DoJ moves to block US Air-American Airlines merger

posted at 2:41 pm on August 13, 2013 by Ed Morrissey

Several years ago, before Delta bought Northwest, I flew into Minneapolis on a Northwest flight.  As the plane touched down on the runway and began its taxi to the gate, the pilot thanked us by saying, “We here at Northwest know you have a wide variety of choices of bankrupt airlines, and we thank you for choosing ours.” If the Department of Justice and several states get their way, we may have a couple of more choices in a similar vein for a little while longer:

The U.S. Justice Department and attorneys general for six states and the District of Columbia on Tuesday filed a civil antitrust lawsuit challenging the proposed $11 billion merger between US Airways Group Inc. and American Airlines’ parent corporation, AMR Corp.

The merger “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 news release.

AMR filed for bankruptcy two years ago, and the merger was a key to its emergence.  Forbes notes that the merger had already won approval from the EU, which makes this intervention a bit of a surprise.  It’s also a reminder to executives to watch their tongues in public when discussing mergers:

Though the agreement has already won approval from European regulators, U.S. attorney general Eric Holder said the tie-up would result in decreased competition and higher prices for air travelers due to the industry’s track record of “coordinated behavior.”

In its complaint, the DoJ, joined by attorneys general from Arizona, Florida, Pennsylvania, Tennessee, Texas and Virginia, argues the merger would “leave three very similar legacy airlines—Delta, United, and the new American—that past experience shows increasingly prefer tacit coordination over full-throated competition.”

The government is also trying to use the remarks of American and U.S. Air executives against the companies. “There is no reason to accept the likely anticompetitive consequences of this merger,” the complaint reads. “Executives of both airlines have repeatedly stated that they do not need this merger to succeed.”

This is the most significant anti-trust move by the Obama administration since their suit to stop the AT&T purchase of T-Mobile. That deal has essentially collapsed, but T-Mobile’s status appears to be improving anyway in the competitive market, using a new pricing plan to grow its subscriber base for the first time in years.   It also expanded its reach with an acquisition of its own this year, MetroPCS,  and T-Mobile’s success certainly boosts the anti-trust strategy at the Department of Justice.  That innovation in customer pricing likely would not have happened had AT&T swallowed T-Mobile.

The Wall Street Journal gives more background on the anti-competitive argument on US Air-American merger, noting that it hits very close to home in the nation’s capital, emphasis mine:

The government’s complaint attempts to use the words of US Airways executives against them in making the case that the merger would be bad for consumers.

The complaint cites US Airways President Scott Kirby’s past statement that fare increases were implemented “because of consolidation.”

At a 2012 industry conference, Mr. Kirby also said consolidation “allowed the industry to do things like ancillary revenues… That is a structural permanent change to the industry and one that’s impossible to overstate the benefit from it.”

The lawsuit says the merger would give the combined company control of 69% of the takeoff and landing spots at Washington Reagan National Airport. The government contends that would lead to higher fares for passengers there.

The department’s lawsuit alleged the merger would make it easier for the remaining airlines “to cooperate, rather than compete, on price and service.”

Maybe mergers are like real estate, where the first three priorities are “location, location, location.” Let’s just say that it would be difficult for a big merger to avoid scrutiny under any circumstances in this administration, but one that makes Reagan National practically a monopoly hub is going to guarantee some kind of action.

And it may well be that this intervention is necessary.  Mergers have reduced competition (and jobs) in the industry as a trade-off for more efficiency.  If American can survive without it, perhaps the consolidation trend needs to be reversed or at least considered more closely.  On the other hand, it’s also possible that American will fail on its own, which would leave a big hole in the flight schedule and not too many players able to fill it. I’d be more comfortable with a reluctant intervention by an administration without an agenda, rather than an enthusiastic intervention by one whose approach to markets has been to expand top-down regulation and control.

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

It’s very odd to have the atty generals in those particular states file in support of this.

changer1701 on August 13, 2013 at 2:45 PM

When are they going to break up the monopoly by TSA? When are they going to get rid of TSA.

Oil Can on August 13, 2013 at 2:47 PM

Airfares are going to go up anyway. Obama is fine with $5 a gallon gasoline. How much does jet fuel cost?

Wait till EPA mandates ‘green’ jet fuels. Right now, the Pentagon is using ‘green’ fuels for our military planes at $15/gallon instead of the usual $4 or so a gallon for plain old JP-5.

When these jokers get done, the special and expensive grade of fuel used in the SR-71 is going seem a bargain.

Liam on August 13, 2013 at 2:50 PM

If the Feds are going to fret so much about the price of an airline ticket, they could always make it easier on the consumer by ditching the taxes associated with buying a fare. That would save a lot for the passenger, wouldn’t it?

Liam on August 13, 2013 at 2:53 PM

The merger “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 news release.

Yes, blame higher airfares on mergers because all those Obama Administration actions blocking off shore drilling in the Gulf and Alaska, dragging heels on fracking, trying to kill the Canadian oil shale pipeline and the all out war on coal for that matter has nothing to do with high airfare rates. What? Fuel costs are one-third of airline operating costs? The devil you say!

Up next, OFA explains how airline mergers are to blame for higher gasoline prices at the pump.

parke on August 13, 2013 at 2:55 PM

Is it location or donation (specifically, lack thereof to Team SCOAMT)?

Steve Eggleston on August 13, 2013 at 2:57 PM

American, US Airways airline merger
Clear topic

The boards of American Airlines and US Airways have approved a merger agreement, sources say. The deal is expected to be announced on Feb. 14, 2013. – AP
********************************

American Airlines statement on Justice Department suit: ‘We will mount a vigorous defense and pursue all legal options in order to achieve this merger’ – @NBCNews

1 hour ago by editor
========================

US Airways statement on Justice Department suit: ‘In light of today’s announcement, the companies no longer expect the merger to close during the 3rd quarter of 2013′ – @NBCNews

1 hour ago by editor
========================

US Air, American Airlines defend merger saying it will create more choices, increased service, more flying options – @Lebeaucarnews

1 hour ago by editor
========================

More: Attorney General Eric Holder says US Air, American merger would mean ‘higher airfares, higher fees’ – @AP

3 hours ago from http://www.nbcnews.com by editor

http://www.breakingnews.com/topic/american-us-airways-airline-merger

canopfor on August 13, 2013 at 2:57 PM

The result of the Northwest/Delta merger resulted in fewer flights to fewer cities, and the entire Northwest Memphis hub has been shutdown. Northwest needed this hub, Delta did not and swiftly moved flights that used to be out of Memphis to Atlanta, or in many cases just discontinued service to some of these cities altogether.

I would expect something similar with a USAirways acquisition of American Airlines.

As Devo once said in song:

Freedom of choice
Is what you got
Freedom from choice
Is what you want

simkeith on August 13, 2013 at 2:58 PM

Bring back Braniff Airlines! They had such pretty orange-painted planes…

Liam on August 13, 2013 at 2:59 PM

As Devo once said in song:

Freedom of choice
Is what you got
Freedom from choice
Is what you want

simkeith on August 13, 2013 at 2:58 PM

Punk/New Wave bands always had a way to get right to the heart of a matter.

Liam on August 13, 2013 at 3:00 PM

The lawsuit says the merger would give the combined company control of 69% of the takeoff and landing spots at Washington Reagan National Airport.

If only the Washington area were served by another airport. They could even name it after someone like John Foster Dulles or Thurgood Marshall.

J.S.K. on August 13, 2013 at 3:01 PM

DOJ:

Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Tuesday, August 13, 2013

Justice Department Files Antitrust Lawsuit Challenging Proposed Merger Between US Airways and American Airlines
Merger Would Result in U.S. Consumers Paying Higher Airfares and Receiving Less Service; Lawsuit Seeks to Maintain Competition in the Airline Industry

Merger Would Result in U.S. Consumers Paying Higher Airfares and Receiving Less Service; Lawsuit Seeks to Maintain Competition in the Airline Industry

The Department of Justice, six state attorneys general and the District of Columbia filed a civil antitrust lawsuit today challenging the proposed $11 billion merger between US Airways Group Inc. and American Airlines’ parent corporation, AMR Corp. The department said that 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 Department of Justice’s Antitrust Division, along with the attorneys general, filed a lawsuit in the U.S. District Court for the District of Columbia, which seeks to prevent the companies from merging and to preserve the existing head-to-head competition between the firms that the transaction would eliminate. The participating attorneys general are: Texas, where American Airlines is headquartered; Arizona, where US Airways is headquartered; 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.”

Last year, business and leisure airline travelers spent more than $70 billion on airfare for travel throughout the United States. In recent years, major airlines have, in tandem, raised fares, imposed new and higher fees and reduced service, the department 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,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “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. 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. They engage in head-to-head competition with nonstop service on routes worth about $2 billion in annual route-wide revenues. Eliminating this head-to-head competition would give the merged airline the incentive and ability to raise airfares, the department said in its complaint.

According to the department’s complaint, the vast majority of domestic airline routes are already highly concentrated. The merger would create the largest airline in the world and result in four airlines controlling more than 80 percent of the United States commercial air travel market.

The merger would also entrench the merged airline as the dominant carrier at Washington Reagan National Airport, with control of 69 percent of the take-off and landing slots. The merged airline would have a monopoly on 63 percent of the nonstop routes served out of Reagan National airport. As a result, Washington, D.C., area passengers would likely see higher prices and fewer choices if the merger is allowed, the department said in its complaint. Blocking the merger will preserve current competition and service, including flights that US Airways currently offers from Washington’s Reagan National Airport.

The complaint also describes how, in recent years, the major airlines have succeeded in raising prices, imposing new fees and reducing service. The complaint quotes several public statements by senior US Airways executives directly attributing this trend to a reduction in the number of competitors in the U.S. market:

· President Scott Kirby said, “Three successful fare increases – [we are] able to pass along to customers because of consolidation.”

· At an industry conference in 2012, Kirby said, “Consolidation has also…allowed the industry to do things like ancillary revenues…. That is a structural permanent change to the industry and one that’s impossible to overstate the benefit from it.”

· As US Airways CEO Parker stated in February 2013, combining US Airways and American would be “ the last major piece needed to fully rationalize the industry.”

· A US Airways document said that capacity reductions have “enabled” fare increases.

“The merger of these two important competitors will just make things worse –exacerbating current airline industry trends toward reduced service, increasing fares and increasing passenger fees,” added Baer.

(MORE…)
=========

http://www.justice.gov/opa/pr/2013/August/13-at-909.html

canopfor on August 13, 2013 at 3:02 PM

DOJ:

canopfor on August 13, 2013 at 3:02 PM

At this point, ‘DOJ’ stands for Department of Jokes.

‘CIA’ really means Can’t Investigate Anything.

Next up: the DSW — Department of Silly Walks.*

*not to be confused with DWS: Debbie WaffenSS Schultz.

Liam on August 13, 2013 at 3:07 PM

Three full service airlines are too little. DFW ticket prices, already high, were harmed enough by Southwest’s acquisition of AirTran. Routes like DFW-ATL were cut down to two carriers (Delta/AA) (DFW Airtran routes eliminated, Wright Amendment prohibits SWA from offering direct flight from Love Field)

American Airlines didn’t need a merger to successfully exit bankruptcy, and the merger kills what little competition there is in DFW, PHX, DCA, PHL, PIT.

Oligopoly is not a desirable market competition state.

phreshone on August 13, 2013 at 3:11 PM

Guess they did not donate enough to the Obama campaign…

albill on August 13, 2013 at 3:14 PM

Guess they did not donate enough to the Obama campaign…

albill on August 13, 2013 at 3:14 PM

Accuracy ^^^^^

Liam on August 13, 2013 at 3:16 PM

It was easy to get EU approval, because the impact on European air travel is de minimis.

phreshone on August 13, 2013 at 3:16 PM

Good about time the government cracks down on these mergers. monopolies are bad for the free market

unseen on August 13, 2013 at 3:16 PM

When are they going to break up the monopoly by TSA? When are they going to get rid of TSA.

Oil Can on August 13, 2013 at 2:47 PM

Democratics are busting their butts to achieve a government monopoly over healthcare.

Government monopolies good!

slickwillie2001 on August 13, 2013 at 3:17 PM

DOJ:

canopfor on August 13, 2013 at 3:02 PM

At this point, ‘DOJ’ stands for Department of Jokes.

‘CIA’ really means Can’t Investigate Anything.

Next up: the DSW — Department of Silly Walks.*

*not to be confused with DWS: Debbie WaffenSS Schultz.

Liam on August 13, 2013 at 3:07 PM

Liam:Lol,…….ILSA Herr’ El ProgressivoStopp0!:)

Yup….Obama and Team have there Collective Heads Up everyone’s
F’n #%^&*(&&^%$#%^&*(&^%$#@$%^&*(&&…….business!:O

canopfor on August 13, 2013 at 3:17 PM

one of the biggest economic boosting actions of Reagan was to break up AT@T. I doubt we would have communications today without that breakup.

unseen on August 13, 2013 at 3:17 PM

BREAKING:

Department of Defense crews responding to bomb threat at Darnall Army Medical Center construction site at Fort Hood; unclear if threat is related to court-martial – @FtHoodShootings

2 mins ago by editor

canopfor on August 13, 2013 at 3:18 PM

When are they going to break up the monopoly by TSA? When are they going to get rid of TSA.

Oil Can on August 13, 2013 at 2:47 PM

never. they can’t take the risk. If an airline goes up in smoke after they got rid of the tSa no matter the cause politicians will blame those that voted to defund it. It’s the same with the NSA funding.

The only way to get rid of it is to change the ruling elites and return to the idea of freedom.

unseen on August 13, 2013 at 3:19 PM

I doubt we would have communications today without that breakup.

unseen on August 13, 2013 at 3:17 PM

should read I doubt we would have the communications we have today without that breakup

unseen on August 13, 2013 at 3:20 PM

Here’s a thought – stop putting airline fees on airline tickets – that would reduce costs.

Also if people would stop worrying about their precious miles and actually support lower cost airlines – the legacy carriers would have to drop their prices.

There is a reason why Southwest planes are always full.

gophergirl on August 13, 2013 at 3:21 PM

canopfor on August 13, 2013 at 3:17 PM

Canada is looking to be a better option for me, for a place to feel more comfortable. It also helps my adopted sister is Canadian (she let me adopt her as such, years ago).

I do not like where my United States is being forced to go.

It’s getting hard retaining this anger while remaining law-abiding.

But that’s what liberals want. They needle and nitpick, until their target blows his stack. Then they act innocent and claim, “See! We were right all along!”

Liam on August 13, 2013 at 3:23 PM

The lawsuit says the merger would give the combined company control of 69% of the takeoff and landing spots at Washington Reagan National Airport. The government contends that would lead to higher fares for passengers there.

Which is the probably the ONLY reason why the Department of Justice wants to sue against the merger–THEY don’t want to pay higher fares getting out of town.

If the merger resulted in US Air/American having monopoly control of a major red-state airport like DFW, Atlanta, or Charlotte, the Feds wouldn’t say boo about it. The Feds don’t care about flyover country, as long as they don’t have to take off or land there.

Steve Z on August 13, 2013 at 3:27 PM

Good about time the government cracks down on these mergers. monopolies are bad for the free market unseen on August 13, 2013 at 3:16 PM

Monopolies can only exist with govt help.

Let’s say all airlines merged, then cut flights and stopped flying to thirty cities.

It would create an instant market for new airlines to service those cities.

If all airlines merged and cut nothing, but the service got even worse and fees went up, it would do the same thing: invite competition.

Unless the govt disallowed it. That’s the only way to prevent it. Govt intervention in markets only distorts markets and keeps costs artificially high. I can’t think of one market where this would not apply. If you can, please inform my ignorance.

Akzed on August 13, 2013 at 3:28 PM

There is a reason why Southwest planes are always full.
gophergirl on August 13, 2013 at 3:21 PM

US Air planes are always full too. Didn’t they merge with United? Seems to have worked out fine.

Akzed on August 13, 2013 at 3:30 PM

canopfor on August 13, 2013 at 3:17 PM

Canada is looking to be a better option for me, for a place to feel more comfortable. It also helps my adopted sister is Canadian (she let me adopt her as such, years ago).

I do not like where my United States is being forced to go.

It’s getting hard retaining this anger while remaining law-abiding.

But that’s what liberals want. They needle and nitpick, until their target blows his stack. Then they act innocent and claim, “See! We were right all along!”

Liam on August 13, 2013 at 3:23 PM

Liam:Keep ye powder dry,..*Wink-wink*,

and I do believe,that once Obama and his Den of Theives are gone,and hopefully Team Right is in power,this American Simmer
ing will cool down and get better!:)

canopfor on August 13, 2013 at 3:33 PM

Odd that the government cares about higher
prices. Isn’t Obamacare the ultimate monopoly?

redguy on August 13, 2013 at 3:34 PM

Wait a tic,the US Government don’t want a merger,
cus that might save fuel!

Crap,forgets dat,me thinks,….. I’ll re-think dat!
(sarc)

canopfor on August 13, 2013 at 3:35 PM

I’m sorry, where is the enumerated power again that gives the federal government any business getting involved in the merger of two companies? Unless you want to twist regulating “commerce… among the several States” to mean controlling what companies can merge. But, then again, I still maintain the commerce clause only gives the feds the power to regulate one state doing business with another, not companies doing business across state lines.

Shump on August 13, 2013 at 3:38 PM

I have a problem when some whips out a figure like 69% of take/landings slots at Reagan, just how many slots does either airline have already?

RonK on August 13, 2013 at 3:39 PM

Oh yes . . . let’s get the freaking government involved in the airline industry, that should make everything better.

rplat on August 13, 2013 at 3:40 PM

Guess they did not donate enough to the Obama campaign…

albill on August 13, 2013 at 3:14 PM

Accuracy ^^^^^

Liam on August 13, 2013 at 3:16 PM

Sounds like the DoJ is looking to correct that – as in demanding specific concessions (labor most likely) in order to ensure the government get’s it’s ‘share’ – the ‘share’ beyond legal taxes, that is.

Athos on August 13, 2013 at 3:42 PM

Odd that the government cares about higher
prices. Isn’t Obamacare the ultimate monopoly?

redguy on August 13, 2013 at 3:34 PM

Our airlines are too important and big to fail…..I call on our pResident to seize control of them and nationalize them immediately. I propose our new national airline be named AirObama in his honor and from our gratitude and thanksgiving.

Save us! You are worthy!

Praise be to Obama!

/SARC

hawkeye54 on August 13, 2013 at 3:45 PM

And it may well be that this intervention is necessary. Mergers have reduced competition (and jobs) in the industry as a trade-off for more efficiency.

I am not sure that statement is correct. Mergers might have reduced competition from the “legacy carriers” but in fact air traffic has flourished in the last decade. While you don’t have Northwest, TWA, Continental, America West etc. show up at an airport near you any more, you’ll notice that Jetblue, Virgin America, Southwest/Airtran and Spirit are adding more and more flights and planes.
The trouble with DCA (Washington Reagan National) is that the slots are controlled. That’s how US/AA have ended up with 69% of the traffic anyhow. Ultimately it’s Congress that controls how many planes fly out of there and FAA that controls the logistics of it. Soooo… yes, there’ll be one less tail color scheme showing up at DCA but they can perhaps take a big chunk of those slots and give them to other airlines.
OR – how’s this for a market economy: remove slot restrictions at DCA. No reason for Congress to get into air traffic flow management in the first place.
In terms of “reducing competition” in other places, there are plenty of new airlines (and plenty of paper airlines) waiting to get into markets which have signs of profit. Where there is profit, they will show up. If there isn’t profit, then merger or not, some places can’t support the air service they desire.

selimt on August 13, 2013 at 3:47 PM

worked for AE when it was under AMR.
one huge reason I am pro-right to work.
and I refuse to fly now that I’ve seen stuff that goes on.

dmacleo on August 13, 2013 at 3:48 PM

Want to create a ‘market’ for high speed rail?

According to conservative principles, a market is created when there is competition – and an alternative solution(s) offers performance, reliability, time, and or cost advantages over the the existing market or companies providing services within that market.

As this statist Administration has demonstrated, when the preferred ‘winner’ – high speed rail, green energy, etc. cannot compete economically, the goal is not to go back to the drawing board and continue to develop those technologies / systems to the point where they can viably compete in the open market with the existing technologies / systems. No, the goal is to to damage (via regulation, law, labor, or any other means necessary) the existing technologies / systems / companies in order to make them as less efficient, less effective, less viable, and less competitive as the preferred ‘winner’.

Despite reams of historical data demonstrating that state-controlled economies fail – this Administration continues to push the direction in the flawed belief that the previous implementations were the problem as opposed to a massively flawed ideology.

Athos on August 13, 2013 at 3:51 PM

Delta + Northwest, United + Continental, Exxon + Mobil, Chevron + Texaco. So why not this? Who squawks the loudest should give a hint to gainers and losers. Unions anyone?

diogenes on August 13, 2013 at 3:59 PM

Is it location or donation (specifically, lack thereof to Team SCOAMT)?

Steve Eggleston on August 13, 2013 at 2:57 PM

The parties involved have not put up enough scratch to the Obama Administration to let this sail through smoothly is my bet.

Lower fares and a monopoly out of DCA are convenient cover to enforce this.

I’d like to see the comparable democrat party donations of USAir-American versus Delta-Northwest and United-Continental.

That’s the Chicago Way.

Can someone find this information?

In the meantime, I think Eggleston has it right.

Stepan on August 13, 2013 at 4:10 PM

The lawsuit says the merger would give the combined company control of 69% of the takeoff and landing spots at Washington Reagan National Airport. The government contends that would lead to higher fares for passengers there.

One of the best growing regions in the country throughout the ongoing recession and they don’t want to pay their fare share.

chemman on August 13, 2013 at 4:36 PM

Anti-trust and anti-monopoly actions are a good thing for a free market. If there are just a handful of companies in a given market sector, they can effectively shut out all competition. That is especially true in the airline industry since gate positions are finite & purchased and controlled by airlines. American could keep all of its gates/slots and not use them and it would effectively keep competition from moving in.

AngusMc on August 13, 2013 at 4:40 PM

Bobbi Rebell Kaufman ‏@bobbirebell 7m

Why the DOJ block of the #americanairlines #usairways merger could stick- WATCH: http://www.reuters.com/video/2013/08/13/settlement-unlikely-in-amr-us-airways-su?videoId=247755814&videoChannel=5 … @ReutersBiz
===============

Settlement unlikely in AMR/US Airways suit-antitrust lawyer (4:50)

August 13 – Antitrust lawyer Bruce Schneider says the allegations in the lawsuit regarding pricing make a settlement highly unlikely. Bobbi Rebell reports.
=====================

VIDEO:(4:50)

http://www.reuters.com/video/2013/08/13/settlement-unlikely-in-amr-us-airways-su?videoId=247755814&videoChannel=5

canopfor on August 13, 2013 at 5:02 PM

It’s not just the DOJ that’s blocking this merger…it’s the AG’s of 5 different states plus DC. These states include TX and AZ…red states where AA and US are headquartered.

DL/NW and UA/CO merged in ’08 and ’11, both years when the industry was reeling from losses and recession issues. AA and US both said they could survive without merging so they probably put a couple nails in their own coffins.

USAir recently swapped most of their LGA landing slots for Delta’s DCA slots which the DOJ had minor issues with before approving it earlier this year. With this new merger, AA/US would control over 2/3s of every available slot at DCA. AA/US also declined to divest any of these slots as a condition to get the merger approved.

When United merged with Continental, they were forced to give away landing slots at Newark to Southwest…slots that normally have a value of over $1 million each. DCA slots are more valuable and AA/US chose to give up none. They gambled and lost.

JetBlast on August 13, 2013 at 5:10 PM

PA is in the suit because PIT would probably lose its hub status.

either orr on August 13, 2013 at 5:25 PM

PIT hasn’t had hub status in years as USAir serves only 8 cities from PIT.

PHL is one of USAir’s three hubs but it’s located only 90 miles from AA’s Int’l hub at JFK. Very unlikely that hubs that close would both survive and NYC would probably trump Philly. That’s why PA is fighting the merger.

JetBlast on August 13, 2013 at 5:43 PM

Why not “globalize” the airlines and let foreign carriers merge or acquire US carriers? It works for everything else.

hip shot on August 13, 2013 at 5:43 PM

Oh, please.

I lived in Cincy in the 90′s and somewhere in the neighborhood of 95% of the flights in and out of CVG were Delta flights. Thus, traveler paid through the nose to fly out of Cincy.

I guess it’s OK to get stuffed out in District 12, but, when something like this threatens our betters in The Capitol, it cannot stand!

IrishTexan on August 13, 2013 at 5:49 PM

Monopoly? You people keep using that word. I do not think it means what you think it means.

The airlines are operating on a flawed model now. Efficiency is badly needed. If mergers and consolidation are not the answer, then what is?

Or, like the Obama goons, are conservatives content to say “No, this is a bad idea” and allow the industry to continue to bleed slowly out?

Adjoran on August 13, 2013 at 9:08 PM

Akzed, the existence of a market opportunity does not mean that there’s a kiosk handing out free money on the street corner. Especially with an industry like the airlines, there is a very high cost of entry: besides the obvious (the cost of planes), there are also airport/hangar fees and the cost of signing contracts with new pilots. You can’t start an airline to service a market with a small business loan from your local bank. Look up, for instance, Independence Air, which was a wonderful small airline with great service and a DC hub that should have worked well for Congressmen, defense contractors, etc. but they went belly up. It’s far too difficult to get started in the airlines these days.

solatic on August 14, 2013 at 3:15 AM

1) Given the Obama administration neither airline contributed enough to Obama to get preferential treatment.

2) Allowing the merger is dead wrong. It leads to “To Big To Fail”. This simply demonstrates that a stopped 24 hour clock is still correct once a day.

{^_^}

herself on August 14, 2013 at 5:36 AM

Great article

api on August 21, 2013 at 3:45 PM