Govt Preventing Airline Merger

[ClosedCaption]

Govt, States Challenge Proposed Airline Merger - ABC News

The federal government is challenging the proposed merger of American Airlines and US Airways, saying it would cause "substantial harm" to consumers by leading to higher fares and fees.

The U.S. Justice Department, joined by the attorneys general of six states, filed a lawsuit to block the merger Tuesday in federal court in Washington, D.C.

The government's challenge threatens to quash a deal that would create the world's largest airline by passenger miles. The airlines could challenge the government in court, or possibly agree to concessions that would convince regulators to approve the merger.

The lawsuit caught many observers by surprise. In the last five years, antitrust regulators had allowed three other major airline mergers to go ahead, leaving five airlines in control of about 80 percent of domestic market. But the government argued that this merger would hurt consumers around the country by eliminating a competitor on more than 1,000 routes.
If the merger leads to even small increases in ticket prices or airline fees, it would cost American consumers hundreds of millions of dollars each year, the department said.

As examples, the government cited round-trip fares for travel this month between Miami and Cincinnati and between Houston and New York in which US Airways' fares are far lower than American and other competitors.

Shares of both airlines plunged on news of the lawsuit. US Airways Group Inc. shares fell $1.66, or 8.8 percent, to $17.16 in midday trading. AMR shares were taken off the New York Stock Exchange shortly after the company filed for bankruptcy protection in late 2011 but still trade over the counter; they were down $2.43, or 41.8 percent, to $3.38.

Mergers have helped the industry limit seats, push fares higher and return to profitability. AMR and US Airways officials had said their merger would help consumers by creating a tougher competitor for United and Delta.

AMR has cut labor costs and debt since it filed for bankruptcy protection. Pilots from both airlines have agreed on steps that should make it easier to combine their groups under a single labor contract, a big hurdle in many airline mergers.

A federal bankruptcy judge in New York was scheduled to hold a hearing Thursday to consider approving AMR's reorganization plan — one of the last steps before the merger would be completed. The hearing was expected to go ahead. The merger has been approved overwhelmingly by AMR creditors and shareholders and by US Airways shareholders.

In its lawsuit, the Justice Department was joined by the attorneys general from American's home state of Texas, US Airways' home state of Arizona, plus Florida, Virginia, Pennsylvania, Tennessee and the District of Columbia.

Your thoughts

 

[martybegan]

Govt, States Challenge Proposed Airline Merger - ABC News

The federal government is challenging the proposed merger of American Airlines and US Airways, saying it would cause "substantial harm" to consumers by leading to higher fares and fees.

The U.S. Justice Department, joined by the attorneys general of six states, filed a lawsuit to block the merger Tuesday in federal court in Washington, D.C.

The government's challenge threatens to quash a deal that would create the world's largest airline by passenger miles. The airlines could challenge the government in court, or possibly agree to concessions that would convince regulators to approve the merger.

The lawsuit caught many observers by surprise. In the last five years, antitrust regulators had allowed three other major airline mergers to go ahead, leaving five airlines in control of about 80 percent of domestic market. But the government argued that this merger would hurt consumers around the country by eliminating a competitor on more than 1,000 routes.
If the merger leads to even small increases in ticket prices or airline fees, it would cost American consumers hundreds of millions of dollars each year, the department said.

As examples, the government cited round-trip fares for travel this month between Miami and Cincinnati and between Houston and New York in which US Airways' fares are far lower than American and other competitors.

Shares of both airlines plunged on news of the lawsuit. US Airways Group Inc. shares fell $1.66, or 8.8 percent, to $17.16 in midday trading. AMR shares were taken off the New York Stock Exchange shortly after the company filed for bankruptcy protection in late 2011 but still trade over the counter; they were down $2.43, or 41.8 percent, to $3.38.

Mergers have helped the industry limit seats, push fares higher and return to profitability. AMR and US Airways officials had said their merger would help consumers by creating a tougher competitor for United and Delta.

AMR has cut labor costs and debt since it filed for bankruptcy protection. Pilots from both airlines have agreed on steps that should make it easier to combine their groups under a single labor contract, a big hurdle in many airline mergers.

A federal bankruptcy judge in New York was scheduled to hold a hearing Thursday to consider approving AMR's reorganization plan — one of the last steps before the merger would be completed. The hearing was expected to go ahead. The merger has been approved overwhelmingly by AMR creditors and shareholders and by US Airways shareholders.

In its lawsuit, the Justice Department was joined by the attorneys general from American's home state of Texas, US Airways' home state of Arizona, plus Florida, Virginia, Pennsylvania, Tennessee and the District of Columbia.

Your thoughts

I dont see how this is an issue considering there is plenty of airline competition, especially domestically with airlines such as Southwest and Jetblue around.

The tactic may be, however, to "sue big", and then accept the merged airline giving up some of thier slots at airports where they are the two main competitors.

 

[Mad Scientist]

Isn't that what the Gov't is supposed to do? Prevent Corporations from getting too big and creating monopolies?

Too bad they won't do that with the Banks eh?

 

[NightFox]

Isn't that what the Gov't is supposed to do? Prevent Corporations from getting too big and creating monopolies?

No it's really not what the government is supposed to do, since history demonstrates that it is government intervention that has been the cause of and the principle sustaining force behind market monopolization (outside of natural monopolies and limited market monopolies of course). The government does this by creating artificially high barriers to entry as well as direct and indirect subsidization of established participants.

What the government is SUPPOSED to do is ensure that the playing field is level, that all market participates play by the same set of rules and that they are held fully accountable for the consequences of their own actions, what they've been engaged in however is exactly the opposite of these things. The government action outlined in the OP's article is nothing more than the result of government attempting to intervene to correct the problems that it's intervention created in the first place.

 

[OldUSAFSniper]

We have the largest American Airlines maintenance base in Tulsa and they are the cities biggest employers, I think over 12,000 employees (unsure about the number). For those of you on the left, do you want to know what the UNION is saying here about the government suing to stop the merger?

The UNION President went on local TV yesterday and said that Eric Holder is suing to stop the merger because the Obama administration is angry that Oklahoma and Texas (another state where American Airlines is big) did NOT fall into their camp during the last election. He also said that it was nothing more than payback since Oklahoma and Texas did not elect to provide the exchanges for Obamacare and are still fighting in the courts. The union negotiated with American Airlines to provide more jobs, pay raises, and more benefits after the merger was completed and now since Holder is suing to stop the merger, the Union President says that the union members will be punished as a result. Needless to say, this along with the Keystone Pipeline debacle has ALL OF THE UNIONS in this state just spitting mad.

The ONLY support for Barry and his cronies came from the unions here. Tulsa's mayorial race is between an incumbent Republican and a Barry-supporting Democrat. The union's were supporting the Democrat until... A quote from the union president: "Chicago politics at its finest!"

So much for Barry's call for jobs...

 

[Soggy in NOLA]

Well, better then the DoJ wasting time investigating rodeo clowns.. oh, wait, never mind.

 

[ClosedCaption]

We have the largest American Airlines maintenance base in Tulsa and they are the cities biggest employers, I think over 12,000 employees (unsure about the number). For those of you on the left, do you want to know what the UNION is saying here about the government suing to stop the merger?

The UNION President went on local TV yesterday and said that Eric Holder is suing to stop the merger because the Obama administration is angry that Oklahoma and Texas (another state where American Airlines is big) did NOT fall into their camp during the last election. He also said that it was nothing more than payback since Oklahoma and Texas did not elect to provide the exchanges for Obamacare and are still fighting in the courts. The union negotiated with American Airlines to provide more jobs, pay raises, and more benefits after the merger was completed and now since Holder is suing to stop the merger, the Union President says that the union members will be punished as a result. Needless to say, this along with the Keystone Pipeline debacle has ALL OF THE UNIONS in this state just spitting mad.

The ONLY support for Barry and his cronies came from the unions here. Tulsa's mayorial race is between an incumbent Republican and a Barry-supporting Democrat. The union's were supporting the Democrat until... A quote from the union president: "Chicago politics at its finest!"

So much for Barry's call for jobs...

In its lawsuit, the Justice Department was joined by the attorneys general from American's home state of Texas, US Airways' home state of Arizona, plus Florida, Virginia, Pennsylvania, Tennessee and the District of Columbia.

People say a lot of things. So what?