Aug 15, 2013

    Justice Dept moves to block US airline merger

    AFTER a decade of rapid consolidation in the nation's airline industry, the United States Justice Department filed a lawsuit on Tuesday to block the proposed merger between American Airlines and US Airways, which would create the world's largest airline.

    The airline industry, though, has had a nearly unfettered run of mergers in recent years, and the American-US Airways combination was seen as the capstone.

    Starting in 2008, the Justice Department approved the mergers of Delta Air Lines and Northwest, United Airlines and Continental, and Southwest and AirTran.

    But, in a twist, antitrust regulators said these past mergers had, in effect, undermined the case for the American-US Airways combination. While those mergers helped the industry return to profitability and brought more stability, they also led to higher fares, regulators said.

    A union between American and US Airways would take the consolidation too far, the Justice Department said.

    "As we look at the market today, it's not functioning as competitively as it ought to be," said Assistant US Attorney-General Bill Baer, head of the Justice Department's antitrust division.

    The decision surprised airline analysts.

    "'Bizarre' is one word," said Mr Robert Mann, an airline consultant and former executive, who characterised the Justice Department as "late to the game with concerns over airline-industry consolidation".