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Panel hears pros and cons of American-US Airways merger

February 26, 2013|By Hugo Martin
  • A merger of US Airways and American Airlines has been announced.
A merger of US Airways and American Airlines has been announced. (Tom Fox / MCT )

Critics and supporters of a merger of American Airlines and US Airways to form the nation's largest carrier testified for the first time Tuesday in a hearing before a congressional panel.

The merger, announced Feb. 14, would cost $1.2 billion in one-time costs but would generate $1 billion annually in new savings and added revenue, representatives from the two airlines said in testimony to a House of Representatives subcommittee in Washington, D.C.

Stephen Johnson, executive vice president for US Airways, and Gary Kennedy, senior vice president at American Airlines, both praised the merger plan, saying it would benefit passengers and increase competition.

"Expanding our network for the benefit of our customers, our employees, our shareholders and our communities was the motivation for bringing these companies together," Johnson said.

The hearing also featured appearances from merger critics, including Christopher Sagers, a professor of law at Cleveland State University.

He argued that numerous mergers in the past have not strengthened the financial footing of the industry and another merger won't help. "It hasn't worked," Sagers said.

Another academic, Clifford Winston, a senior fellow at the Brookings Institution, spoke in favor of the merger, saying mergers have helped the industry overcome crisis, such as fuel price spikes and financial recessions.

U.S. Rep. Spencer Bachus, who chaired the panel on regulatory reform, commercial and antitrust law, noted that the merger has the support of the key employee unions for the two airlines.

The merger must be approved by the U.S. Department of Justice and a New York judge overseeing the bankruptcy of American Airlines' parent company, AMR Corp.


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