Ba 4309 - American Airlines & Us Airways Merger

American Airlines, US Airways Merger

BA 4309

12/02/13

In November of 2011 AMR the parent company of American Airlines filed for bankruptcy. As a result of the infamous recession that started in 2008 it was not surprising to see such a big company file for bankruptcy.  However, it was not only one or two companies struggling in the industry at the time. US Airways was experiencing some revenue shortfall as well. The industry saw some other Previous big mergers — Delta Air Lines and Northwest, United Airlines and Continental, Southwest Airlines’ purchase of AirTran. These mergers, having worked in positive manner for these companies, the president of US Airways came up with the idea of merging with American, which would help recover revenues for both companies. American, the third-largest U.S. airline, with No. 5 US Airways, when merged, is believed by analysts, that the combination would have about 20 percent market share.

The $11 billion merger would create the world’s largest airline, after four other major U.S. carriers combined in recent years. Although the idea sounded promising there were some obstacles to be overcome. The U.S. Department of Justice filed an antitrust lawsuit against the merger claiming that the merger would harm the consumers. With two of the biggest airlines becoming one, consumers would lose the benefit of the competition between the two. As a result they would be subject to pay a higher rate for travels. Another reason the DOJ tried to stop the merger is because of the potential monopoly that would result if two of the major players in the game joined forces. In addition to the raised airfare, they feared they would stifle competition since they will not be competing against each other anymore. The lawsuit was filed by the U.S. District Court for the District of Columbia and backed by several states including Texas, where American Airlines is headquartered. American Airlines and US Airways compete directly on thousands of routes. This head to head competition with non-stop services routes alone generates about $2 Billion in annual revenues. The merger would create the largest airline in the world and result in four airlines controlling more than 80 percent of the United States commercial air travel market.