The proposed tie-up would lead to less competition in the industry and higher prices for consumers, according to a complaint filed today in Washington federal court. The Justice Department said it seeks to permanently block the merger “or any other transaction that would combine the two companies.” US Airways dropped as much as 12 percent and the bonds of American parent AMR Corp. fell on the news.
The Obama administration said in court papers that it wants to stop the deal because it would remove incentive for US Airways to offer lower prices, and spur higher fares. AMR and US Airways plan to fight the suit, AMR Chairman Thomas Horton said in a memo to employees.
“This transaction would result in consumers paying the price -- in higher airfares, higher fees and fewer choices,” said U.S. Attorney General Eric Holder in a statement. “Today’s action proves our determination to fight for the best interests of consumers by ensuring robust competition.”
The lawsuit, unexpected by analysts and industry executives, marks a sharp break with the Justice Department’s past policy, which allowed six unprofitable airlines to merge over the past five years in an effort to cut costs and end losses.
Bankruptcy Filing
For AMR, which filed for bankruptcy protection in November 2011, the merger would have completed its reorganization and allowed it to exit court protection. AMR last year flew more than 80 million passengers to about 250 destinations, earning more than $24 billion in revenue, the U.S. said.
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US Airways in 2012 flew more than 50 million passengers to 200 destinations, with more than $13 billion in revenue, the government said in its complaint. The airline plunged 8.7 percent to $17.18 at 12:49 p.m. in New York.
