US moves to block merger of American Airlines and US Airways

The US justice department has filed an anti-trust case to block the merger of American Airlines and US Airways.

The deal, which would create the world's largest airline, was approved by a federal judge in March and has been backed by the European Union.

The complaint says customers would see a price rise as the merger would "substantially lessen competition" in the domestic market.

Six US states and the District of Columbia have joined the suit.

"By challenging this merger, the department of justice is saying that the American people deserve better," US Attorney General Eric Holder said in Tuesday's statement.

"This transaction would result in consumers paying the price - in higher airfares, higher fees and fewer choices."

The lawsuit also cites direct competition between the airlines on nonstop routes worth about $2bn (£1.3bn) in annual revenues.

American Airlines has been in bankruptcy protection since November 2011, but US Airways has been profitable in recent years.

The two combined airlines would have 6,700 daily flights and annual revenue of roughly $40bn.

The justice department complaint argues the two companies do not need to merge to continue to be competitive, and that American Airlines is likely to exit bankruptcy as a "vigorous competitor".

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The department also cited American Airlines' recent aircraft purchase, the largest in industry history.

If the merger continues, there will be only three major US airlines, which the justice department alleges "increasingly prefer tacit coordination over full-throated competition".

Some industry analysts suggest that American Airlines and US Airways' ability to compete without a merger is not as strong as the department argues.

"I'm not sure if long term either of these airlines can be a viable competitor by itself," Ray Neidl, an airline analyst at Nexa Capital, told the BBC.

"It probably will cause prices to go down in the short term as they compete, but I think long term US Airways and American are going to have a hard time competing."  source : http://www.bbc.co.uk