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American Airlines Hub States Fight Anti-Merger Lawsuit

Aug 21, 2013 4:28 pm

Skift Take

These states had a lot riding on the merger, so it’s no surprise they’re pulling for its success. But after presenting a well-considered and thoroughly researched lawsuit, the federal government is not likely to change its mind based on three states’ financial interests.

— Eliza Ronalds-Hannon

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Pinoy Photographer  / Flickr

Miami International Airport is one of the hubs that will suffer if the American Airlines-US Air merger is blocked. Pinoy Photographer / Flickr


Officials in three states are pushing back against the U.S. government’s attempt to block the proposed merger of American Airlines and US Airways to create the world’s biggest airline, saying the combined company would benefit their local economies.

Last week, the U.S. Justice Department filed a lawsuit challenging the merger, saying it would reduce competition among air carriers and ultimately lead to higher fares for passengers.

But some local political and business officials in Florida, Texas and North Carolina, which are home to large hubs for American and US Airways, are asking the federal government and supporting states to reconsider the lawsuit.

Carlos Gimenez, the mayor of Miami-Dade County, which includes the city of Miami, on Wednesday called on U.S. Attorney General Eric Holder to withdraw the lawsuit.

“American Airlines is a vitally important part of our work force,” Gimenez told a media briefing. “It’s vitally important that American be allowed to come out of bankruptcy and expand their footprint.”

American Airlines, which sought Chapter 11 protection in late 2011, is one of the largest private employers in Miami-Dade County. The carrier operates around 70 percent of the flights at the Miami airport, making it a dominant hub for flights to and from Latin America. Local officials have long promoted Miami as the “Gateway to the Americas.”

Gimenez’s support for the deal put him at odds with Florida state officials. The Justice Department lawsuit was joined by six states, including Florida and Texas.

Gimenez said Miami airport lawyers were looking at their legal options.

The Justice Department lawsuit drew support from consumer advocates, but surprised the airline industry and raised questions about the sustainability of the airlines’ budding recovery.

Other communities also support the merger.

“For us, it’s keeping what we have, we hope, and adding more” flights and jobs, said Connie Majure-Rhett, president and chief executive of the Chamber of Commerce in Wilmington, North Carolina. US Airways offers 13 daily flights out of the Wilmington airport.

Majure-Rhett said the Wilmington airport had lost a direct flight to Chicago and hoped it might regain it in the merger of the two carriers. “That’s one of our most traveled-to destinations for our business travelers,” she added.

In Texas, the heads of the Chambers of Commerce in Dallas and Fort Worth, where the merged American Airlines would be based, sent a letter to that state’s attorney general asking him to drop his support for the U.S. Justice Department’s lawsuit.

“If this merger is not finalized, there is no plan B for American Airlines,” Dallas Regional Chamber President James Oberwetter and Fort Worth Chamber President Bill Thornton wrote.

“By any stretch of the imagination, having what the press refers to as the ‘World’s Largest Airline’ based in Texas, makes our state more competitive,” their letter added.

American parent AMR Corp and US Airways plan to vigorously defend the merger, which they say would provide a third global rival to Delta Air Lines and United Continental , both the products of mergers.

Miami International Airport Director Emilio Gonzalez said he worried about the potential impact on the airport’s bond ratings if the merger fails.

Standard & Poor’s and Fitch Ratings in October assigned A ratings to revenue bonds issued by the county department responsible for maintaining the Miami airport.

“Our concern is that anything that affects American Airlines’ growth, anything that affects American Airlines’ ability to get out of bankruptcy through this merger, could very well have a detrimental effect on our bond rating,” Gonzalez said.

(Reporting by Kevin Gray in Miami and Karen Jacobs in Atlanta; Editing by Tim Dobbyn). Copyright (2013) Thomson Reuters. Click for restrictions.

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