Friday, April 9, 2010

Consolidation Continues

Consolidation continues in the airline industry as British Airways and Iberia announced the finalization of their merger agreement today.  See Nicola Clark et al., British Airways and Iberia Sign Merger Deal, N.Y. Times, Apr. 8, 2010 (available here).  If the deal is approved by the European Commission, BA-Iberia will become one of the largest airlines in the world.  Meanwhile, news agencies are still buzzing about yesterday's revelation that American carriers United Airlines and US Airways are in the midst of their own merger negotiations.

From a legal perspective, the possibility of a United/US Airways merger raises more interesting issues.  As discussed yesterday on the blog, see here, the two U.S. airlines have twice failed to win merger approval from the Justice Department.  Despite the fact both airlines have lost significant market share since their last attempted link-up in 2000, their merger plans may run up against Assistant Attorney General Christine Varney's plans for "vigorous antitrust enforcement," including limiting further market concentration in presumably all industrial sectors.  See generally Christine A. Varney, Assistant Attorney General, U.S. DOJ Antitrust Division, Vigorous Antitrust Enforcement in This Challenging Era, Remarks to the U.S. Chamber of Commerce (May 12, 2009) (available here).  The DOJ has already proved to be a thorn in United's side during its (ultimately successful) bid to win antitrust immunity for its partnerships with carriers such as Continental and Lufthansa as part of the Star Alliance.  In that instance, however, the DOJ had no statutory authority to block the Department of Transportation from making the immunity grant.  If United and US Airways decide to proceed with a full-on merger, the DOJ will have full powers to review and potentially challenge the consolidation.

The second interesting legal issue a possible United/US Airways merger raises is what, if any, effect it will have on United and Continental's pending antitrust immunity application for their alliance with Japan's ANA.  Will the DOT put its immunization analysis on hold until the merger is consummated?  If the immunity is granted before a merger is finished, will a new proceeding have to be initiated afterward?  And, regardless of the timetable, will the potential merger have any impact on the DOT's decision over whether or not to grant the immunity at all?

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