Airline Antitrust Hawks Lose Altitude

Vol. 53 No. 2

By

Richard D. Cudahy is a senior circuit judge of the United States Court of Appeals for the Seventh Circuit. Prior to his appointment to the court, he was the resident partner in the Washington, D.C., office of the former Chicago law firm of Isham, Lincoln, and Beale.

The proposed merger of American and US Airways airlines has taken a swift but bumpy flight from announcement to government antitrust complaint to settlement, barely touching the runway at any point. The reversal of sentiment by regulators, participants, and onlookers was perhaps the most striking aspect of the whole business.1 When the merger was announced, there was only sporadic adverse comment, but a complaint filed by the Antitrust Division of the Department of Justice evoked a veritable firestorm of criticism of the proposed merger. Critics including a variety of antitrust gurus registered their disapproval (and featured such luminaries as Irwin Stelzer2 and Herbert Hovenkamp3), perhaps carrying on in the tradition of Alfred Kahn, who, as their regulator, had released the airlines into the raging storms of competition in 1978. Thereafter, Kahn, from time to time, had prodded the government to pursue antitrust remedies in the interest of competition. The government complaint, among other things, alleged that the proposed merger would seriously undermine competition between American’s nonstop service to various destinations and US Airways one-stop service to the same points. There were intimations in some accounts of the pending lawsuit that the matter might be settled through American’s surrender of a number of its “slots” at Reagan in Washington, D.C., and LaGuardia in New York to other airlines. Most media comment, however, seemed to regard this possibility as unlikely and inconsistent with aggressive demands by the Antitrust Division.4

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