While not quite cancelled, the mega merger between American Airlines and US Airways to form the world's largest airline, has certainly been delayed. Announced in February, the deal is supposed to create, yet again, the largest airline in the States and be the grand finale of airline mergers after more than 5 years of industry consolidation through mergers and acquisitions. The deal was put on hold Tuesday however, when the Department of Justice filed an antitrust lawsuit against the merger, claiming the merger would reduce competition on routes, raise fares, and increase the likelihood of coordinated actions by the industry. While unlikely to derail the merger, which was scheduled to be finalized next month, the lawsuit will definitely delay its progress.
Washington has become a hot spot for debate for regulators, with officials pushing the new airline to give up slots at National. The joint airline would control 69 percent of takeoff and landing slots, and the Justice Department fears that this will lead to increased fares and fees out of and into the airport, as well as more limited choices for passengers. The lawsuit also alleges that the merger may threaten the presence of airlines like JetBlue at national, who entered the market when they traded slots at JFK in New York with American for slots at National, and they still maintain a relatively weak presence in DC.
The Department of Justice claims the merger is also anti-competitive across the board, not just here in washington. Since the airlines don't share any hubs, they only directly compete on 12 non-stop routes, however, the merger would make the new airline the only carrier to fly the route on seven of the 12. Using an algorithm called the Herfindahl-Hirshman Index to measure market concentration and competition, the DoJ also says that the merger will lower competition on 1,677 routes, including the non-stops, and increase competition on only 210 routes.
Lawyers for American Airlines and US Airways have said they fully intend to fight the suit in court, rather than pursue a compromise or settle out of court.
Special note: From this point forward, blog posts will not come every Monday like clockwork as they have in the past. School is starting soon and the pressure to have one post every week at the exact same time has proven to be too much as sometimes topics will be harder to come by than other times. I will still try to post an average of one post a week, sometimes there will be multiple posts in a week, other times none at all.
