August 14, 2013
Credit: AMR Corp.
Lawyers for AMR Corp. and US Airways are focused on battling the U.S. Justice Department (DOJ) in court rather than striking a concessions deal to gain approval for the carriers’ proposed merger.
The defense strategy, according to three leading antitrust lawyers employed by the airlines, will center on proving how the merger will create benefits for consumers through cost synergies that will, in part, be passed to passengers. The defense also will show that the “new American” will increase services and create a competitive network for corporate travelers that currently have to rely on United Airlines and Delta Air Lines, the lawyers said during an Aug. 14 conference call.
The call came a day after the DOJ, along with the District of Columbia and six states with close ties to the two airlines, issued a lawsuit seeking an end to the merger between US Airways and AMR. The lawsuit claims budget fares currently offered by US Airways would disappear, that network overlap could adversely affect more than 1,000 city pairs, that the price and scope of ancillary fees would increase, and that the new airline would cut capacity to raise fares.
“They [DOJ] got this wrong. They got this very wrong,” said Rich Parker, partner at Washington law firm O’Melveny & Myers and a noted antitrust specialist. “We intend to have our day in court, and look forward to it,” he added.
Parker, along with Dechert partner Paul Denis and Jones Day’s Joe Sims, said the airlines’ defense also will dispel DOJ’s claim that U.S. airlines collude to set ticket prices, and noted that the burden of proof in this case is on the regulator, not them, to show the merger is anti-competitive. “No one should assume the merger is over,” said Sims, who represents AMR.
Sims also took aim at DOJ’s statement that 1,044 city pairs would be “presumptively illegal” should the merger be concluded. Instead, he noted, the two carriers’ networks overlap on “just 12 nonstop routes, not 100s and 1,000s.”
The lawyers also dismissed DOJ’s use of public and internal communications by executives from both airlines—mostly by Doug Parker, US Airways Chairman and CEO and proposed CEO of the new American—that indicate that fares will increase after the merger. These statements, the lawyers noted, were “out of context” and not relevant to the merger. “It’s [the merger] about attracting more passengers and increasing capacity. The case is not about emails,” said Denis.
Parker and his colleagues also made note of DOJ’s failure to prove the anti-competitiveness of consolidation in almost all of its recent objections, adding that DOJ has only successfully stopped one merger in the past eight years.