Baer further sated “Americans spent more than $70
billion flying around the country last year.
Increases in the price of airline tickets,
checked bags or flight change fees resulting from this
merger would result in hundreds of millions of dollars
of harm to American consumers.
If this merger
were to go forward, consumers will lose the benefit of
head-to-head competition between US Airways and American
on thousands of airline routes across the country in
cities big and small. They will pay more for less
service because the remaining three legacy carriers
United, Delta and the new American – will have very
little incentive to compete on price. Indeed, as our
complaint shows, the management of US Airways, which
will run the new airline, sees consolidation as a
vehicle to reduce competition between the airlines and
raise fees and fares.
“Here is one powerful example. Today, US Airways
competes vigorously by offering discounts of up to 40
percent if a consumer takes its one stop instead of
another airline’s nonstop route. This means that if you
need to catch a flight at the last minute for any reason
celebration or emergency you will find it is 40 percent
cheaper to take US Airways’ connecting service than the
non-stop fare offered by American, Delta and United. The
big three airlines American, Delta and United don’t like
this aggressive price cutting by US Airways.
“For example, for round-trip flights leaving on August
13 and returning on August 14 from Miami to Cincinnati,
you can see the benefits of US Airways’ discount
American is the only airline on this route to offer
nonstop service, charging $740.
Delta and United don’t have offer competition
since they both charge more for their connecting service
than American charges for nonstop service.
In this instance, a consumer who bought a US
Airways one-stop ticket would save $269 compared to
American’s nonstop service.
“You can see the benefits of competition between US
Airways and American on hundreds of other flights.
For example, on round-trip flights leaving on
August 13 and returning on August 14 from New York to
Houston, US Airways’ one stop fare is about $870 cheaper
than the other legacy carriers’ nonstop flights, and
even beats JetBlue and AirTran by more than $300.
“Although Southwest doesn’t participate in the standard
online travel sites, a cross-check against the Southwest
website for the same dates demonstrates that US Airways
also beats Southwest’s $887 nonstop fare by more than
If this merger happens, US Airways’
aggressive discounting called Advantage Fares – will
disappear. As a bigger airline with many more hubs,
there will be no incentive for the merged company to
offer any of the discounts I just described, resulting
in higher prices, less choice and fewer services for the
more than two million travelers who today benefit from
the program. How do we know it? We know this from the
internal analyses and the planning documents put
together by American in considering the likely effects
of this merger.
“The elimination of the Advantage Fares program is just
one example. If the merger goes forward, consumers can
also expect to pay higher fees for things like checked
bags, flight changes, more legroom and frequent flyer
Today, American does not charge if
you redeem frequent flyer miles. US Airways charges an
average of $40. If the merger is allowed, US Airways is
planning to take this frequent flyer benefit away and
make American’s frequent flyers pay redemption fees.
By eliminating this competitive distinction
between American and US Airways, the new airline
generates an additional $120 million in revenue. But you
pay the price.
“Consumers will also pay more on routes where US Airways
and American today offer competing nonstop service.
We know from prior mergers that elimination of
head-to-head competition on nonstop routes results in
substantial price increases for consumers.
similar fare increases if this merger is allowed. For
example, US Airways and American offer competing nonstop
service between Charlotte, North Carolina and Dallas-Ft.
Worth. Consumers will likely pay more than $3 million
more per year for travel on that route alone.
“You don’t need to go far from this very city to see
another worrisome effect from the proposed merger.
Across the Potomac River, the merged airline would
dominate Washington Reagan National Airport, by
controlling 69 percent of the take-off and landing slots
And, it would have a monopoly on 63
percent of the nonstop routes out of Reagan National. By
allowing one airline to control that many slots, the
merger will prevent other airlines, including low-fare
carriers like JetBlue and Southwest from competing at
Reagan National. It would face little or NO competition.
Indeed, this would get worse. Recently JetBlue started
service from Reagan National to Boston, competing with
US Airways, and fares dropped by more than 30 percent
saving consumers about $50 million a year.
consumers saved about $14 million in lower fares between
Tampa and Reagan National after JetBlue started
competing against US Airways.
But and this is important half of JetBlue’s slots
at Reagan National are leased from American. If this
deal is allowed, new American can terminate that lease
and JetBlue’s ability to compete will be severely
diminished. Consumers will pay the price.
Blocking the merger will preserve current competition
and service at Reagan National airport, including
flights that US Airways currently offers to large and
small communities around the country.
The complaint also describes other ways in which
consumers are at risk if we allow this deal to further
reduce the number of competitors in this industry. You
do not need to take my word for this.
High level executives at US Airways have talked
about how consolidation allows for capacity reductions
that “enable” fare increases.
One US Airways executive recently stated that
this merger is “the last major piece needed to fully
rationalize the industry.”
In the airline business the word “rationalize” is
a code word for less competition, higher costs for
consumers and fewer choices.
Both US Airways and American have publicly stated that
they can do well without this merger.
American has used the bankruptcy process to lower
its costs and revitalize its fleet.
It has repeatedly said that it can thrive as a
Just this January, American’s management
presented plans that would increase the destinations and
frequency of its flights in the U.S., allowing it to
compete independently and vigorously with plans to grow.
executives of US Airways agree about American’s ability
to make it on its own.
They have noted that American will be stronger
post-bankruptcy and that “[t]here is NO question” about
American’s ability “to survive on a standalone basis.”
Airways also has said that US Airways itself does not
need the merger that it can thrive as a standalone firm.
The lawsuit we filed today to block this deal gives
consumers the best possible chance for continued
competition in an important industry that they have come
to rely upon.
Allied Pilots Association (APA) President Capt. Keith
Wilson said “Approving the merger is in the best
interests of all concerned. We are disappointed that the
U.S. Department of Justice has challenged the merger and
look forward to the opportunity to highlight the
merger’s many benefits. The pilots of American Airlines
remain fully committed to merging with US Airways, which
will provide for a more secure future for the 100,000
men and women who work for the two airlines,” Wilson
said. “As for the notion that the merger would be
anti-competitive, the two airlines’ route structures are
highly complementary with very little overlap. Combining
the two carriers would significantly expand the choice
of travel destinations available to consumers.
“Also, the combination of American Airlines and US Airways
would create a network carrier comparable to Delta and
United in terms of revenue and reach, establishing an
important competitive counter balance to those two
Consolidation has enabled our
industry to stabilize after a round of Chapter 11
bankruptcies that were the result of various exogenous
shocks, including terrorist attacks, fuel price spikes
and pandemics. It makes no sense for the Justice
Department to conclude now that airline industry
consolidation is somehow undesirable.”