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Attempt To Create Largest Airline Runs Into Turbulence
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Story By: Larry Stine

 

 

 
 
 
   
   
  Originally Published on: 8/15/2013

An attempt to create the world's largest airline has run into severe turbulence. The government unexpectedly blocked the proposed $11-billion merger of American Airlines and U.S. Airways over fears the super-merger would be bad for travelers. Rene Marsh reports. It would be the largest airline in the world. But before the $11-billion deal could take off, the Justice Department filed a lawsuit challenging the merger of American Airlines and U.S. Airways, saying passengers would lose big. Consumer advocates agree. "'Cause you've been saying all along that this should not happen," says Charlie Leocha, Director of the Consumer Travel Alliance. "This is really good news for consumers because we were going to loose an incredible amount of competition within the United States and when we lose competition that's never good when it comes to price control." The Justice Department used a flight to illustrate what's at stake. They say this round-trip from Miami to Cincinnati cost $471 on U.S. Airways and $751 on American. If the two airlines merge, the Justice Department says U.S. Airways' aggressive discounting could disappear. Opponents say it would reduce competition, cut service and increase fees. At airports like Reagan National near Washington, D.C. where the two carriers operate, a combined airline would control 69 percent of the take-off and landing slots. In a joint statement, the airlines say they plan to fight the lawsuit. This spring, the CEO's defended the merger. "By putting these two networks together, we're able to provide better service, more efficient service, to consumers," says Douglas Parker, Chairman and CEO of U.S. Airways Group. "This is creating enhanced competition in the U.S. because today, you have two really big global airlines, United and Delta, and this creates a third, as a competitive counterbalance to that," says Thomas Horton, Chairman and CEO of American Airlines. The Justice Department says the companies can thrive on their own. "So they are going do just fine, they are not going go away and be reduced to nothing," says Leocha. "The Justice Department saying they don't have a problem with airlines making money but they have a problem with reduced competition and they say these two airlines compete directly on thousands of routes," says CNN's Rene Marsh.
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