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Department of Justice sues to stop AMR/USAirways merger

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posted on Aug, 13 2013 @ 11:48 AM
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The Department of Justice, joined by the states of Arizona and Texas has filed a lawsuit to block the merger of American Airlines, and USAirways, which would create the largest airline in the world. The GAO, which looked into the merger, without recommending or opposing the merger said that it would cut competition on over 1600 routes with one stop or less.

The Justice Department filed a 56 page complaint in the Washington DC courts, saying:


"Because of the size of the airline industry, if this merger were approved, even a small increase in the price of airline tickets, checked bags, or flight change fees would cause hundreds of millions of dollars of harm to American consumers annually,"

www.latimes.com...

The lawsuit was joined by Texas, Arizona, Florida, Tennessee, Pennsylvania, District of Columbia, and Virginia. Texas is the headquarters for AMR, the parent company of American, and Arizona is the headquarters for USAirways.


Millions of passengers depend on the airline industry to travel quickly, efficiently, and safely between various cities in the United States and throughout the world. Since 1978, the nation has relied on competition among airlines to promote affordability, innovation, and service and quality improvements.

In recent years, however, the major airlines have, in tandem, raised fares, imposed new and higher fees, and reduced service. Competition has diminished and consumers have paid a heavy price.

This merger—by creating the world’s largest airline— would, in the words of US Airways’ management, “finish[ ] industry evolution.” It would reduce the number of major domestic airlines from five to four, and the number of “legacy” airlines—today, Delta, United, American, and US Airways—from four to three. In so doing, it threatens substantial harm to consumers.

Because of the size of the airline industry, if this merger were approved, even a small increase in the price of airline tickets, checked bags, or flight change fees would cause hundreds of millions of dollars of harm to American consumers annually.



Today’s legal action was prompted by the State’s concerns about the potential for reduced airline service to several of Texas’ smaller airports that are currently served exclusively by American Airlines and American Eagle flights. In recent years, U.S. Airways has pursued a “capacity discipline” strategy, a business model that relies upon substantial reductions in both service and capacity – a phenomenon that has followed each significant legacy airline merger in recent years. If this strategy is continued when U.S. Airways’ executives take over leadership at the new American Airlines, some areas in rural Texas could see their travel options reduced as a result of the merger.

American Airlines and U.S. Airways compete directly on thousands of heavily traveled nonstop and connecting routes, including nearly 200 routes beginning or ending in Texas cities. According to the State’s antitrust complaint, the proposed merger would result in decreased competition, higher airfares and fees, reduced service and downgraded amenities. The dollar impact nationwide could exceed $100 million a year.

The merger would make a combined U.S. Airways/American Airlines the largest worldwide carrier and reduce the number of the larger “legacy” airlines from four to three – U.S. Airways/American, United/Continental and Delta/Northwest – and the number of major airlines from five to four. If the merger were approved, the three remaining legacy airlines combined with Southwest Airlines would account for more than 80 percent of domestic travel.

aviationblog.dallasnews.com...



posted on Aug, 13 2013 @ 11:57 AM
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80% of domestic travel.... I think we all know what that means...





posted on Aug, 13 2013 @ 12:00 PM
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What I want to know is what happens when the two companies Fail at merging, would whats left be viable?

When the government shut down the Tmobile ATT merger, it hurt Tmobile more than helped, they got spectrum in the exchange but the parent company took that so Tmobile got very little and had to sell to another company fairly quickly to survive the debacle.

So what happens if the government shoots it down?

Sometimes companies merge when they are no longer sustainable on their own, so how would if effect Jobs etc?



posted on Aug, 13 2013 @ 12:10 PM
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Why not just call it all Air America and be done with the illusions?

Fly Air America! '
Where we can screw you at more gates, in more time zones at the same time than anyone else
'!



posted on Aug, 13 2013 @ 12:10 PM
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reply to post by benrl
 


Both companies are viable on their own, but since all the other companies are merging into super companies, they are trying to as well. They say it will keep them competitive with the other giant airlines.



posted on Aug, 13 2013 @ 12:17 PM
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Originally posted by Wrabbit2000
Why not just call it all Air America and be done with the illusions?

Fly Air America! '
Where we can screw you at more gates, in more time zones at the same time than anyone else
'!


Well they would have to step up their coke smuggling to get that name.



posted on Aug, 13 2013 @ 12:37 PM
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reply to post by benrl
 


One of the big reasons American wants the merger is because they're having to modernize their fleet. If they merge, then both airlines pay to modernize the fleet, instead of American paying. American has a reputation for cheapness that far exceeds any other company I have ever heard of. One executive, years ago, was bragging about how he not only put the security guards out of a job at one of their facilities, he even put the guard dog they used to replace them out of a job to save money.



posted on Aug, 13 2013 @ 12:38 PM
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I'm out of my intellectual field here but doesn't this tread on the whole concept of the "Free market"?



posted on Aug, 13 2013 @ 12:41 PM
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reply to post by yourmaker
 


Not when you go from eight or nine major airlines to four, and those four carry almost all of the air travel in the country. Those four can then get together and decide they're going to raise prices (all the airlines cooperate when it comes to price jumps), and make it like it was many years ago, where a normal person can take one or two flights in their lifetime.



posted on Aug, 13 2013 @ 01:04 PM
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I already avoid flying as much as I can. Airlines have made it an intolerable mess with all their fees and nonsense. Not to mention the TSA.



posted on Aug, 13 2013 @ 01:29 PM
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reply to post by benrl
 

It sounds like there is plenty being smuggled between TSA agents letting it through and airline employees making sure some never gets near the TSA in the first place. lol.....

It's a 3 ring circus of corruption mixed with flaming incompetence, all wrapped in "Must have" legislation that requires nothing change or improve. You can't make the stuff up. Why not merge into the World's largest monument to what could have been but failed on the way?



posted on Aug, 13 2013 @ 02:01 PM
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Originally posted by Wrabbit2000
reply to post by benrl
 

It sounds like there is plenty being smuggled between TSA agents letting it through and airline employees making sure some never gets near the TSA in the first place. lol.....

It's a 3 ring circus of corruption mixed with flaming incompetence, all wrapped in "Must have" legislation that requires nothing change or improve. You can't make the stuff up. Why not merge into the World's largest monument to what could have been but failed on the way?


The entire airline industry has been a cluster $%#$ of government intervention, from bail outs, to union busting, all meddling on the part of the government. Remember Airlines where also "too big too fail", any time government steps into meddle in failing business models we get this type of end result.



posted on Aug, 13 2013 @ 02:12 PM
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reply to post by benrl
 

Oh yes, I remember. The airlines still paint the picture as if 9/11 was the source of their troubles and that's the biggest lie going. Those of us who haven't gotten collective running amnesia by the kool-aid, or whatever it is out there these days, recall they were rightly on the verge of failing before the towers were hit. 9/11 saved them in a very literal way for years ...it didn't hurt them.

Now the bad business that ran them into the ground before 9/11 has worked past the bailouts and help even that event gave them and they're back to fail at square one. Errr... perfect time to consolidate and make a monopoly. lol... (not)



posted on Aug, 13 2013 @ 02:28 PM
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This is good to see. Refreshing.


But I do find myself wondering, with my inquisitive and skeptical mind, why the government is blocking this action, when they seem to allow monopolies or near-monopolies in plenty of other industries in various areas....



posted on Aug, 13 2013 @ 02:39 PM
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Originally posted by iwilliam
This is good to see. Refreshing.


But I do find myself wondering, with my inquisitive and skeptical mind, why the government is blocking this action, when they seem to allow monopolies or near-monopolies in plenty of other industries in various areas....


Because technically there are still laws that have to be followed, Lobbying hasn't destroyed them all yet, give it time though.

Telecom is a perfect example of companies bending over backwards to squeeze back together what the government tried to separate. As I said though with the T-mobile example shows they still enforce some of those laws.

The skeptic in me thinks someone just didn't lobby hard enough for the merger... meaning not enough free meals, vacations, and future jobs promised to get it by.



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