Lawyer sees “tricky” challenges for
US Airways and American in fighting the Department of Justice’s assault on
their planned merger.
With the Department of Justice (DOJ)
now blasting the
deal on competition grounds, US Airways and American are no
longer expecting to close a merger in the third quarter.
Instead, the carriers are gearing up for a
legal showdown, said US Airways’ CEO, Doug Parker.
"We will fight them," he
reportedly told employees.
But Jonathan Lewis, an antitrust lawyer based in Washington,
told Routes News that the government could be holding the
aces.
For a start, the DOJ is not savaging
the tie-up just as a negotiating ploy, he said.
"The government is suing to
block the transaction, and that is what they want as a result in the
case," he toldRoutes News.
What’s more, along with a technical
analysis showing an impact on 1,034 routes, the DOJ has garnered a slew of
comments from airline executives that suggest the merger would sap competition.
"It’s going to be difficult for
executives at the two companies to walk away from their words – this is going
to be a very difficult complaint," said Lewis.
For example, the DOJ quoted US
Airways’ president, Scott Kirby, as saying "three successful fare increases"
could be passed along "because of consolidation".
Lewis also questions how the two
airlines’ claim the merger will benefit passengers stacks up against the
market’s existing concentration.
"Consolidation in the industry
is said to have enabled the airlines to raise fares and fees," he said.
"That is a concern here as well
as US Airways discontinuing its one-stop flight discounting."
For Lewis, it would be
"tricky" for US Airways and American to minimise the impact of the
executives’ statements cited by the DOJ.
"During the investigative phase
of the government’s review, the airlines most likely tried to do that
already," he said.
But he sees how the two carriers may
fight their corner.
"One thing the airlines will
likely attempt to show is that the smaller players have been nipping at their
heels, and are likely to step up to prevent fare hikes," he said.
"They will be looking for
examples where they attempted to raise fares, or fees, but couldn’t because of
the smaller players."
Also, while the DOJ aims to scuttle
the merger, it might settle for a deal on slots, he added.
"The government is suing to
block the transaction…. That, of course doesn’t mean that the government and
the airlines don’t resolve the case before the court decides whether to grant
the government’s requested relief," he said.
"If that were to happen,
shedding slots to preserve competition may just be the option that resolves the
government’s concerns."
Jeremy Robinson, head of competition
law at Kennedys
Aviation, forecasts "an interesting battle".
In his view, the case will hinge on
whether the merger would substantially lessen competition for commercial air
travel throughout the US
"I expect the carriers will try
to show that the threat of entry to defeat anti-competitive behaviour is very
high, and that the merger would give rise to specific efficiencies from which
US consumers would benefit," he toldRoutes News.
But the backdrop of recent market
consolidation, which has already bulked up Delta,
Southwest and United, intensifies the challenge for the two carrier’s legal
teams.
"As any market consolidates,
the opportunities for further deals to get past antitrust regulators
reduce," said Robinson.
"This is in part what has
happened here – the DoJ is saying ‘enough is enough’."
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