AMR, US Airways leaders defend merger at Senate hearing

Posted Tuesday, Mar. 19, 2013  comments  Print Reprints
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The proposed merger between AMR Corp.'s American Airlines and US Airways Group would increase fares, reduce service to smaller communities and make it more difficult for low-cost carriers to compete, two consumer advocates said at a Senate hearing today.

"The proposed deal raises significant competitive issues that could result in harm to consumers," said Diana Moss, vice president of the American Antitrust Institute, in testimony to the Judiciary Committee. The institute is a Washington non-profit that promotes consumer rights.

The deal to create the world's largest carrier was defended by the companies' chief executive officers, Doug Parker of US Airways and Tom Horton of Fort Worth-based AMR, in a joint statement to the committee. Parker would lead the joined company.

Sen. Mike Lee, a Utah Republican, questioned the executives about the Washington region, where the two carriers control about two-thirds of flights at the capacity-controlled Reagan National Airport.

There is no need for the U.S. government to take away Reagan slots from the new airline because the region is served by two other large airports with robust competition, Horton said. Taking Washington slots from the combined carrier would hurt service to smaller communities, Parker said.

Low-cost carriers such as Southwest Airlines and Alaska Air Group will continue to provide competition that will help keep fares down, they said. The two company leaders said they expect to save at least $1 billion annually by combining.

Combining American and US Airways would leave three major U.S. carriers with domestic and international routes, down from seven in 2000. Announced on Feb. 14, the merger is scheduled to be completed as American exits bankruptcy protection in this year's third quarter.

The combination must win approval from AMR's bankruptcy judge, shareholders of Arizona-based US Airways and U.S. regulators. The Justice Department's antitrust division earlier this month asked for more information from the companies.

The merged airline would keep American's name and continue to be based in Fort Worth.

When Southwest is included, the merger would "result in four top airlines controlling nearly 80 percent" of domestic air traffic, Sen. Amy Klobuchar, chairman of the antitrust subcommittee, said in opening statements.

The panel must review concentration in the industry and what it means for rural areas, baggage fees and other airline charges, said Klobuchar, a Minnesota Democrat.

"With fewer competing airlines, can we expect even more of these charges?" she said. "We need to know now that fewer airlines won't mean fewer flights and fewer services," she said.

William McGee, a consultant to Consumers Union, said previous mergers have hurt airline passengers.

"We are concerned that the proposed merger between American Airlines and US Airways has the potential to further deprive air travelers of healthy, robust competition, and to further deprive communities of being part of a vibrant air transportation network," he said.

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