American-US Airways Merger: Who’s Supporting the DoJ?
The proposed merger between US Airways (NYSE:LCC) and AMR Corp.’s (AAMRQ.PK) American Airlines still has plenty of opposition, not only from the U.S. Department of Justice but also from the attorney generals of several states, who back up the DoJ’s claims that the merger will cut down on competition drastically and raise the price of flying for consumers.
While Texas Attorney General Greg Abbott pulled out of the fight against the merger on Tuesday, attorney generals from Arizona, Virginia, and Pennsylvania have reiterated their support for the DoJ, according to a report from The Dallas Morning News. Since the airlines said that they would use American Airlines’s headquarters in Forth Worth, Texas, as the headquarters of the newly merged entity, some officials from Texas have come out in support of the merger, saying it would help stimulate the Texas economy and create jobs. Pressure related to that issue is likely why Abbott dropped out of the DoJ’s suit.
American Airlines and US Airways have argued that the merger would actually help stimulate competition by allowing them to better compete with other large airlines, many of which have been created or expanded from mergers and acquisitions in the industry. United Continental Holdings (NYSE:UAL) was created by a merger between United and Continental, and Delta Air Lines (NYSE:DAL) bought Northwest Airlines. The airlines have said that the DoJ is being tougher on them than it has been on other mergers in the industry.
Attorney generals from Arizona and Pennsylvania as well as the DoJ have criticized that argument. “US Airways is saying the exact same thing as Delta did when it tried to get its merger with Northwest approved and United did when it tried to get its merger with Continental approved. Neither airline has delivered on its promises of dramatically increased service. Delta even closed two hubs,” Pennsylvania Attorney General Kathleen D. Kane said in a Q-and-A about the merger on her website.
Arizona Attorney General Tom Home said in a statement seen by the The Dallas Morning News: ”As the number of airline carriers has decreased in recent years, we’ve all seen fares go up and new fees imposed for baggage, desirable seats, etc. Our complaint quotes one of the airline presidents as reporting that consolidation (mergers that reduce the number of airlines) has enabled the airlines to raise prices.”
Virginia Attorney General Ken Cuccinelli is coming under pressure from The Association of Professional Flight Attendants for opposing the merger. The organization is saying that the merger will create stable jobs for many Virginia airline workers, some of whom may get laid off if the merger is stopped. Cuccinelli is standing his ground for now, as Ronald Reagan National Airport, where the two airlines would control 69 percent of the takeoff and landing slots if the merger goes through, is in the state.
The airlines and the Department of Justice are set to go to trial on November 25.
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