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Other states press ahead with US Airways merger challenge

By David McLaughlin and Sara Forden
Bloomberg News

WASHINGTON Texas Attorney General Greg Abbott’s decision to quit a U.S. lawsuit aiming to block the merger of American Airlines and US Airways Group Inc. isn’t shaking the resolve of other states to press ahead with the case.

The attorneys general of Florida, Pennsylvania, Arizona, Virginia, Michigan, Tennessee and the District of Columbia are standing with the Justice Department and pursuing their claims against the airlines, according to their offices.

“We’re remaining in the case,” Stephanie Grisham, a spokeswoman for Arizona Attorney General Tom Horne, said in an interview. “There hasn’t even been any discussion of dropping out.”

Texas, the home state of American parent AMR Corp., reached a settlement with the airlines on Oct. 1 and withdrew from the lawsuit. Abbott, the state’s attorney general, said the deal resolves his objection to the merger by ensuring service for rural areas in the state.

Texas was among seven states and the District of Columbia that had joined the Justice Department’s lawsuit against the airlines. They argue that the proposed merger, which would create the world’s largest carrier, threatens competition and would harm consumers. The case is scheduled to begin trial in federal court in Washington on Nov. 25.

Michigan Attorney General Bill Schuette wants the state’s consumers “to have more choices and the lowest possible rates – that comes with strong competition and more airlines,” Schuette spokeswoman Joy Yearout said in a statement.

Laura Glading, the president of the union representing flight attendants at American, said the union is urging other states to join Texas and drop out. Glading met with Arizona’s Horne about the case and told him jobs are at risk if the merger doesn’t go through. US Airways is based in Tempe, Ariz.

The union has also met with District of Columbia Attorney General Irvin Nathan and Tennessee Attorney General Robert Cooper, Glading said. Thursday it publicly called on Virginia Attorney General Ken Cuccinelli to drop out and Friday pushed for Florida’s Pam Bondi to quit.

“These AGs are not looking at the whole picture,” Glading said in a phone interview. “American cannot survive as a standalone.”

Melissa Maxman, an antitrust attorney at Cozen O'Connor, said it’s in the interest of the airlines to lobby states to withdraw from the case. The reasons that Texas or another state quit can become evidence in the case used by the airlines, she said.

“It’s like death by a thousand cuts,” said Maxman. “You just want to start cutting away at the group of AGs that are anti-merger and then you can ask them why and then you have conflicting evidence.”

American, based in Fort Worth, Texas, and US Airways argue the tie-up will benefit consumers and create an effective competitor to Delta Air Lines Inc. and United Continental Holdings Inc. Charlotte would be the combined airline’s second-biggest hub, after Dallas/Fort Worth.

Grisham, the Arizona spokeswoman, said in a statement that the merger would lead to higher fares and less service.

“We remain convinced that the airline merger between US Airways and American Airlines is harmful to competition, and to Arizonans,” she said.

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