DALLAS – American Airlines and US Airways expected to spend this week cruising toward completion of a merger that would create the world’s biggest airline.

Instead, they were stunned Tuesday when the federal government and six states sued to block the $14 billion deal, saying it would hurt competition and cost consumers hundreds of millions of dollars a year in higher fares and extra fees.

Antitrust regulators had done little to interfere with other big airline mergers in the past five years, including Delta-Northwest and United-Continental. So, they were not expected to stand in the way of American and US Airways. But this latest deal would leave four airlines controlling more than 80 percent of the U.S. air-travel market.

“By further reducing the number of legacy airlines and aligning the economic incentives of those that remain, the merger of US Airways and American would make it easier for the remaining airlines to cooperate, rather than compete, on price and service,” the lawsuit said.

The Justice Department turned the words of US Airways leaders against them. The 56-page complaint filed in U.S. District Court in Washington, D.C., was peppered with quotes from internal emails, investor presentations and public comments in which top executives noted that previous mergers had helped lead to higher fares and higher fees to check a bag or change a ticket.

Executives of the two airlines vowed to challenge the lawsuit.

“We will fight them,” declared US Airways CEO Doug Parker, who would run the combined company.

Paul Denis, a Washington antitrust lawyer hired by US Airways, said Tuesday would be the Justice Department’s “best day” in the matter. “They got to hold their press conference. Now they’ve got to try their case in court,” he said.

Tom Horton, CEO of American Airlines parent AMR Corp., said the companies had spent months trying to persuade the Justice Department that the merger would help customers and boost competition by creating a tough new rival to larger airlines United and Delta.

AMR has been operating under bankruptcy protection since November 2011. It has cut labor costs, renegotiated aircraft and other leases and earned $220 million profit in the second quarter – its first profit in the April-to-June period in six years. It is forging ahead with an order for hundreds of new airplanes.

The company had expected the highlight of this week to be a Thursday hearing at which a federal bankruptcy court judge would approve its reorganization plan, including the merger. That would be one of the final steps before AMR could exit Chapter 11 protection by the end of September.

The hearing is likely to go ahead, and the judge could approve AMR’s turnaround plan on the condition that the Justice Department’s opposition is resolved. But AMR probably won’t come out of bankruptcy for at least a few more months while it fights the lawsuit, officials at the companies said.

American and US Airways had been so confident of a quick merger that they had already named executives for the combined company, which was to be based at AMR’s headquarters in Fort Worth and called American Airlines Group Inc. Executives at Tempe, Ariz.-based US Airways have been house-hunting in the Dallas-Fort Worth area.

It’s possible that the lawsuit will never go to trial. Analysts said the Justice Department could be seeking more time and leverage to squeeze concessions from the companies, such as giving up some of their precious takeoff and landing slots at Reagan National Airport, which would create room for new competitors at the busy airport across the Potomac River from Washington.

At a news conference, Assistant Attorney General Bill Baer said the Justice Department was always prepared to discuss a settlement but that it preferred this time to seek an injunction to block the deal. “As we look at the market today, it’s not functioning as competitively as it ought to be,” he said, and “if this deal goes through, it’s going to be much worse.”

The Justice Department, which was joined in the lawsuit by the attorneys general of six states and the District of Columbia, said the merger would cause “substantial harm” to consumers by leading to higher fares and fees.

Government lawyers cited examples in which US Airways operates one-stop flights that undercut nonstop flights by American and other rivals by hundreds of dollars. After the merger, they said, US Airways would drop that practice, pushing fares higher.

The lawsuit caught many observers by surprise. In the last five years, antitrust regulators in the Bush administration had allowed Delta Air Lines to buy Northwest, while the Obama administration permitted United Airlines to combine with Continental, and Southwest Airlines to buy AirTran. The nation had gone from nine major carriers in 2005 to five, and the Justice Department hadn’t opposed an airline merger since United’s 2001 attempt to buy US Airways, a deal that was later abandoned.

Consumer advocates cheered the lawsuit. “This is the best news that consumers could have possibly gotten,” said Charlie Leocha, director of the Consumer Travel Alliance and member of a panel that advises the government on travel-consumer issues.

At Buffalo Niagara International Airport, U.S. Airways and American Airlines are relatively small players.

In June, US Airways served 12 percent of outbound passengers. American Airlines served just 3 percent. The region’s biggest player – Southwest – served 33 percent.

US Airways and American do not compete in the Buffalo market since there is no overlap in the destinations they serve. US Airways flies to Boston, Charlotte, N.C., Philadelphia, and Washington, D.C., while American Airlines serves only Chicago’s O’Hare Airport.

“Competitive pressure from other airlines will help in keeping fares in check,” said C. Douglas Hartmayer, a spokesman for the Niagara Frontier Transportation Authority, which oversees the airport. “Low-cost airlines like Southwest and JetBlue have helped to keep our airfares very competitive.”


Airlines presence in Buffalo

12%: U.S. Airways’ share of Buffalo Niagara International Airport passengers in June.

Destinations: Boston, Charlotte, N.C., Philadelphia, and Washington, D.C.

3%: American Airlines’ share of passengers in June.

Destination: Chicago’s O’Hare Airport.

News Business Reporter Samantha Maziarz Christmann contributed to this report.