Justice Department will sue to block United-US Airways merger

Friday, July 27, 2001 | 11:32 a.m.

SUN STAFF AND WIRE REPORTS

WASHINGTON -- The Justice Department, citing antitrust concerns, said today it will file suit to block the merger of United Airlines and US Airways.

The department said the 16-month-old proposal, which would have created the nation's largest airline, would "reduce competition, raise fares and harm consumers."

The department said it will be joined in its suit by the attorneys general of several states -- but not Nevada's.

"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 ruling was widely expected even before United's parent company, UAL Corp., wavered this summer in its commitment to what would have been the largest-ever airline purchase.

The Justice Department said the merger would violate antitrust laws by reducing competition in hub-to-hub nonstop markets like Philadelphia-Los Angeles, San Francisco-Denver and Pittsburgh-Washington D.C., where US Airways and United are each other's only nonstop competitor.

The Washington, D.C., and Baltimore markets would also see reduced competition, the department said. The government is likely to find that competition also would suffer on East Coast and international routes, and in the realm of corporate and government business travel.

Under the terms of the deal, United is entitled to walk away Aug. 1 -- next Wednesday -- paying a $50 million breakup fee. Industry experts have said the Chicago-based carrier was seeking a final verdict to minimize the impact of potential litigation by US Airways shareholders.

Nevada's consumer advocate, Tim Hay, said Nevada is not joining the Justice Department's suit because Las Vegas and Reno airport officials said they don't feel the merger would adversely effect airline competition at McCarran and Reno /Tahoe International airports.

United carried 260,347 passengers to and from Las Vegas in June, making it the third-largest carrier in the city. Its business was dwarfed by No. 1 Southwest and No. 2 America West with 986,968 and 591,628 passengers, respectively. US Air is ranked No. 10 at McCarran, carrying 56,381 Las Vegas passengers in June, McCarran statistics show.