Why Are Some States Supporting the American-US Airways Merger?
US Airways (NYSE:LCC) and AMR Corp.’s (AAMRQ.PK) American Airlines just gained some allies in their battle to merge to create the world’s biggest airline and bring AMR Corp. out of bankruptcy. Officials from Florida, Texas, and North Carolina are pushing back against the U.S. Department of Justice’s suit to block a merger between the two companies, according to a report from Reuters.
The merger received approval from the European Commission after both airlines made antitrust concessions at London’s Heathrow Airport and passed a vote with AMR Corp.’s creditors before it was blocked from passing the final hurdle by the U.S. Justice Department last week. The DoJ was joined by six states and the District of Columbia in its suit to block the merger, saying in a filing that it would cut down on competition in the already shrinking U.S. airline market, thus raising prices for consumers.
Florida, Texas, and North Carolina are home to large hubs for the airlines, and these states believe the merger would help improve their economies. Miami-Dade County’s mayor came out in support of the deal, even though Florida is one of the states joined by the Justice Department in the suit to stop the merger, Reuters reports. American Airlines is one of the biggest employers in the county and operates about 70 percent of the flights at the Miami airport, an important hub for flights to and from Latin America.
The airport in Wilmington, North Carolina, has 13 of its daily flights run by US Airways, and had hoped it could add more flights if the merger went through. As for Texas, which is home to the Fort Worth-based American Airlines, officials from the Chamber of Commerce there told Reuters that having the world’s largest airline based in the state would benefit their economy. Texas officials also said they don’t see any other way out of bankruptcy for AMR Corp., according to letters seen by the publication.
“Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure,” Attorney General Eric H. Holder Jr. said in the Department of Justice’s statement after it sued to block the merger. “By challenging this merger, the Department of Justice is saying that the American people deserve better. This transaction would result in consumers paying the price — in higher airfares, higher fees and fewer choices.”
American Airlines and US Airways maintain that the merger would actually create more competition. The duo say recent mergers like those that created United Continental Holdings (NYSE:UAL) and Delta’s (NYSE:DAL) purchase of Northwest Airlines have led to larger airlines the two companies don’t stand a chance of competing against on their own. But according to data from the Government Accountability Office, the American-US Airways merger would cut down on competition more than the previous mergers.
According to Reuters, AMR and US Airways said they remain committed to the merger and will fight to convince U.S. regulators that it would be good for the American public.
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