Early in 2013, two of the world’s largest airlines, U.S. Airways and American Airlines, came to terms on a merger deal that would combine the two to create a “premiere global airline“. The merger between the two U.S. companies would make their combined airline the largest in the world. The merger was expected to be completed in early September, but on August 13th the United States Justice Department filed a lawsuit set to block the proposed merger on the basis of anti-trust and the higher airline ticket prices that they expected to come with it; as per the lawsuit. On November 12th, the U.S. Department of Justice and the U.S. Airways/American merger came to terms that would allow the completion of the merger, but would force the merged airline to give up “take off and landing slots and gates at seven U.S. airports“. The Department of Justice stated a good level of satisfaction with what was ultimately agreed upon between the two parties citing that the agreement adequately addressed their antitrust concerns. The belief on part of the U.S. government, is that the vacated spots at those seven U.S. airports will be able to be filled with lower ‘budget’ airlines thereby counteracting the overall effect of the merger on the U.S. airline ticket price market.
As we’ve learned, each and every piece of the larger market has an effect on the strength and pricing of the market as a whole as in business no one move is isolated from the rest of the business world. Will the agreement that the U.S. government and the merger have come to solve the government’s earlier issues with the merger? Perhaps, but there’s also those who argue that the government did not get enough back to justify allowing the merger to go through and for the two merged airlines to combine into the world’s largest airline. There’s multiple angles to the merger itself as well as this new agreement and only time will tell how the airline market will be effected.
Sources:
Reuters – http://www.reuters.com/article/2013/11/13/us-usa-antitrust-airlines-idUSBRE9AC02120131113
USA Today – http://www.usatoday.com/story/travel/news/2013/08/13/justice-american-us-airways/2647545/
U.S. Airways – http://www.usairways.com/en-US/aboutus/pressroom/newamerican.html?c=glmus_21132&re=1
The Globe & Mail – http://www.theglobeandmail.com/report-on-business/international-business/us-business/in-us-airline-antitrust-spat-lobbyists-come-out-on-top/article15397996/
Photo Courtesy of James Willamor via Flickr and Creative Commons