Feds Try To Kill American-U.S. Airways Merger

The Justice Department is against dictatorships. Even airline-industry ones.

After months of negotiations, American Airlines and U.S. Airways announced in February that they'll merge to create the world's largest airline [insert evil laugh here]. Now, the U.S. Department of Justice has filed a lawsuit trying to block the merger, under the grounds that having one chief airline would eliminate competition and up the general price of travel.

The new corporation would be named American Airlines Group, and would retain AA's name and branding and U.S. Airways' management. The two airlines have 100,000 employees between them, and, post-merge, would kick things off with a cool $40 billion of revenue. Every day, the merged airlines would control nearly 7,000 flights, which is seven flights of every ten from Reagan National Airport.

The Justice Department claims that the merge would break antitrust laws, which exist to ensure fair economic competition for the public's benefit. Says the lawsuit:

Because of the size of the airline industry, if this merger were approved, even a small increase in the price of airline tickets, checked bags, of flight change fees would cause hundreds of millions of dollars of harm to American consumers annually. Millions of passengers benefit each year from head-to-head competition that this merger would eliminate.

The Justice Department has approved mergers in the past: Southwest and AirTrain, United and Continental, and Delta and Northwest. Still, none have had the heft that AA and U.S. Airways merger would bring. Some also fear that small aircraft hubs would be closed as a result of the merger (the bigger-scale the merger, the greater chance there is that a joint corporation wouldn't financially need to keep them open).

At present, U.S. Airways Advantage has significantly lower fares than AA — for a return flight between Miami and Cincinnati, the difference is $471 versus $740, according to the Justice Department. This competition is healthy, and promotes lower fares for passengers: for example, JetBlue's competitive presence has made U.S. Airways' prices drop by a third.

Critics point to the fate of other merged carriers, which "have culled unprofitable and redundant service, while further reducing overall schedules amid soaring fuel prices and a weak economy," according to the Wall Street Journal.

Six states have joined the Justice Department in support of the lawsuit.