline CEOS and other industry leaders as it prepares for trial. Leocha said he has spoken with department lawyers three times since the merger was announced, each time at his own behest. "They are taciturn," he said, making it difficult to determine what they are thinking. US Airways CEO Doug Parker had a similar impression: He told The Dallas Morning News in October that the airlines had numerous meetings and conversations with DOJ after announcing their merger plans Feb. 14, but "they never indicated, 'Oh, everything's OK, don't worry about it.' They asked questions."

Leocha said he thinks DOJ is concerned about high fees in the airline industry, starting with the $200 charge at all four legacy carriers to change a reservation. Just as the Justice Department was concerned about collusion on ticket pricing in the 1990s, he said, it is concerned today about "the cozy relationship on fees." The airlines wait for one carrier to announcer a higher fee, than typically match shortly thereafter.

US Airways and American both raised their domestic change fee to $200, matching other carriers, after announcing that they wanted to merge. Leocha called that "waving a red flag in front of a bull."

A goal for Consumer Travel Alliance, the Business Travel Coalition and other consumer groups has been to require disclosure of ancillary fees. If that requirement was part of the settlement with what would be the world's biggest airline, "that would be huge," Leocha said. "In my congressional testimony, I suggested that if competition was taken out of the system, a way to put it back would be through the ability to compare prices across airlines including ancillary fees. To date, airlines have refused."

When the merger was announced, Leocha conducted a study that indicated it would diminish competition in 736 markets. The Government Accountability Office reviewed his data and compiled a list of about 1,665 markets, some with two connections. Then Justice Department then undertook its own study and came up with about 1,000 markets.

Leocha dismissed the argument that since the Justice Department has approved mergers involving Delta ( DAL), and United ( UAL), it therefore must approve the American/US Airways merger. After all, he said, when the U.S. had six legacy carriers, taking one out removed 16% of the competition. When the U.S. has four legacy carriers, taking one out removes 25% of the completion.

"Everybody always used to say that the last guy merging would have the hardest time, because a larger percentage of destinations disappears," Leocha said.

As for the argument that Southwest ( LUV) now functions as a network carrier, offering connections in various cities, Leocha noted that Southwest serves 96 destinations, fewer than any network carrier.

In speaking with the DOJ, Leocha said:, "A big thing we spoke about was that consumers are losing a low cost leader among network carriers, which is US Airways. When I would sit down with the lawyers and talk face to face, way back when I first mentioned that, it struck a chord. They are taciturn, but you can see when they grab their legal pads. I could tell that at least they liked the idea."

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

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

More from Stocks

Tesla Is Taking Apple's Ecosystem Model Up a Notch

Tesla Is Taking Apple's Ecosystem Model Up a Notch

Video: Jim Cramer on What Trade Tariffs and Rising Rates Mean for Stocks

Video: Jim Cramer on What Trade Tariffs and Rising Rates Mean for Stocks

Dow Makes Move Higher as Bond Yields Hover Near 3% Threshold

Dow Makes Move Higher as Bond Yields Hover Near 3% Threshold

The Stock Market Isn't Rigged, Just Look At The Odds (VIDEO)

The Stock Market Isn't Rigged, Just Look At The Odds (VIDEO)

Kanye West Loves His Tesla - But Should He Love the Company's Stock, Too?

Kanye West Loves His Tesla - But Should He Love the Company's Stock, Too?