The US government on Tuesday sued to block American Airlines and US Airways’ proposed merger to create the world’s biggest airline, saying consumers would end up paying higher fares and fees.
The surprise move likely would delay, or even derail, a merger set to close next month and could stall a broad industry restructuring that investors were counting on to support airline profits, triggering a 5.4 per cent decline in US airline shares. It also could hinder American parent AMR Corp’s efforts to emerge from its nearly 2-year-old bankruptcy.
The Department of Justice, which has in recent years allowed two major airline mergers - United-Continental and Delta-Northwest - to go ahead, made it clear that it is out to block the US$11 billion deal entirely rather than seeking concessions from AMR and US Airways.
“We think the right solution here is a full-stop injunction,” Bill Baer, head of the Justice Department Antitrust Division, told reporters on a conference call.
The lawsuit, filed in US District Court for the District of Columbia and joined by six states including Arizona and Texas, drew support from consumer advocates, but surprised the industry and raised questions about its budding recovery.
Investors had been counting on large US airlines to carefully notch up fares, fees and profits, ending years of price wars, overcapacity and setbacks such as the 9-11 attacks, the financial crisis and rising fuel costs.
The Thomson Reuters airlines index had climbed more than 35 per cent this year as investors grew more confident that airlines would be solidly profitable.