Airline antitrust trial to start in November

Posted Friday, Aug. 30, 2013  comments  Print Reprints
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A decision Friday by a federal district judge to schedule a November antitrust trial could work in favor of American Airlines and US Airways in their quest to fend off a government lawsuit and create the world’s largest airline by year’s end, according to a range of industry experts.

In a courtroom conference at the U.S. District Court for the District of Columbia, Judge Colleen Kollar-Kotelly seemed skeptical of the Justice Department’s request for a March trial date, calling it “too far off.”

The judge scheduled the trial to begin during the week of Thanksgiving. The trial could last from 10 to 15 days, with both sides seeking testimony from airline executives and economists, among others. Attorneys will return to Kollar-Kotelly’s courtroom for a status conference on Oct. 1 to discuss pre-trial issues.

Speaking outside the courthouse Friday, lawyers for the airlines confidently predicted victory.

“We’re going to win,” said Rich Parker, an attorney for US Airways.

However, antitrust experts say the airlines shouldn’t dismiss the ability of the Justice Department to flex its muscles in its attempt to block the $11 billion deal — nor should they underestimate a “tough-minded” judge with a deep background in antitrust cases, including a government lawsuit against Microsoft. That case ultimately ended in a settlement.

“She’ll put the government through its paces, as well as the industry,” said Carl Tobias, a law professor at the University of Richmond. “She’s certainly seen a lot of assistant U.S. attorneys in her courtroom.”

“She will encourage them to try to settle it, if possible,” Tobias added.

The chief executives of American Airlines and US Airways issued a joint letter on Friday, telling workers they are pleased with the Nov. 25 date.

“The Court has set a schedule that will enable us to resolve this litigation in a reasonable timeframe,” said American’s Tom Horton and US Airways’ Doug Parker. “We are more committed than ever to bringing our airlines together and look forward to making our case for the new American in court.”

Industry analysts called the judge’s decision a “win” for the carriers.

Wolfe Research analyst Hunter Keay said he believes there is a 75 percent likelihood that the merger between the two airlines will occur, calling the Justice Department’s case “weak.”

“We also think DOJ relies too heavily on anecdotal and vignette-driven arguments, as was the case in Oracle/PeopleSoft, which DOJ lost in embarrassing fashion,” Keay wrote in a research report sent to investors on Friday.

The airlines and many industry observers reacted with surprise earlier this month when the Justice Department’s Antitrust Division filed suit against the merger; six states and the District of Columbia joined the lawsuit.

The department had approved three large airline mergers in recent years: Delta-Northwest, United-Continental and Southwest-AirTran. But more recently it successfully blocked AT&T’s attempt to purchase rival T-Mobile, a $39 billion deal that would’ve created the nation’s largest cellphone provider. After the Senate in December confirmed William Baer as the Justice Department’s antitrust chief, the department sued to block a merger of two larger beer makers. It later reached a settlement with the companies.

Some saw the lawsuit as a welcome sign of renewed vigor in the department.

“If people take antitrust laws seriously, they should not be surprised to see them being enforced,” said Bert Foer, president of the American Antitrust Institute, which opposes the merger.

Attorney Rich Parker accused the government of trying to change the rules.

“They approved other mergers,” he said. “Our merger passes muster by 10 miles.”

But Mark Ryan, the director of litigation in the Justice Department’s Antitrust Division, said that the government’s approval of past mergers was “not a defense” for this one.

Ryan cited a number of concerns outlined in the government’s Aug. 13 complaint, including the transparency of pricing, higher ticket prices and checked-baggage fees, the possibility of anticompetitive coordination with other airlines, the end of head-to-head competition for numerous city pairs, the end of a popular discount program and the combined airline’s dominance at Washington’s Reagan National Airport.

Critics of airline industry consolidation said the move was long overdue.

“They brought this case three mergers too late,” said Joseph Bauer, a law professor at the University of Notre Dame.

Meanwhile, a federal bankruptcy judge in New York is expected to rule on American’s reorganization plan, which includes the merger, in September. Judge Sean Lane indicated Thursday that he’s inclined to approve it on Sept. 12, but he wants to hear more about the airlines’ response to the government’s case.

Staff writer Andrea Ahles contributed to this report.

ctate@mcclatchydc.com Twitter: @tatecurtis

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