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By Larry Paxton
The saga of the US Airways(PBR188) and American Airlines(PBR109) merger continues to drag out with the US Justice Department filing antitrust suits earlier this month against the $11 billion deal.
The primary concerns of the Justice Department are that the merger would provide fewer choices for consumers and drive up fares because of increased costs. Also, with the merger the new American Airlines would also have significantly more gates at some airports, such as the Washington Dulles Airport where they would have three quarters of the gates. A new argument is that American Airlines, which is in bankruptcy, just had its first profitable quarter in quite some time. The thinking is that they are now demonstrating that they are capable of going it alone and don’t need to merge.
Of course, the airlines claim that just the opposite would be true, and that another benefit of the merger is that increased competition would result.
It was anticipated that the merger would be completed during this 3rd quarter. The airlines have said that any delay would provide additional problems because US Airways operations are already in the process of moving to the Dallas-Ft Worth area, personnel are putting in bids for houses there, selling theirs in the Phoenix area, and many other complications.
Because of the suit the next court date is scheduled for November, but the Justice Department has asked for a delay until March, 2014, to adequately prepare their case. The airlines say they are ready to present their case and there is no reason why the Justice Department shouldn’t be ready as well.
There have also been some indications that the Justice Department might be willing to settle. The airlines might have to give up some gates and some other concessions are possible.
As a person who flies a few times a year for both business and pleasure it is hard to know how this should be resolved and the impacts it will have on me and my fellow travelers. The concerns from both sides seem legitimate, but, as usual, the time it takes to negotiate and resolve the issues seem to be taking much too long. It is another classic case of big capitalistic companies clashing with big government to figure out what is best for the confused and sometimes helpless consumer. I wish us well.
(Larry Paxton is President/CEO of Pax Business Resources, LLC, which provides the popular The PBR1000 Quarterly Progress Report, tracking over 1,000 of the largest US publicly traded companies through its business research arm, www.PBRMarketTools.com.)
