Department of Justice announced a settlement todaythat will allow American Airlines and US Airways to merge into the world’s largest airline.
In August, when the DOJ sued to block the merger, it argued the elimination of a major competitor would “result in passengers paying higher airfares and receiving less service.”
Before allowing them to get together after all, the DOJ is requiring the American and US Airways to give up key landing and takeoff spots at seven airports. Those spots will go to low-cost carriers.
The idea is that giving a leg up to airlines like Southwest and JetBlue will make up for the loss of competition created by the merger, and consumers will see lower fares as a result.
Along with the announcement of the settlement, the DOJ distributed two charts to support that argument.
The first shows what has happened to fares and traffic on various routes when low cost carriers enter the market. The red shows how much traffic jumped, and the blue shows the drop in fares. The first bar shows that when JetBlue began flying between Boston and Newark, traffic jumped 151%, and average fares dropped 56%.
The second shows the expansion of service offered by Southwest after it was given slots at Newark Liberty Airport as part of a 2010 deal that allowed United and Continental Airlines to merge. According to the DOJ, those slots allowed it to reach these 60 cities from the airport, mostly via connecting flights.
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