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EDITORIAL: Obama delays a merger

American and USAir hit unexpected government turbulence

- - Monday, August 19, 2013

Just when American Airlines was about to emerge from bankruptcy and proceed to a merger with USAir, the control tower calls them back to the terminal. The Justice Department says not so fast. The lawyers want to take another look at the corporate nuptials, and it's not quite clear why.

The government lawyers are concerned that the surviving airline, to be called American Airlines Group, would leave only three of the so-called "legacy airlines," legacies from the days when dozens of airlines, like the railroads in their early days, sprouted and prospered nearly everywhere. The new American, along with Delta, United and Southwest, the king of the discounters, would control 90 percent of U.S. air traffic. Flying 187 million passengers a year, served by more than 100,000 employees, the new American would be the world's largest airline.

The Justice Department thinks this might mean higher, not lower, fares. Investigators have uncovered emails between airline executives speculating about how the new airline might charge more after the merger. There's speculation, too, that the new American and United could merge later, creating an airborne gorilla of truly immense size. The implications of that are not clear, either.

Both American and USAir have been struggling, if not exactly on life-support, for years. Entangling American in antitrust litigation at the end of two-year bankruptcy proceeding threatens its survival again. A company pursued by the federal government on antitrust will suffer new headaches. The company wanted this merger, its employees wanted it, the bankruptcy judge approved it. In the end, the Justice Department might even approve it. But the government lawyers have thrown a wrench into the works.

These questions were thought settled, and the intervention of the Justice Department, particularly at such a late date, was unexpected. Some airline analysts think the late attention from the Justice Department indicates the Obama administration means to take a tougher look at mergers generally in the president's second term. The White House has earned a reputation for being darkly suspicious of capitalists.

American and USAir, both eager to make things happen as quickly as possible, might have to give up certain routes and valuable gates at certain airports and make certain binding promises not to cut back on service. Airlines were once among the most popular American institutions, run by men steeped in aviation experience, lore and tradition, some of them dating from the days of open cockpits. The "legacy operators" are gone now, and buffeted by events largely beyond their control, the airlines have become no more popular than the lawyers who run many of the companies. Air travel, once a treat, has become something to be endured, no more glamorous than a streetcar ride.

The Washington Times