The US Justice Department has filed a lawsuit to challenge the merger between US Airways and American Airlines on the grounds it would violate US antitrust law and lead to less competition in the industry.
The Justice Department said a merger would remove the inventive for US Airways to offer lower prices and higher airfares for consumers, a person familiar with the matter reportedly told Bloomberg.
This will come as a major blow for American Airlines, which filed for bankruptcy protection in November 2011. The merger would have allowed it to complete its reorganisation.
The decision marks a decisive change in policy for the government department, which has allowed six unprofitable airlines to merge over the past five years. It certainly came as a surprise to US Airways investors, where shares briefly fell as much as eleven per cent and remain heavily suppressed.
At the beginning of August, Eurozone regulators approved the merger, on the condition that competition be increased on the Heathrow-Philadelphia route.