Lower competition and increased ticket costs. That’s the charge being leveled by antitrust officials about the proposed US Airways-American Airlines merger. On Tuesday, the Justice Department, 6 state attorneys general and the District of Columbia filed the suit in DC.
“By challenging this merger, the Department of Justice is saying that the American people deserve better,” said Attorney General Eric Holder in a statement. “This transaction would result in consumers paying the price — in higher airfares, higher fees and fewer choices.”
The lawsuit puts on hold what would have become the world’s largest commercial air carrier — and the DOJ action surprised the bejesus out of the airline industry.
“We Will Fight Them”
“We and our counterparts at US Airways have been working with the DOJ staff for months to ensure that they had an informed view of the merger,” says American CEO Tom Horton, in a memo yesterday to employees. “We have maintained that the merger is complementary (only 12 overlapping routes), that it provides significant customer benefits and that it enhances competition in the airline industry.”
US Airways chairman Doug Parker was even more direct. “We are extremely disappointed in this action and believe the DOJ is wrong in its assessment … we will fight them.”
Costs to You
Whatever the outcome of DOJ’s suit, the larger issue remains: The current business model for domestic airlines is seeing the industry bleed red ink. Increasing jet fuel costs and the investment needed to modernize an aging fleet are the big industry expenses that won’t go away anytime soon. (Learn how to save big on airfare.)
Whether this merger goes through or not, we may all expect to see higher ticket costs in the years to come. Stay tuned.