Justice Department Sues to Block US Airways, American Merger

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U.S. Airways and American Airlines planes are shown at gates at DFW International Airport Thursday, Feb. 14, 2013, in Grapevine, Texas. The two airlines will merge forming the world's largest airlines.  (AP Photo/LM Otero)
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The proposed $11 billion US Airways (LCC) merger with American Airlines was hit with a major roadblock on Tuesday when the U.S. filed a lawsuit to block the deal on antitrust grounds. Shares of US Airways fell more than 8.5% on the news.

The suit, which was filed by the Department of Justice, says the AMR-US Airways merger threatens "substantial harm" to consumers by reducing the number of major domestic airlines, and would lessen competition in local markets.

The lawsuit is supported by several states, including Arizona and Texas, a major hub and the headquarters of American Airlines, as well as Florida. Virginia and Pennsylvania.

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U.S. regulators are concerned that a merger, if approved, would stifle competition, leading to higher fares and fees that would cost consumers "hundreds of millions of dollars" more than they already pay each year.

"Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure," said Attorney General Eric Holder. "This transaction would result in consumers paying the price -- in higher airfares, higher fees and fewer choices."

Reducing the number of carriers and creating the world's largest airline would only help the remaining carriers, including Delta (DAL) and UnitedContinental (UAL), which would be the second and third largest U.S. carriers, respectively, if the deal went through, the government claims.
Neither U.S. Airways nor American immediately responded to FOX Business for a comment.

Follow Jennifer Booton on Twitter at @Jbooton

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