US, States Challenge Proposed Airline Merger [VIDEO]

The Justice Department and a number of U.S. state attorneys general are challenging the proposed $11 billion merger between US Airways Group Inc. and American Airlines' parent company, AMR Corp.

The Justice Department says the merger would result in the creation of the world's largest airline. The government says a combination of the two companies would reduce competition for commercial air travel in local markets and would result in passengers paying higher airfares and receive less service.

A lawsuit filed in federal court in Washington, D.C., seeks to prevent the companies from making the deal in order to preserve head-to-head competition.

A spokesman for US Airways had no immediate comment. American Airlines did not immediately return a call seeking comment.

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