[160813.EN.AIR] US Justice Department Files Legal Challenge Against AMR - US Airways Merger

THE US Justice Department has filed a court challenge against the planned US$11 billion merger of American Airlines parent AMR Corp and US Airways Group, alleging it would reduce competition and increase fares.

The antitrust action was launched in the US District Court for the District of Columbia and joined by Arizona and Texas as well as consumer advocates.

AMR Corp has been in bankruptcy since November 2011 and had built its restructuring on the merger with US Air to create the world's biggest airline.

Said the Justice Department: "Consumers deserve the benefit of that continuing competitive dynamic. We think the right solution is a full-stop injunction."

AMR and US Airways said they would launch a "vigorous and strong defence" against the effort to block their merger.

The merger has already won the approval of the European Union after the surrender of slots at London's Heathrow and Philadelphia airport was assured.

The Justice Department said it was concerned that the merged airlines would control more than 80 per cent of the US air travel market.

At Reagan National Airport near Washington, DC, the combined airline would control 69 per cent of take-off and landing slots, the department said.

But industry experts said the move was out of step with past practices and would potentially leave US Air and American, which is emerging from bankruptcy, at a competitive disadvantage.

"This is another governmental mistake," former American Airlines CEO Robert Crandall told Reuters, adding that it would "reduce effective competition in the airline industry, as neither US Air nor American Airlines is large enough to compete effectively in their present forms.

By allowing mergers between United Airlines and Continental, and Delta Airlines and Northwest, the government "made a third large merger inevitable," said Mr Crandall.

But consumer lobby Consumer Travel Alliance director Charlie Leocha said: "This is the best possible and the only good consumer outcome that we could have gotten."

Source : HKSG.