Department of Justice sues to block American-US Airways merger

The US government challenged the planned $11bn (£7.1bn) merger of American Airlines and US Airways yesterday, with the Justice Department going to court to block the deal on the grounds that it would hit competition in local markets and drive up air fares.

As a result, shares in US Airways were down by more than 42 per cent in afternoon trading while those in American's parent company, AMR, were down more than 8 per cent.

General Eric Holder, US Attorney General, said the merger would mean "higher fares, higher fees and fewer choices" for air travellers.

Currently, the two carriers are direct competitors on more than a thousand routes representing "tens of billions of dollars in annual revenues," the Justice Department said.

The case was filed before a bankruptcy hearing due to take place tomorrow, in which a judge is expected to approve the merger plan. AMR, which filed for bankruptcy in 2011, wants to wrap up its restructuring plans with the deal, which would create the world's largest airline.

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