A merger of American Airlines and US Airways would violate U.S. antitrust law, the Justice Department, six state attorneys general and the District of Columbia allege in a lawsuit filed Tuesday in Washington, D.C.
Bloomberg reports that Justice alleges the merger would lead to "less competition in the industry and higher prices for consumers." The wire service explains:
"The Justice Department sued to block the transaction because it would remove the incentive for US Airways to offer lower prices and lead to higher airfares for consumers, said a person familiar with the matter who asked not to be identified because the matter is private.
"The suit, unexpected by analysts and industry executives, marks a sharp break with the department's past policy, which allowed six unprofitable airlines to merge over the past five years in an effort to cut costs and end losses. For American parent AMR Corp., which filed for bankruptcy protection in November 2011, the merger would have completed its reorganization and allowed it to exit court protection."
As NPR's Marilyn Geewax has reported, the proposed merger would create the country's largest airline and company, which would be worth about $11 billion.
The merger had been long rumored and was finally approved by both corporate boards back in February.
"Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure," Attorney General Eric Holder said in a statement. "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. Today's action proves our determination to fight for the best interests of consumers by ensuring robust competition in the marketplace."
Update at 2:30 p.m. ET. 'A Vigorous Defense':
In a press release, American and US Airways say they will mount a "vigorous and strong defense" to Justice's lawsuit.
The companies continued:
"We believe that the DOJ is wrong in its assessment of our merger. Integrating the complementary networks of American and US Airways to benefit passengers is the motivation for bringing these airlines together. Blocking this procompetitive merger will deny customers access to a broader airline network that gives them more choices.
"Further, this merger provides the best outcome for AMR's restructuring. The widespread support from the employees and financial stakeholders of both airlines underscores the fact that this is the best path forward for both airlines and the customers and communities we serve."
Update at 11:12 a.m. ET. Thursday Hearing:
The Wall Street Journal reports that American Airlines' parent company had a bankruptcy hearing scheduled for Thursday in which "a judge was slated to confirm AMR's plan of reorganization after its bankruptcy filing in late 2011."
The reorganization plan essentially involves a merger with US Airways. The Journal reports that it was not yet clear whether the airline would go through with the hearing.
Also, we're still waiting to hear reaction from the airlines.