Department of Justice Announces Airline Settlement
Posted: Friday, November 15th, 2013 at 1:23 am
A major obstacle that threatened the merger of two airlines has been removed by the U.S. government, which could lead the way to the creation of the world’s largest air carrier. The U.S. Department of Justice (DOJ) announced on November 12 that it had settled an antitrust lawsuit it had previously filed due to concern that the merger between American Airlines and US Airways would stifle competition. The final judgment filed by the DOJ will thus allow the two companies to finalize the merger agreement.
The DOJ concluded that the entry into the final judgment is in the interest of the public, and further noted that the parties involved are now in compliance with the stipulations of the Antitrust Procedures and Penalties Act. In accordance with these requirements, copies of the final judgment have been made available to the public, as have comments on this judgment and any responses to them made by the federal government.
Under the name New American, the carrier will operate 57 percent of the nation’s airline flights. It was this domination of the airline business that prompted U.S. officials to challenge the merger in August. This was two months after the U.S. Government Accountability Office released a report stating that the merger would reduce competition on more than 1,500 domestic routes, while increasing competition on only about 200 routes.
The increase in the size of the airline will be offset by the fact that New American will be required to divest many of its terminal gates and reduce its service to some major airports. Those affected will include Ronald Reagan-Washington National Airport, serving the nation’s capital, and La Guardia Airport, serving New York City.
The discussion about a possible a merger began last year when US Airways expressed interest in American Airlines, which had previously filed for bankruptcy. If completed, this consolidation will be only the latest in a series of mergers that can be traced to the deregulation of the U.S. airline industry in 1978. Although deregulation was credited with the creation of lower fares, it also produced a long period of unsustainable financial losses, necessitating the consolidation of many companies.