Justice Department Seeks To Block US Airways, American Airlines Merger

August 13, 2013

WASHINGTON (AP) — US Airways and American Airlines are vowing to uses "all legal options" to fight back against a government effort to block a merger of the two airlines.

airplane US Airways airplane at Phoenix Sky Harbor International Airport. (Photo by Al Macias - KJZZ)

The Justice Department says the merger would cause "substantial harm" to consumers by bringing higher fares and fees. It has been joined by a half-dozen states in a lawsuit challenging the merger.

The airlines could fight back in court, or they could agree on concessions that would persuade regulators to approve the merger.

The deal’s been in the works since February, and would create the world’s largest airline, and that is part of what the states and feds have a problem with. They worry the merger would mean higher airfares and less service for passengers.

In a statement, Arizona Attorney General Tom Horne called the deal “anticompetitive,” and said Arizona consumers would be forced to pay millions of dollars more per year in airfares if it went through.

Bob Mittelstaedt, Dean Emeritus with W.P. Carey School of Business at Arizona State University does not buy those arguments. He was surprised by the lawsuit and said it is a 50-50 proposition as to whether it stops the merger.

"There’s a chance that that could happen. I would hope that something more reasonable would prevail, in terms of making some concessions and then getting on with it," Mittelstaedt said.

Mittelstaedt said even if the deal does go through, it will be later than originally expected. Both airlines say they will fight the lawsuit which pushed the stocks for both carrier’s parent company lower Tuesday.

The Justice Department had been expected to pressure American and US Airways to give up some takeoff and landing slots at Reagan National Airport outside Washington, where a merger would make them the dominant carrier. Instead, the government is arguing that the merger would hurt consumers around the country by eliminating a competitor on many routes.

The stock prices for both airlines did not take kindly to the Justice Department's announcement. Shares of US Airways sank 13 percent. American fared much worse. Shares of the Dallas-based airline dropped 45 percent.

KJZZ's Mark Brodie and Peter O'Dowd contributed to this report.

Updated 8/13/2013 5:36 p.m.