American, US Airways Come Out Swinging Against Anti-Merger Suit

In a hastily put together conference call with journalists and industry analysts, three attorneys representing American Airlines and US Airways gave a strong response to the U.S. Department of Justice lawsuit that would block the carriers from merging. “We have great respect for the Department of Justice,” said anti-trust lawyer Rich Parker, “but they got this one wrong, very wrong.”

DOJ lawsuit – the fallout begins

Looking Forward to Day in Court

The attorneys made one point over and over – that the airlines are looking forward to their day in court. However, the lawyers also carefully left the door open to the possibility of a settlement which could avert a court battle. As one attorney put it, they’re willing to listen but are preparing for trial.

Air travel analyst Rick Seaney said he’d be surprised if a settlement isn’t reached. He also pointed out that, until a judge rules on the DOJ, the merger goes forward. “Ultimately I think there will be some kind of concessions and the merger become a reality.”

Issue of Competitiveness

At issue is the DOJ’s claim that a merger would be anti-competitive, an argument the airlines strongly dispute. Among their arguments:

  • The merger will lower costs – creating “a half-billion dollar worth of synergies” – with the savings passed on, at least in part, to consumers
  • The merger will increase competition by attracting passengers with a “higher-quality product” that only a merged carrier can offer

The attorneys were asked to speculate about possible routes or service that might be on the chopping block (if any) should settlement talks get underway, but attorney Paul Denis waved the question away saying, “This is not a call where we would ever negotiate a settlement.” The airline industry is a notoriously difficult one to predict in any event, since so much of it is at the mercy of outside factors. As Seaney has long pointed out, ticket prices alone are determined by the price of oil, customer demand, seat capacity – and yes, competition.

Greater Scrutiny for This Merger?

Although the attorneys suggested otherwise, it appeared to some that the DOJ suit may have blind-sided airline executives, possibly because the past three mega-mergers seemingly met with little government interference. “No doubt this one’s gotten a higher level of scrutiny,” said analyst Seaney who wondered about previous merger investigations: “Were they asleep at the switch?”

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Published: August 14, 2013