It appears that the Department of Justice has been doing its research and is pulling a bit of a “Remember when you said that thing about mergers hiking airline fares?” in its lawsuit seeking to block them merger of American Airlines and US Airways. Included in the 56-page lawsuit filed yesterday are quotes from internal emails as well as comments made in public by the airlines’ top executives touting the fact that past mergers have led to raised fares and more fees passengers have no choice but to pay.
The suit hearkens back to the time in 2011 when US Airways President Scott Kirby said that industry consolidation had made it possible for airlines to then successfully complete three airfare hikes that year, reports the Associated Press’ Scott Mayerowitz. And then in 2012 he spoke at an industry conference, saying it’s “impossible to overstate the benefit” of mergers in giving airlines the ability to impose new fees.
That seems to translate to: “Isn’t it great that airlines can make more money with mergers by charging higher fares and tacking on extra fees?”
That’s not the line executives had been towing in the run-up to the merger, however, as lawyers for the DOJ point out. While patting themselves on the back for making money due to consolidation, they’re also claiming that the new airline would somehow lower fares through “unspecified or unverified ‘synergies.’”
If there’s one thing my Great Uncle Aloysius always told me, it’s never to rely on unspecified synergies. Also, he was always like, “What’s a synergy? Pass me my pipe tobacco when you’re done with it.”
The government is now taking those words and throwing them back in the executives’ faces.
“By making claims about the benefits that are at odds with their prior statements on the likely effects of this merger,” the government says American and US Airways executives are “saying what they believe needs to be said to pass antitrust scrutiny.”
The government says mergers will only serve to harm consumers, not help them, by limiting their choices and giving them no option but to pay those fees and higher fares. We’ve seen the piggyback effect before — one airline institutes a fare hike, and very often, the others follow suit so as not to be left behind in the moneymaking game.
Gov’t uses airline executives’ words against them [Associated PRess]