The Justice Department says it has reached an agreement to allow American Airlines and US Airways to merge, creating the world's biggest airline.What happened in the interim? Well, a lot of economists made a lot of money. You see every big M&A gets scrutinized by the government and a lot of economists employed by the DOJ analyze the impact of the proposed deal on consumers and the companies themselves hire big economics consulting firms like NERA to do their own analysis.
The agreement requires the airlines to scale back the size of the merger at Washington's Reagan National Airport and in other big cities.
In August, the government sued to block the merger, saying it would restrict competition and drive up prices for consumers on hundreds of routes around the country.
The airlines have said their deal would increase competition by creating another big competitor to United Airlines and Delta Air Lines, which grew through recent mergers.
The settlement reached Tuesday would require approval by a federal judge in Washington. It would require American and US Airways to give up takeoff and landing rights or slots at Reagan National and New York's LaGuardia Airport and gates at airports in Boston, Chicago, Los Angeles, Dallas and Miami to low-cost carriers to offset the impact of the merger.
In the end lots of economists and lawyers get involved and try to hash out a compromise. Some times they can't and they try and hash it out in court, but usually this happens: the economists and lawyers agree to a plan that satisfies the DOJ that there will not be undue impacts on consumers.
Clearly in this case there DOJ was concerned that the merger would leave quite a few markets with too little competition and so a remedy was agreed on.
The economic consulting business is booming and the salaries are fantastic - something to think about if you are considering the Econ major.