Jetrader - July/August 2013 - 15

rejection of the US Airways–United merger, the DOJ noted the
impact on international routes amongst its reasons to sue to stop
the merger. Specifically, the DOJ found that, because US Airways
competed with United or one of United’s alliance-members, the
merger would have the effect of eliminating the only nonstop
competitor for certain of United’s alliance partners. In the instant
case, because American Airlines is a member of the oneworld alliance and US Airways is a member of the Star Alliance, there are
concerns as to how the international alliances will be reconfigured
and how fares will be affected. Composed of 12 carriers serving
160 countries with approximately 9,500 daily departures (a global
capacity of 11.6 percent), oneworld’s addition of US Airways to
the alliance will finally provide the scale to match the rival
SkyTeam (at 18.3 percent) and Star Alliance (at 24.8 percent),
according to Reuters. The American–US Airways merger will also
change market shares internationally, having the biggest impact
in European cities where the merger creates a large market share
gain and the market leader has a relatively low share. The CAPA
Centre for Aviation points out that the merger will afford the
airline a 32  percent market share in Spain, 26 percent in Italy,
23 percent in Ireland, 17 percent in the UK, 13 percent in France
and 11 percent in Switzerland. As a result, CAPA predicts that
Iberia (Spain) and Alitalia (Italy) may feel the heat the most,
which may result in increased branding and marketing competition
within those countries. It is not yet known how routes may be
altered upon reconfiguration of the alliances or changes in market
share, but the DOJ will pay careful attention as to whether such
reconfiguration will result in a reduction of competition.
Overall, not only will the DOJ examine the resulting airline
with respect to its overlapping routes and route concentration,
but the resounding industrywide competitive effects, practicality
of LCC competition and international impact will be considered
with particularity.

Although prediction of the future
of a competitive industry is never
a precise art, the DOJ in this case
is aided by precedent mergers and
emerging market data in the wake
of those precedents to arrive at the
best possible outcome for the future
and health of the industry in the
wake of such a momentous merger.
the industry in the wake of such a momentous merger. With each
large airline merger, the industry becomes more concentrated by
legacy carriers and Southwest, rendering it correspondingly more
difficult for LCCs and entrant airlines to compete. And, with each
large airline merger, the DOJ must apply more scrutiny to the
potential anti-competitive effects of the merger. If the American–
US Airways merger is allowed to proceed, the landscape of the
airline industry may become a fundamentally different one from
what we have known; this begs the question as to whether this
will ultimately become the last of the large airline mergers.




Going Forward
Despite these enumerated antitrust concerns, American and US
Airways officials remain hopeful that the merger will generate an
efficient and competitive airline. From a bankruptcy perspective,
the Honorable Sean H. Lane approved the American–US Airways
merger on 11 April 2013. See In re AMR Corporation, Docket No.
7587. Relying upon the bankruptcy Trustee’s Section 363 power
to “use, sell, or lease, other than in the ordinary course of business, property of the estate,” the court found that the merger
was indeed based upon sound business judgment. The merger is
also strongly supported by employees, the unions, the Pension
Benefit Guaranty Corporation, the Unsecured Creditors Committee,
the Ad Hoc Committee of AMR Corporation Creditors and other
interested parties.
However, despite this outpouring of support by interested
parties in favor of the merger, the task of the DOJ is to analyze
the consequential antitrust effects upon the industry as a whole
and decide whether a resulting four-airline oligopoly will maintain vigorous competition within the aviation industry. Although
prediction of the future of a competitive industry is never a
precise art, the DOJ in this case is aided by precedent mergers
and emerging market data in the wake of those precedents to
arrive at the best possible outcome for the future and health of


Procedurally, the DOJ maintains the peremptory authority as to antitrust
evaluation pursuant to the Hart-Scott-Rodino Act. See 15 U.S.C. § 18(a) et seq.
While the Department of Transportation (DOT) and Congress will hold hearings
and provide a forum to generate insights as to the issues, it is important to
remember that the DOJ preempts this field of regulatory oversight.
According to the Research and Innovative Technology Administration of the
Bureau of Transportation Statistics for the period January-December, 2012:
Delta Air Lines, 16.3%; United Continental, 16.1%; Southwest–AirTran, 15.0%
and 2.8%; American, 12.9%; and US Airways 8.1%.
Those mergers primarily include Trans World Airlines and American Airlines
(2001), US Airways and America West Airlines (2005), Delta Air Lines and
Northwest Airlines (2008), Republic Airlines and Midwest Airlines (2009),
Republic Airlines and Frontier Airlines (2009) and United Airlines and Continental
Airlines (2010), most of which were born out of bankruptcy. The proposed U.S.
Airways and United Airlines merger (2001) was the only airline merger denied
by the DOJ and was therefore never carried through to fruition.
The DOJ and FTC have issued a set of guidelines by which they evaluate the
competitive nature of horizontal mergers for purposes of antitrust review. See
U.S. Department of Justice and Federal Trade Commission, Horizontal Merger
Guidelines, n.7, at § 5.3 (August 2010), available at


Dewayne DeVos

Westover Metro


255 Padgette St. Suite 5 Chicopee, MA 01022

Cell: 1-413-885-5321
Of ce: 1-413-593-1300
FAA CRN DBBX269X / EASA.145.6139

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Jetrader • July/August 2013 15 AM
22/04/13 11:21

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