UPDATE: American CEO Horton reacts to Justice Department suit
The US Department of Justice has filed a lawsuit to block the proposed merger between American Airlines and US Airways, saying the proposed deal violates US antitrust law. The suit claims the AMR-US Airways merger threatens “substantial harm” to consumers by reducing the number of major domestic airlines, and would lessen competition in local markets. (see story here)
In a letter sent to employees of American Airlines, chairman and CEO Tom Horton reacted to the news, stating, “We and our counterparts at US Airways have been working with the DOJ staff for months to ensure that they had an informed view of the merger. We have maintained that the merger is complementary (only 12 overlapping routes), that it provides significant customer benefits and that it enhances competition in the airline industry.”
The letter goes on to say, “Since the DOJ has formed a contrary view, the matter will now be settled by the courts.” Horton adds: “We and US Airways will vigorously defend our position.”
The Justice Department lawsuit, which was unexpected by analysts and industry executives, puts on hold American’s plans to exit bankruptcy through an $11 billion deal that would create the world’s biggest airline.
In his letter, Horton points out that the American-US Airways deal was a key step to American’s emerging from bankruptcy. “It has formed the basis for an unusually successful restructuring, with very positive outcomes for our people, our customers, our owners and the communities we serve.”
However, Horton goes on to point out that the merger was also “subject to a number of approvals including US Airways shareholders, AMR creditors, the Court, and the United States and European Union regulatory authorities. The US Airways and AMR financial stakeholders have voted overwhelmingly in support of the merger and the EU approved the merger.”
Shareholders of both airlines had approved the merger in a July vote (see story here) and just last week, the European Commission had given a green light to the deal.
However US regulators are citing fears that the merger would stifle competition, leading to higher fares and fees that would cost consumers “hundreds of millions of dollars” more. The DOJ’s action marks a sharp break with previous policy, which over the past five years has allowed six unprofitable airlines to merge in an effort to cut costs and end losses.
“Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure,” said Attorney General Eric Holder. “This transaction would result in consumers paying the price – in higher airfares, higher fees and fewer choices.”
Several states are supporting the lawsuit, including Arizona, where US Airways is headquartered, and Texas, where the headquarters of American is located, as well as Florida, Virginia and Pennsylvania.
— Dan Booth
RetiredLawyer - 14/08/2013 23:24
Horton has only himself to blame. The e-mails cited in the Government's Complaint are straight out of what antitrust enforcers look for. Reducing capacity and raising prices is economically harmful to competition - by definition. As an antitrust attorney with 40 years in the field, the airlines' claims of "helping consumers" through the merger is nothing more than perfume on a pig. DOJ got it right for a change.
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