AA-US Airways merger under government scrutiny

Summary:A U.S. agency review finds that the potential merger will hurt competition on routes traveled by over 50 million passengers.

The merger of American Airlines and U.S. Airways is under review by Congress as the creation of the world's largest airline could be deemed anti-competitive.

In a study conducted by the U.S. Government Accountability Office (.pdf), antitrust regulators say that the merger could result in reduced competition on over 1,600 routes that are traveled by 53 million passengers a year, which is more serious than the loss incurred by the 2010 merger of United and Continental Airlines.

U.S. Airways and American Airlines parent company AMR announced the merger in February. To go ahead, the firms need approval from the judge overseeing American's bankruptcy proceedings and acceptance by U.S. Airways shareholders.

Within the report, GAO considers both nonstop and connecting routes. Overlaps appear on only 12 nonstop routes, but analyst Gerald Dillingham told a Senate aviation subcommittee that if the merger goes ahead, competition will wane as one less airline will fly connecting routes.

U.S. Airways CEO Doug Parker commented that the merger will be good for American consumers, as the larger firm will be able to offer more locations than each company separately.

Although lacking power to stop the merger going ahead, Congress could try and influence the DoJ's decision. In order to prevent antitrust behavior, the department could require the merged carrier to give up flight slots on routes including travel to Washington and smaller cities.

Sen. Jay Rockefeller, chairman of the Senate transportation committee commented that Congress "must make sure that the advantages of a strong aviation sector benefit more than just shareholders."

Last month, the FAA and American Airlines settled a dispute for $24.9 million after the agency claimed AA violated safety regulations over electrical wiring in planes and unfinished plane repairs.

Read More: Skift

Image credit: Flickr

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This post was originally published on Smartplanet.com

Topics: Innovation

About

Charlie Osborne, a medical anthropologist who studied at the University of Kent, UK, is a journalist, freelance photographer and former teacher. She has spent years travelling and working across Europe and the Middle East as a teacher, and has been involved in the running of businesses ranging from media and events to B2B sales. Charli... Full Bio

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