By now, most people assumed that the $11 billion merger between US Airways and American Airlines was a sure thing. Well, it has just been revealed this week that the U.S. Department of Justice is going to try to stop it. The department believes that this merger will result in lower competition and raise airfares for travellers.
The deal that was proposed by these two airlines will create the world’s largest airline. Not only that, but it will only put only four airlines in control of at least 80 percent of all commercial flights in the United States. The Department of Justice believes that this will hurt the airline industry in America, and it does not want to let that happen.
This merger was announced by these two airlines back in February. They had originally hoped that they would complete the deal in just a few months. However, with the Department of Justice trying to stop it, it is more likely that this deal will get dragged on for months, if not completely shut down.
If the Department of Justice fails to stop the merger, this will be the seventh airline merger since 2005. These mergers are causing the airline industry to consolidate extremely quickly. A lot of these airlines started to merge together during the global economic downturn. The best way for them to fight going bankrupt was to band together and pull their resources. Now, however, the travel industry is starting to get back on its feet, but there are few airlines left to take travellers were they want to go.
Eric Holder, who is the attorney general, said that the Department of Justice is going to challenge this merger. By doing so, the department is sending a message to the American people that they deserve better than this. Soon there will be only a few airlines left, which will really hurt competition and send prices sky high.
The assistant attorney general, who is also the person in charge of the Department of Justice’s antitrust division, Bill Baser, said that this merger cannot be allowed to happen. If it goes through, people are going to see an increase in prices and bag fees. Even a small increase will result in millions of dollars of harm to the American people. Both of these airlines have already stated that they can be successful on their own, so why should they merge together to form the world’s largest airline and hurt competition?
This new lawsuit against the merger was filled in Texas, Tennessee, Florida, Arizona, Pennsylvania and in the District of Columbia. If the merger goes through, it will result in the newly formed company controlling nearly 70 percent of all landing and take-off spots at Washington Reagan National Airport. This will pretty much put that whole airport in the palm of its hands. The Department of Justice used this as its main argument to stop the merger. It said that the people of Washington will be the first to see higher prices because the newly formed company will almost own all of the take-off and landing slots in that airport.