Airline merger blocked by federal government

On Behalf of Dunlap Fiore, LLC |

Traveling by air is a fast and convenient means of transportation for both business and pleasure. Consumers typically shop around for deals to get a reasonable price for their trip, and many likely compare the different fares various airlines offer. Occasionally, in the interest of streamlining an operation and offering better service and routes to customers, two airlines may consider merging. However, there are times when the government may block such mergers.

Recently the federal government stepped in and blocked the merger between American Airlines and US Airways. The airlines are trying to understand why the government is blocking their merger when in the past such mergers were approved. Recently filed paperwork in a US district court shows that the airlines are asking the Department of Justice to provide them documents regarding four mergers that happened between 2005 and 2011. Specifically, they are interested in knowing why mergers between Delta and Northwest, United and Continental, Southwest and AirTran and US airways and American West were approved.

The federal government has indicated that their merger will increase the prices of airfare and reduce competition. Further, the government stated that previously approved mergers did not produce the expected benefits such as better service and competition. The airlines, however, argue that their merger will not impact consumers. If the AA-US Airways merger were to succeed, it would result in the world’s largest airline.

Negotiations and deal making surrounding mergers is a complex area of business law. In addition to ensuring that the merger is right for a business, the parties may have to deal with federal government objections to larger mergers.

Source: USA Today, “US Airways, AA want to know why US OK’d previous mergers,” David Koenig, Sept. 21, 2013