Justice Department’s antitrust division

Justice Department’s antitrust division
November 13, 2013
In August, the Justice Department’s antitrust division filed a lawsuit toblock the merger of
American Airlines and US Airways, which would create the world’s largest airline and concentrate
80 percent of the domestic air-travel business in the hands of four companies.
This week, the department dropped its opposition after the companies agreed to give up some
space at a few airports — hardlysufficient to ensure the vigorous competition in the airline
industry needed to keep fares down.
In agreeing to the merger, the department seems to have forgotten the crucial arguments it made
in its suit. It said that competition would decline significantly onmore than 1,000 routes where the
two companies currently compete head-to-head. And it said that the new combined American
Airlines would control 69 percent of the limited takeoff and landing slots at Ronald Reagan
National Airport near Washington, giving it a near-monopoly there.
Under the proposed deal, which is subject to public comment and has to be approved by a federal
judge, the two airlines will divest15 percent of the takeoff and landing slots they control at Reagan
National Airport and 7 percent ofthe slots they control at La Guardia Airport in New York to
low-cost airlines like JetBlue. This would give travelers at those airports more choice and possibly
lower fares, but the changemay not be significant.
The combined airline would also have to give up two gates at Boston Logan International, Miami
International, Chicago O’Hare International, Los Angeles International and Dallas Love Field.
With the exception of LoveField, where American has just two gates, the two airlines control many
gates at those airports and relinquishing two at each will not make a big difference.
These steps do virtually nothing to address the issue of reduced competitionin dozens of other
markets and on routes where the two airlines currently compete for customers. In some cities like
Phoenix, Charlotte and Philadelphia, the merged airline will have such a dominant position that its
competitors will have a very hard time challenging it.
The antitrust division asserts the settlement is better than blocking the merger because it gives
new, lower-cost airlines a chance to enter some airports by making gates or takeoff and landing
slots available. The division assumes that the smaller airlines likeJetBlue, which has a much more
limited network, will ensure stronger price competition. But US Airways, which has an extensive
An Unwise Airline Merger – NYTimes.com http://www.nytimes.com/2013/11/14/opinion/an-unwise-airline-merger.h…
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network and aggressive business tactics, already offers lower fares than American in many
Furthermore, the agreement simplyignores the central concern the Justice Department expressed
in its lawsuit: the four big airlines — United, Delta, Southwest and the merged American — will
have an even greater incentive to raise fares and fees because consumers will have fewer choices.
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An Unwise Airline Merger – NYTimes.com http://www.nytimes.com/2013/11/14/opinion/an-unwise-airline-merger.h…
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