By JAMES B. STEWART
Did the Justice Department cave?
This week, the government announced that it was dropping its lawsuit to block the merger of American Airlines and US Airways after the parties reached a settlement. The new American will be the world’s largest airline and one of just three remaining legacy carriers in the United States, along with Delta Air Lines and United Airlines.
“This settlement ensures airline passengers will see more competition on nonstop and connecting routes throughout the country,” Attorney General Eric H. Holder Jr. said this week.
But three months ago, in August, he had this to say about the proposed merger: “The American people deserve better. This transaction would result in consumers paying the price — in higher airfares, higher fees and fewer choices.” And in its complaint, the Justice Department noted that the three legacy carriers and Southwest would control 80 percent of domestic air service.
No wonder this week’s settlement left many antitrust experts scratching their heads, even as the airlines and their shareholders celebrated.
The Justice Department did get some important concessions from American and US Airways, primarily an agreement to give up slots at some of the nation’s busiest airports, including La Guardia in New York, Reagan National in Washington and Logan Airport in Boston, to low-cost carriers. The department said it was the biggest divestiture program agreed to by any airline as a condition of federal approval of a merger.
But when the government sued to block the merger, it stressed the “thousands” of routes where US Airways and American “compete directly,” not just a handful of congested airports. Unmentioned in the settlement, but a prominent feature in the earlier complaint, are US Airways’ low-cost Advantage Fares, which the government argued would probably vanish on the many routes where competition between the two carriers would be eliminated.
“The settlement is hard to square with the original complaint, ” said Christopher L. Sagers, an antitrust professor at Cleveland-Marshall College of Law….