Airline Merger Fight Set to Become Slugfest

August 13, 2013

​Mark Ostrau, co-chair of Fenwick & West’s antitrust and unfair competition group, is quoted in a Law360 article titled “Airline Merger Fight Set to Become Slugfest.”

The Department of Justice recently filed a lawsuit seeking to block the merger of US Airways and American Airlines due to antitrust concerns. The merger would create the world’s largest airline, which regulators fear could hurt competition and lead to higher fares for consumers and a hike in other fees. The suit is not only impacting the merger, but also American’s road out of bankruptcy.

“This looks like an all-or-nothing situation,” said Ostrau. “If there were an easy fix that everybody could live with, we wouldn't have gotten to where we are.”

The DOJ has identified over 1,000 city pairings where they feel competition would suffer if this merger were allowed to proceed. The airlines have a choice of defending the merger as a whole, or defending the deal on a market-by-market basis, similar to what AT&T attempted to do in their proposed acquisition of T-Mobile.

However, as paraphrased by Law360, Ostrau says that a market-by-market strategy is a “slow, tedious slog that, as often as not, undercuts the rationale for doing the deal at all.” 

“You either find that you can't fix everything, or by trying, the deal no longer makes sense,” he said.

For those who felt that regulators might be lenient with American due to their bankruptcy filing and restructuring, this suit has proven to be a surprise. But Ostrau tells Law360 that “Bankruptcy has become just part of the airline business process. If anything, it arguably makes [American] a stronger competitor. That's a point the DOJ made clearly.”

The full article is available through the Law360 website (subscription required).