American Air, US Air Defend Planned Merger

WASHINGTON--Executives for American Airlines Inc. and US Airways Group Inc. ( LCC ) on Tuesday defended their planned merger against claims from consumer advocates who said it could lead to higher fares, fewer regional routes, and decreased competition.

"What we're trying to do here is provide more to our customers," said Douglas Parker, chairman and chief executive of US Airways Group, at a Senate Judiciary Committee hearing on the merger. "We don't have the ability to get to as many places as some of our larger competitors--combined, we do."

The hearing came a month after AMR Corp. and US Airways Group Inc. announced they would combine, a deal expected to create the world's largest airline and $1 billion in cost savings, with an expected market value of about $11 billion. The deal, which would bring AMR out of the bankruptcy case it filed in 2011, would be called American Airlines Group Inc. and is subject to bankruptcy court and regulatory approval.

"There's no substitution for competition," said William McGee with the Consumers Union. "A merger of this magnitude can dramatically change the structure of the market and dramatically alter profit-making centers away from keeping prices low."

The Senate panel questioned airlines executives about fare hikes, route cancellations to small- and mid-sized markets and how expanding globally would affect domestic flights.

"Service to all metropolitan areas and midsized and small cities is more important than ever, yet we have seen reduced service," said Sen. Amy Klobuchar (D., Minn.), chairman of the antitrust panel that conducted the hearing. "We appreciate the goals stated here promise complementary flight networks, increased efficiencies and offer more options, but consumers have a right to be skeptical."

Mr. Parker, who is slated to be chief executive of the combined company, and Thomas Horton, CEO of American Airlines and its parent company AMR Corp., told senators that routes would not be disrupted, competition would be stronger, not eliminated, and it would allow them to expand globally.

Currently, the two airlines overlap on 12 of more than 900 routes.

Senators also pressed executives on capacity at Washington-area airports. The new company would have nearly 70% of the available slots at Reagan National Airport, said Sen. Michael Lee (R., Utah), which regulators could raise as a competitive issue.

Mr. Parker said he wouldn't propose selling any of the positions because they are important connections. Should the positions go to other airlines, it was not likely they would be used for regional flights because that isn't as profitable, Mr. Parker said.

Diana Moss, vice president of the American Antitrust Institute, who studies the airline industry, said analyses of earlier mergers indicates that fare increases will likely be a reality and carriers may drive traffic to larger hubs instead of direct regional flights. "We have to inform what goes on in this case with what goes on in the past," Ms. Moss said.

Write to Sarah Portlock at sarah.portlock@dowjones.com

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