Nov. 25 date set for trial of American and US Airways merger

The U.S. lawsuit clouds the future of American Airlines, which had planned to emerge from bankruptcy soon. (Jim Watson / AFP/Getty Images)

The U.S. airline industry has experienced a wave of mergers and bankruptcies in recent years, driven by a drop in travel after the 2001 terrorist attacks, volatile fuel prices and a tough economy.

United merged with Continental in 2010, after the union of Delta and Northwest Airlines in 2008. Southwest acquired AirTran Airways in 2010.

The average domestic fare has increased nearly 17% since 2007, but when adjusted for inflation prices have risen only about 4%, according to the U.S. Department of Transportation. But on some routes where there is little competition, fares have soared.

In the last decade or so, the Justice Department has raised concerns about some proposed mergers, filed lawsuits to halt other consolidations and allowed still others to move ahead.

Speaking to reporters, Baer of the Justice Department said the agency was opposed to the US Airways-American merger because the industry landscape has changed. He also noted that recent financial reports suggest the two airlines are thriving and able to compete independently.

"If this merger were to go forward, consumers will lose the benefit of head-to-head competition between US Airways and American on thousands of airline routes across the country — in cities big and small," he said. "They will pay more for less service."

David Balto, an antitrust lawyer and former policy director of the Federal Trade Commission, said the Justice Department seems to be putting the brakes on more consolidations in an industry that has shrunk significantly in the last decade.

"The number of competitors matters," he said. "I think we have reached a level of competition where the Justice Department could not stomach."

Labor unions for American and US Airways workers, who had portrayed the merger as key to future profits and increased salaries, voiced disappointment with the lawsuit.

"A combined carrier offers our members both improvements in wages and job security," said Garry Drummond, a spokesman for the Transport Workers Union of America. "The new American will certainly offer travelers more options and better service."

Still, the Justice Department listed several examples to bolster the argument against a merger.

If the airlines unite, the new carrier would control 69% of the government-issued slots at Ronald Reagan Washington National Airport.

"Washington, D.C.-area passengers would likely see higher prices and fewer choices if the merger were approved," the suit said.

The suit also argues that after the merger, US Airways would have no incentive to offer lower prices on flights that compete with Delta, United and American.

As an example, US Airways priced a one-stop, round-trip ticket in mid-August between Miami and Cincinnati at $471, but the prices were substantially higher for American ($751), United ($762) and Delta ($762), according to the suit.

Baer noted that when AMR filed for bankruptcy in 2011, it promised to emerge stronger on its own by renegotiating its labor agreements and other contracts.

"They have a viable plan to stand alone," he said. "They were telling the world that they can make it on their own."

hugo.martin@latimes.com

ricardo.lopez@latimes.com

Times staff writer Joe Bel Bruno contributed to this report.