| FOR IMMEDIATE RELEASE
FRIDAY, JULY 27, 2001
TDD: (202) 514-1888
DEPARTMENT OF JUSTICE AND SEVERAL STATES WILL SUE TO STOP
Deal Would Result in Higher Air Fares for Businesses and Millions of Consumers
WASHINGTON, D.C. -- The Department of Justice today concluded that the proposal for United Airlines to acquire US Airways would reduce competition, raise fares, and harm consumers on airline routes throughout the United States. The Department expects to file suit to block the merger and to be joined in its suit by the Attorneys General of several states, including California, Connecticut, Delaware, Iowa, Maine, Maryland, the Commonwealth of Massachusetts, Michigan, Minnesota, New York, the Commonwealth of Pennsylvania, and Vermont.
United Airlines and US Airways initially announced their proposed merger in May 2000. The parties made submissions to the Department and announced some changes in January 2001, and the Department continued its analysis and discussion of the proposed transaction. In May 2001, both United and US Airways requested that the Department delay action on the merger proposal until further notice, pending submission of new proposals. No new proposals were submitted. On July 12, however, the parties notified the Department of their intent to close the transaction with no material structural changes to the proposal and requested a prompt decision, resulting in today's announcement.
United and US Airways are the second and sixth largest U.S. airlines. The acquisition would give United a monopoly or duopoly on nonstop service on over 30 routes, where consumers spend over $1.6 billion annually, and substantially limit the competition it faces on numerous other routes representing over $4 billion in revenues. US Airways is United's most significant competitor on densely-traveled, high revenue routes between their hubs, such as Philadelphia and Denver, as well as for nonstop travel to and from Washington D.C. and Baltimore, and on many routes up and down the East Coast.
"A vigorously competitive airline industry is vital to our economy and effective antitrust enforcement is important to preserving the benefits of competition in a deregulated airline industry. While mergers can further competition, this one does not. If this acquisition were allowed to proceed, millions of consumers -- business, government and families -- would have little choice but to pay higher fares and accept lower quality air service," said Attorney General John Ashcroft.
The Department maintains that the proposed acquisition would violate the antitrust laws by reducing competition in:
Noting that United and US Airways offered proposals to limit the loss of competition from this merger, R. Hewitt Pate, Deputy Assistant Attorney General of the Department's Antitrust Division stated, "In the final analysis, the core of the proposed remedy -- a divestiture of assets at Reagan National airport and a promise by American Airlines to fly five routes on a nonstop basis -- would not adequately replace the competitive pressure that a carrier like US Airways brings to the marketplace.
"The proposal did not assure competition for those adversely affected by the acquisition, such as passengers in east coast connect markets, and instead substituted regulation for competition on some key routes and created competitive harms through United's and American's agreement to jointly fly and price the New York, Washington and Boston shuttle routes."
US Airways operates hub airports in Philadelphia, Pittsburgh and Charlotte. United operates hubs at Los Angeles, San Francisco, Denver, Chicago and Washington Dulles. US Airways is headquartered in Arlington, Virginia with revenues of $9.2 billion in 2000. United is headquartered in Elk Grove, Illinois with year 2000 revenues of $19.4 billion.