Aug. 13 - The Dept. of Justice is suing to block the $11b merger between AMR and US Airways-saying it would hurt consumers. Bobbi Rebell reports.
US Airways and American Airlines parent AMR are crying foul- vowing to fight a government lawsuit that could ground their planner merger. The U.S. Justice department is suing to block the planned $11 billion merger between the airlines- saying the deal would hurt consumers- who would face higher prices. It was a surprise because other large scale mergers have been allowed- United and Continental- and Delta and Northwest. But Bruce Schneider, who heads the antitrust practice at Strook & Strook & Lavan, says that's exactly the problem: SOUNDBITE: BRUCE SCHNEIDER, PARTNER, STROOK & STROOK & LAVAN (ENGLISH) SAYING: "The Justice Department is doing a retrospective on those other mergers, and seeing that the consequence of it has been a reduction in the number of flights, which we call a reduction in output and a reduction in quality, and they point particularly to the ancillary charges that we all encounter on airlines these days: baggage fees, snack fees, and that that is a vehicle for raising prices and they are predicting that this, like the ones before, would have the same result." Airline stocks plunged on the news- AMR in particular hit hard- its emergence from bankruptcy was tied to the deal. The government claims if AMR and US Airways merge- more than 80 percent of the US commercial air market would be controlled by just four airlines. The government did not appear open to a settlement, saying the two airlines can succeed as independent companies. SOUNDBITE: BRUCE SCHNEIDER, PARTNER, STROOK & STROOK & LAVAN (ENGLISH) SAYING: "I think that the complaint makes it difficult to settle. It's not like some of the earlier merger cases, where its just city pairings where its just divest here divest there and you are one. If they are serious about this theory and they have economic and documentary evidence on it then its going to play out." European regulators approved the deal earlier this month after the airlines promised to surrender slots at two airports.