US airlines’ mega merger hit by government lawsuit

Marion Dakers
THE AMERICAN government shocked the aviation industry yesterday by launching a lawsuit to block the landmark merger of US Airways and American Airlines.

The US Department of Justice said the $11bn tie-up “would result in US consumers paying higher fares, higher fees and receiving less service”.

The move throws into doubt the future of American Airlines parent AMR, which has been in bankruptcy since November 2011 and had based its return to solvency on the merger.

The DoJ said it believes the pair can survive as independent, competing companies.

AMR and US Airways said they would launch a “vigorous and strong defence” against the effort to block the deal, which was first unveiled in February.

“I think this is another governmental mistake,” former American Airlines boss Robert Crandall told Reuters.

The merger won the backing of European competition watchdog earlier this month, after the pair agreed to give up some take-off slots at Heathrow and Philadelphia.

Airlines have been through a wave of consolidation since the financial crisis, as passenger numbers waned and the price of fuel reached crippling peaks.

Delta merged with Northwest in 2008 to create the world’s largest carrier, while United and Continental tied the knot in 2010.

Delta won US approval for its purchase of a 49 per cent stake in Virgin Atlantic in June. Shares in US Airways plunged XX per cent yesterday.