Arizona investors are crying foul on Attorney General Tom Horne this week after he announced that the State would join the U.S. Department of Justice in filing suit to block the pending merger between U.S. Airways and American Airlines.
American Airlines entered bankruptcy with plans to restructure and remain independent, adopting a standalone business plan designed to “restore America to industry leadership, profitability, and growth,” according to the company. The airline, which is still in bankruptcy, is claiming the merger is necessary for survival.
The parent company of American Airlines, Inc., and US Airways Group, Inc. announced this week that they “intend to mount a vigorous and strong defense to the U.S. Department of Justice’s effort to block their proposed merger.”
“We believe that the DOJ is wrong in its assessment of our merger. Integrating the complementary networks of American and US Airways to benefit passengers is the motivation for bringing these airlines together. Blocking this procompetitive merger will deny customers access to a broader airline network that gives them more choices.
“Further, this merger provides the best outcome for AMR’s restructuring. The widespread support from the employees and financial stakeholders of both airlines underscores the fact that this is the best path forward for both airlines and the customers and communities we serve.”
Investors question what they call is an assault on an Arizona company. One Tucson area investor described watching the company’s stock plummet as Horne made an appearance on CNBC about the lawsuit. The unions join investors in support of the company’s move leaving many to question why (and for whom) did Horne decide to join the suit.
Despite the fact that the company is in the process of restructuring, Horne surprised many financial experts when he made an incredible claim last week in an interview with CNBC that the company showed a profit.
Horne stated, “American and U.S. Airways compete directly on thousands of heavily traveled nonstop and connecting routes. If this merger is completed, consumers will likely see less competition and higher airfares because airlines will be able to cut service and raise prices with less fear of competitive responses from rivals.”
However, the company argues that because the combined airline expects to maintain current hubs of both airlines and expand service from those hubs, it will result in more choices for customers.
Horne claims that the merger would bring an end to an aggressive “pricing strategy and increase nationwide ticket prices by hundreds of millions of dollars. The merged airline would also be inclined to adopt American’s higher ancillary fee schedules (such as checked bag fees and ticket change fees), potentially costing consumers an additional $280 million each year.”
Horne’s former supporters note that he should allow the market to determine which companies live and die, and allow the consumer to decide how much they are willing to pay.
The other states joining in the lawsuit include Florida, Pennsylvania, Tennessee, Texas and Virginia. The District of Columbia has also joined the suit.