Jetrader - July/August 2013 - 13

The Last

An analysis of the antitrust arguments concerning
the  American Airlines – US Airways merger
By Kristen Chmielewski, attorney, Global Transportation Finance team at Vedder Price P.C.


“Should [the American Airlines–US Airways merger] be the ‘last
merger’ in the airline industry? Would allowing this merger finally
strike the right balance between competition and the cyclical
bankruptcies that have occurred in the industry recently?”
These were the questions posited by United States Senate
Judiciary Committee Chairman Bob Goodlatte in his opening statement at a Senate subcommittee hearing convened on 19 March to
consider the effects of the proposed merger between American
Airlines and US Airways on the competitive landscape of the
airline industry. The purpose of the hearing was to provide a
forum for debate to generate insight on the variety of issues that
stem from the proposed merger rather than render any decision
as to whether the merger should be permitted to proceed from
an antitrust perspective—an ultimate decision that is within
the purview of the United States Department of Justice (DOJ).1
The debate that has ensued has centered on a variety of
antitrust issues related to the competitive nature of the airline
industry. This article will focus primarily upon the issues that the
DOJ is likely to address in its deliberation of the American–US
Airways merger. Because the DOJ evaluates each transaction on a
case-by-case basis, this article aims to enumerate certain factors
on which the DOJ has centered its analysis in previous airline
mergers, and then compare those concerns to the facts of the
American–US Airways merger.

DOJ Points of Analysis
The Clayton Antitrust Act prohibits mergers that “substantially
lessen competition” or “tend to create a monopoly.” See 15 U.S.C.
§§ 12-27, 29 U.S.C. §§ 52-53. There is no question that the proposed
American–US Airways merger on its face will reduce competition
in the United States and global markets in that it seeks to reduce
the number of legacy carriers to three. These three carriers when

combined with legacy look-alike Southwest–AirTran would account
for 71.2 percent of airline domestic market share determined by
domestic revenue passenger miles.2 Post-merger, American would
emerge from bankruptcy as the largest U.S. carrier with a combined
market share of 21 percent and will undoubtedly be subject to
DOJ antitrust review under the Clayton Act as a result.
The American–US Airways case currently before the DOJ benefits from the precedent of previous mergers involving U.S. legacy
carriers.3 Primary factors cited by the DOJ in its antitrust review
of mergers include the resulting number of overlapping routes,
airport concentration and the resulting competitive landscape of
the industry as a whole.

Overlapping Routes
The DOJ allowed both the Delta–Northwest and United–
Continental mergers to proceed unchallenged, although both were
found to have substantially eliminated competition on hub-to-hub
routes due to overlapping flights. According to a white paper by
the American Antitrust Institute and the Business Travel Coalition,
“the mergers together produced three monopoly routes and four
duopoly routes.” By contrast, the DOJ did not approve the 2001
proposed US Airways–United merger due to resulting monopolies
or duopolies on nonstop service on more than 30 routes. Such a
reduction of competition often results in increased fares. Indeed,
“one-half of the Delta–Northwest hub-to-hub routes show fare
increases exceeding 10 percent over the pre- to post-merger, two of
which exceeded 20 percent … [and] all of the United–Continental
flights show fare increases.”
With respect to the American–US Airways merger, there are
purportedly 22 routes in which post-merger concentration would
exceed the guidelines propagated by the DOJ and the Federal Trade
Commission (FTC).4 There are 11 markets where the merger would
Jetrader • July/August 2013 13

Jetrader - July/August 2013

Table of Contents for the Digital Edition of Jetrader - July/August 2013

A Message from the President
Q& A: Up Close with DVB Bank SE
Boeing’s Twin-Aisle Strategy Emerges with Customer, Financier Support
The Last Merger?
ISTAT Asia 2013
Aircraft Appraisals Index
Jetrader - July/August 2013 - cover1
Jetrader - July/August 2013 - cover2
Jetrader - July/August 2013 - A Message from the President
Jetrader - July/August 2013 - 4
Jetrader - July/August 2013 - Calendar/News
Jetrader - July/August 2013 - Q& A: Up Close with DVB Bank SE
Jetrader - July/August 2013 - 7
Jetrader - July/August 2013 - 8
Jetrader - July/August 2013 - 9
Jetrader - July/August 2013 - Boeing’s Twin-Aisle Strategy Emerges with Customer, Financier Support
Jetrader - July/August 2013 - 11
Jetrader - July/August 2013 - 12
Jetrader - July/August 2013 - The Last Merger?
Jetrader - July/August 2013 - 14
Jetrader - July/August 2013 - 15
Jetrader - July/August 2013 - ISTAT Asia 2013
Jetrader - July/August 2013 - 17
Jetrader - July/August 2013 - 18
Jetrader - July/August 2013 - Aircraft Appraisals
Jetrader - July/August 2013 - 20
Jetrader - July/August 2013 - 21
Jetrader - July/August 2013 - Index
Jetrader - July/August 2013 - cover3
Jetrader - July/August 2013 - cover4