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The US Justice Department and several states filed suit Tuesday to block the $11 billion merger between American Airlines and US Airways, saying it would cut competition in the industry.
The move effectively dragged to a halt the long-pending merger to create the world's largest airline as American Airlines and its parent AMR Corp. exit bankruptcy restructuring.
The merger "would substantially lessen competition for commercial air travel in local markets throughout the United States and result in passengers paying higher airfares and receiving less service," the Justice Department said in a statement.
"Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure," Attorney General Eric Holder said in a statement.
"This transaction would result in consumers paying the price -- in higher airfares, higher fees and fewer choices."
The suit was joined by justice officials of six states and Washington DC.
It said that the two airlines compete head to head on more than 1,000 routes, and the merger would remove that competition.
"Eliminating this head-to-head competition would give the merged airline the incentive and ability to raise airfares," the department said.
It also said that the US airline industry was already "highly concentrated" and that after the merger four airlines would control more than 80 percent of the commercial air travel market.