UPDATE 2-American Airlines, US Airways unions rally for merger

Wed Sep 18, 2013 6:37pm EDT

By Diane Bartz

WASHINGTON, Sept 18 (Reuters) - Union members who work for American Airlines and US Airways Group rallied on Capitol Hill on Wednesday, urging the U.S. Justice Department to drop its opposition to a planned merger between the two airlines.

The rally by pilots, flight attendants, baggage handlers and others also attracted a handful of the 300 lawmakers that the union representatives are meeting this week in hopes of building support for the deal.

Representatives of the Association of Professional Flight Attendants, the Allied Pilots Association and US Airline Pilots Association and the Transport Workers Union also met on Wednesday with William Baer, the head of the Justice Department's Antitrust Division, to express displeasure over the lawsuit, a union source said.

The Justice Department filed a lawsuit on Aug. 13 to stop the planned merger between US Airways and American's parent, AMR Corp. The government argues it would violate antitrust laws because it would lead to higher airfares and other fees.

A judge will hear the case without a jury in November and decide whether the deal can go forward.

Representative Ed Pastor, a Democrat from Arizona, where US Airways is headquartered, said he was surprised that the Justice Department wanted to stop the deal after allowing other large airline mergers in recent years.

Delta Air Lines Inc acquired Northwest Airlines in 2008, United merged with Continental in 2010 and Southwest Airlines Co bought discount rival AirTran in 2011.

Without the planned deal between American and US Airways, "competition will be stifled and the stability that we want in the airline industry will be taken away," Pastor said.

Pilots attending the rally made similar points, with one saying that the Justice Department allowed other airline mergers "without a whimper."

"All of a sudden they're trying to stop this," said Jim Sgueglia, 55, who said he has been flying for US Airways for 26 years.

Seth Bloom, an antitrust expert formerly with the department and now in private practice, said the rally would likely have no effect on its views.

The merger is a critical piece in American's future plans. The company declared bankruptcy in 2011 and a judge approved its plan to emerge from bankruptcy that was centered on the deal with US Airways.

The airlines and the Justice Department could settle the antitrust lawsuit, which would likely require the companies to sell assets. Any such divestitures would require the bankruptcy judge's approval.

AMR shareholders, who stand to receive a 3.5 percent stake in the merged entity, would likely be wiped out under any plan other than a merger, experts say. Most of AMR's key creditors, including the unionized workers, support the tie-up.

The airlines themselves have defended the deal by arguing in court filings that it would create $500 million in savings to consumers annually by building a stronger competitor to Delta and United.

In its complaint, the Justice Department focused on Ronald Reagan National Airport, just outside Washington, D.C., where the two companies control a combined 69 percent of takeoff and landing slots. It also listed more than 1,000 routes between two cities where the two airlines dominate the market.

The case at the U.S. District Court for the District of Columbia is No. 1:13-cv-12346.

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Comments (1)
Kake1977 wrote:
I think this merger should be approved as is, and American/USAir shouldn’t have to divest anything than maybe enough gates and slots at DCA to reduce their market share below 50%.

When the industry was deregulated in 1978, it was thought that there would be more airlines and more competition. One wonders if those people had any common sense at all. The airline hub was not a new animal spawned from deregulation. The CAB should have known that major airlines would build fortress hubs and choke out the new airlines. But deregulation did happen, and today we are left with only a handful of airlines.

However I believe this merger should happen because it would bring greater stability to this industry. How many more airline bankruptcies does this county and industry need to sustain before lawmakers realize that in a free market, in order to prevent crippling fare wars and disruptions, that we need a only a few industry heavyweights. By allowing AA and USAir to merge, they will be greater positioned to compete with Delta and United, and to a lesser degree, Southwest. If this happens, it will (1) make airlines stocks more predictable and solid with a good chance for market gains; (2) better position U. S. airlines to compete against foreign heavyweights such as ANA, Cathay Pacific, British Airways, Lufthansa, Etihad, Emirates, Qatar, and the growing Chinese airlines; (3) help insulate them from market shocks thereby saving employees from massive layoffs and wage-cuts; and (4) give these heavyweights better buying power from suppliers for everything from toilet paper to fuel.

Finally, the airline industry is a service industry. Therefore not only do airlines compete with other airlines, but they compete with their own customers meaning if ticket prices get too high, people will drive, take the train or bus, or not travel. When this happens on a large scale, it opens an opportunity for a group of investors to start a new airline to exploit this gap like JetBlue did in the late 1990′s. In a way, the industry is self-regulating when it comes to ticket prices. The whole industry is an oligopoly. Therefore, the government would have it’s own interests at heart by letting this merger go through.

Sep 19, 2013 12:30pm EDT  --  Report as abuse
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