WASHINGTON – The federal government is trying to block 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 and the District of Columbia, sued to block the merger Tuesday in federal court.
The airlines said the government’s conclusions were wrong, and they vowed to use all legal options to fight back.
The government’s action 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 the 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. Mergers have helped the industry limit seats, push fares higher and return to profitability.
Last year, business and leisure travelers spent more than $70 billion on airfare in the United States. Consumer advocates cheered the lawsuit.
“This is the best news that consumers could have possible gotten,” said Charlie Leocha, director of the Consumer Travel Alliance and member of a panel that advises the government on travel-consumer issues.
In its lawsuit, the department said that 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,
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 those of American and other competitors.
In making its case against the merger, the government relies heavily on airlines executives’ own words.
Throughout the lawsuit, Department of Justice lawyers quote internal emails, investor presentations and public comments by the two airlines’ top executives noting how past mergers have allowed for increased fares and rising fees for checking a bag or changing flights.
For instance, the suit recalls how US Airways President Scott Kirby noted in 2011 that past mergers had paved the way for the airlines to push through three successful airfare hikes that year. Shares of both airlines plunged on news of the lawsuit.
The companies issued a statement criticizing the Justice Department’s conclusions and arguing that together they would create a stronger network of flights that gives travelers more choices.
In a letter to AMR employees, CEO Tom Horton said both companies tried to convince the Justice Department that the deal would be good for their customers and for airline competition.
“Since the DOJ has formed a contrary view, the matter will now be settled by the courts,” Horton said, a process he said would likely take a few months.
The airlines had already announced the management team at the combined company, which would be called American Airlines Group Inc. Those plans are now on hold.