Nightly News   |  August 13, 2013

US Air, American merger could hurt customers, Feds say

The Justice Department and attorneys general from six states and Washington, D.C., want to block the merger of American Airlines and US Airways, claiming the union would cut competition and result in higher ticket prices. But, the airlines tout the deal as a win for travelers.  NBC’s Tom Costello reports.

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>>> good evening, i'm lester holt sitting in tonight for brian. if you've found why areself in front of a computer lately trying to find cheap air fair, you know how frustrating it can be. there are fewer seats to be had as airlines have cut capacity. and megamergers have swept smaller companies into history. today the government blocked the merger between united and usairways. contrary to what those two carriers have been saying, the deal will reduce competition and force us all to pay more to fly. tom costello has a story from one of the airports that could be most impacted by all this. washington's reagan national . tom?

>> justice says if this deal goes through, this new mega airline would control 69% of the takeoff and landing slots at reagan national airport . competition will be affected nationwide. for months, usairways and american had been promoting their merger as a big win for customers.

>> we've not only become a bigger airline. but also something so much greater.

>> today the government and a bipartisan group of attorneys general from six states and d.c. move to block the deal, saying the new airline would be too big, reducing the number of big carriers from 4 to 3.

>> they tend to contract the market, you have less routes, less choices, less people trying to please you, they don't have people competing with them, they don't need to please you.

>> some passenger rights at vow cats are applauding.

>> consumers got no new destinations and we lost competition across the country. that's what i was concerned about.

>> the government argues the merged airline would cut competition since they compete directly on 1,000 routes already. american and usairways insist they compete on just 12 routes. in a joint statement, they vow to fight the government in court, saying blocking this pro competitive merger will deny competitors access to a network that gives them more choices. merging does make good business sense.

>> this industry has a track record of too many planes and too many players, and unless they can tighten up profitability by tightening up capacity, it's going to be a badly damaged industry.

>> the proposed deal would be the latest airline megamerger following united, continental, northwest and delta. southwest and both airtran and ata. usairways and america west . is it good for passengers who now pay more for luggage, leg room, even sodas.

>> the prices are no longer competitive, i would be unhappy.

>> if you're not providing the services, they're going to go to another airline. if you're not providing the route, they're going to go to another airline.

>> the government has approved airline mergers in the past, this one was too big and it says those previous mergers have proven that too often the airlines hike fares and cut their routes.

>> this merger was announced as american was slipping off into bankruptcy. a lot of people are wondering, is a weakened american better off than to have this merger go through?

>> you know, this is a business where it's survival of the fittest . clearly if you lose an airline, if that ever became an eventuality, that would be bad news for customers also. the government finds itself walking a fine line here between what's good for the customers and what's good for business.

>> it's been tough going weatherwise