Valley business leaders were surprised Tuesday when word spread that the Justice Department and several state attorneys general, including Arizona’s, filed a lawsuit to halt an $11 billion planned merger between American and Valley-based US Airways.
“I’m afraid that there would be an impact,” should the airlines merge, said East Valley Partnership President and CEO Roc Arnett. “Without the home office being here, they won’t support people like East Valley Partnership and the chambers and there will be fewer employees. And the loss of a major Fortune 500 company that we have here in the Valley is a net loss to the Valley. Will that loss occur if they stay? I certainly hope not.”
The merged company headquarters would be in Texas under a plan announced in February to create the country’s largest airline. But US Airways assured Tempe officials it would maintain a local presence and Phoenix would be one of the new company’s hubs. Currently, there are between 8,000 and 10,000 US Airways employees in the Valley.
“Tempe’s top priority is we want to make sure we retain as many airline jobs as possible in Tempe and throughout the region,” Tempe Mayor Mark Mitchell said. “We also know in regards of the merger, the merger would be good for Tempe, the Valley and Arizona.”
Arizona Attorney General Tom Horne joined Texas, Florida, Pennsylvania, Tennessee and Virginia, along with the District of Columbia and the U.S. Department of Justice, in filing suit to block the pending merger. In a press release Tuesday, Horne cited concerns that with less competition, air fares could rise.
“Competition is crucial for a vital economy” said Horne. “As the state’s chief legal officer, it is my duty to maintain competitive markets in Arizona for the benefit of our citizens. This merger is anti-competitive and Arizona consumers will be forced to pay millions of dollars more each year in increased airfare if it goes through as planned.”
The release goes on to state: “Although the proponents of the last few airline mergers promised they would cut costs for passengers, those savings never materialized.”
However, aviation expert Robert Mittelstaedt, dean emeritus and professor at Arizona State University’s W. P. Carey School of Business, believes the merger could be good for the Valley.
“We ought to be rooting for it to go through. A person’s first reaction is we would lose the headquarters, but Sky Harbor will still be a significant hub for the new airline,” he said. “I’ve said a number of times that I believe it may result in increased traffic through Sky Harbor.”
Mittelstaedt said the merged airlines could offer flights to the East Coast through Phoenix for cities such as Ontario and Long Beach.
“If you look at Southern California, there are plenty of people who would rather change planes in Phoenix ... without having to go down to LAX (Los Angeles).”
“On the whole, I think it’s going to be a positive for Phoenix and it would be a negative if it didn’t go through, just in the viability of US Airways in general and the missed opportunity,” he said.
Julie Rodriguez, spokeswoman for Phoenix Sky Harbor International Airport, said US Airways and American combined account for about half the flights out of Phoenix. US Airways makes up the bulk of that figure, she said.
In fact, US Airways and Southwest — the two busiest airlines out of Sky Harbor — account for about 80 percent of the flights out of Phoenix.
American Airlines and US Airways Group released a joint statement online that they plan to “mount a vigorous and strong defense to the U.S. Department of Justice’s effort to block their proposed merger.”
“We believe that the DOJ is wrong in its assessment of our merger. Integrating the complementary networks of American and US Airways to benefit passengers is the motivation for bringing these airlines together. Blocking this pro-competitive merger will deny customers access to a broader airline network that gives them more choices,” the statement says.
Tempe Chamber of Commerce President and CEO Mary Ann Miller said the news of the lawsuit was surprising, but she also noted it’s not clear what it would mean for the Valley-based employer.
“You don’t know exactly what things would look like immediately after or five years after (a merger),” she said. “From Tempe and Phoenix’s standpoint, it really wouldn’t be that huge of a loss. Not that we want them to go, but there isn’t a lot of overlap from the U.S. Airways and American operations out of Phoenix. The flights out of Phoenix are pretty darn full. I don’t expect that even with the merger that would change what’s happening at Sky Harbor.”
While there may be changes in key management, she said, “Overall, it’s not like the thousands of employees of U.S. Airways are going to pick up and be gone. I think most of them will stay here. Communities where there’s much more overlap will have a larger impact.”
The lawsuit was filed just days before a judge was to rule on American Airlines restructuring plan under its bankruptcy filing.
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