Texas AG Explains State’s Lawsuit To Block AA/US Airways Merger
DALLAS (CBS 11 NEWS) - In his first remarks, Texas Attorney General Greg Abbott seeks to explain why his office joined the U.S. Justice Department’s lawsuit to block the proposed merger between American Airlines and US Airways.
The Justice Department’s lawsuit surprised many.
But many people expressed even more surprise that Texas joined that lawsuit.
After days of remaining silent, Abbott, who’s also running for Governor, is addresses criticisms of his decision by saying, “I have sued the Obama administration about 28 times and have repeatedly battled against overreaching actions by the federal government. I would not join with the federal government in a legal action if the merits did not command it. In this instance, the facts compel action to ensure the rule of law is enforced.”
Abbott’s Republican challenger in the Governor’s race, Tom Pauken criticized Abbott.
But the Attorney General says the proposed merger violates antitrust laws. “The legal violations appear so avert that it would offend my oath of office not to take action.”
The Attorney General’s office said it was concerned the newly combined airline would drop flights to smaller cities in Texas, leaving them without any air service.
Abbott says the merger would harm competition for nearly 200 routes in the Lone Star State.
The Justice Department has argued if the two airlines join forces, it will reduce competition and raise airfares and fees.
Abbott says, “The goal of the airlines appears to undermine free markets. The combined airlines will be able to extract higher fees and impose more onerous fares only because the free market system will be so distorted.”
Attorneys for American and US Airways strongly disagree.
They call the government’s case weak, and plan to fight the lawsuit in court.
The airlines say that a merger would allow them to offer more flights to more destinations, and that it would allow them to compete more effectively with United and Delta.
The government previously allowed those two airlines to merge with others.
Some attorneys believe that’s a legitimate argument for American and US Airways to make in court.
But Abbott says each airline can compete in the free market. “If you look at the recent financial performance of US Airways and American Airlines, you can see how the two airlines are viable, healthy and in a position to be competitively aggressive and successful on a stand-alone basis.”
American and US Airways attorneys say they don’t believe politics has anything to do with the lawsuit.
Both airlines say the lawsuit will delay the merger by at least several months.
They’re trying to have a trial date expedited.
The airlines hoped to close their merger transaction next month.
On Thursday, the airlines urged bankruptcy judge Sean Lane to approve American’s reorganization plan. But Judge Lane delayed his decision. He may rule during another hearing set for August 29th.
The reorganization plan would pave the way for American to exit bankruptcy. But unless American and US Airways can resolve their differences with the government over the merger, American can’t reorganize. Its plan relies on being able to merge.
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