Consolidating miles in airline mergers


30-Sep-2017 12:18

But the reversal in the American-US Airways case was part of what antitrust observers see as a string of disappointing decisions by the Obama administration.

“I hoped they would be much more aggressive and much more concerned about increasing concentration and ongoing predatory conduct,” said Thomas Horton, a former Justice Department antitrust attorney now at University of South Dakota law school.

While the price of fuel – one of airlines’ biggest expenses – has plummeted by as much as 70 percent in the last two years, the industry has kept most of those savings for itself. That’s in contrast to Europe, where the industry is significantly less concentrated and there is intense competition.

The combined company, which operates as American Airlines, has steadily increased fees since the deal, one of the harms the Justice Department warned of three years ago.

“The combination of American Airlines and US Airways creates a better network than either carrier could build on its own,” Emanuel wrote in an October 2013 letter to the Justice Department that other mayors signed onto.

“American’s substantial operations throughout the central United States provide critical coverage where US Airways is underdeveloped.” The letter was an uncanny echo of the airlines’ arguments – for good reason: It was actually written by an American Airlines lobbyist, emails obtained by Pro Publica show.

And just days after the suit was announced, the airlines turned to Chicago Mayor Rahm Emanuel, Obama’s first White House chief of staff, to help push back against the Justice Department.

Some lawyers and officials who worked on the American-US Airways case now say they were “appalled” by the decision to settle, as one put it.

consolidating miles in airline mergers-36

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“The White House does not play a role in those decisions.” But the abrupt move to settle was met with a backlash among the team building the case, according to interviews with four lawyers and officials who worked on the case.There’s no direct evidence that the lobbying worked.The Justice Department denies the pressure affected its decision-making and the White House said it was not involved.The Justice Department’s abrupt reversal came after the airlines tapped former Obama administration officials and other well-connected Democrats to launch an intense lobbying campaign, the full extent of which has never been reported.

DOJ lawsuit: Consolidation has “hurt passengers” Emails: Rahm Emanuel letter actually written by airline lobbyist Contacts between Obama officials and airline lobbyists Goldman Sachs analysis: “Dreams of oligopoly” They used their pull in the administration, including at the White House, and with a high-level friend at the Justice Department, going over the heads of staff prosecutors.“Too often they really took the business side.” Obama’s antitrust enforcers have been somewhat more aggressive than the Bush administration in challenging mergers.



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