AA-USAir Merger Approved by US Department of Justice

The New York Times reports that

The Justice Department has reached a preliminary agreement to settle its fight with American Airlines and US Airways over their proposed merger, according to a court document filed on Tuesday. Under the proposal, American and US Airways would sell 104 takeoff and landing slots at Ronald Reagan National Airport in Washington, 34 slots at La Guardia Airport in New York, and various assets at five other airports, including O’Hare Airport in Chicago, Los Angeles International Airport and Boston Logan International Airport. The settlement still needs to be approved by the Federal District Court in the District of Columbia as well as a judge overseeing American Airlines’ bankruptcy proceeding. The airlines are confident they can now close their merger deal by mid-December

The implications of the merger are very significant here in Miami from an economic perspective. American is a major employer in the region and has a robust network of flights to and from Latin and South American and Europe. Because American Airlines already operates as a hub with few flights overlying USAir's route system (USAir typically served specific markets with a few flights a day to Charlotte, Philadelphia), it is not clear that domestic operations will be impacted to any remarkable measure. 

Not the case in other cities, particularly Washington, D.C. and New York (LaGuardia). As part of a stipulated agreement with the federal government, the merged airline will have to divest of particular "slots" to "low cost carriers" such as JetBlue to ensure the promise (or what is left of the promise) of a contestable deregulated airline marketplace. 

A copy of the proposed consent order appears here:

AA-USAir Proposed Final Judgment.pdf by Timothy M. Ravich, Esq.

On August 13, 2013, the United States Department of Justice  and attorneys general from six states, including Florida,and the District of Columbia filed a lawsuit challenging the $11 billion merger of American Airlines and US Airways, saying the combination would lead to higher prices and less service for consumers. 

 A formatted copy of the complaint appears below. 

Interestingly, these cases have proven very difficult for the government to establish. In the late 1990s, for example, the Department of Justice was not successful in prosecuting American Airlines (via its parent AMR) for "predatory pricing." Antitrust enforcement is a highly complicated area of the law. The goal of such litigation is to make sure that consumers are not worse off in the long run as a result of market behavior that actually reduces competition.  While that sounds easy and good, marshaling the facts and evidence and expert resources to prove that free market impulses should be stopped requires tremendous legal resources.

While globally important, this lawsuit is particularly important to South Florida and Miami residents who have already suffered the demised of Eastern Air Lines and Pan Am in years past.

Department of Justice Complaint (Re USAir -American merger) by Timothy M. Ravich, Esq.