Preliminary Deal in American-US Airways Merger Lawsuit
(Washington, D.C.) The Justice Department has reached a settlement with American Airlines and US Airways that requires the airlines to sell facilities at seven airports in order to complete their planned merger.
The deal announced Tuesday allows low-cost airlines to increase their presence at Boston’s Logan, Chicago’s O’Hare, Dallas’ Love Field, Los Angeles, Miami, New York’s LaGuardia, and Washington’s Reagan National airports.
In August, the Justice Department filed an antitrust suit against the airlines, arguing that the combination would reduce choices for customers by giving the combined carrier a stranglehold at certain major airports.
At Reagan National, for instance, the two airlines would have controlled 69% of the take-off and landing slots.
Under the agreement, the airlines will sell to low-cost carriers 104 slots at Reagan National, 34 slots at LaGuardia, and rights to gates at Logan, O’Hare, Love Field, LAX and Miami.
“This agreement has the potential to shift the landscape of the airline industry,” said Attorney General Eric Holder. “By guaranteeing a bigger foothold for low-cost carriers at key U.S. airports, this settlement ensures airline passengers will see more competition on nonstop and connecting routes throughout the country.”
US Air and American had argued that the merger, expected to result in the world’s largest airline, would create an enhanced combined network to benefit customers.
The trial in the antitrust case was set to start Nov. 25.
The airlines cheered the agreement and the ability to move forward with the merger.
The two carriers had rounded up support from their unions as well as leading politicians around the country to try to pressure Justice into allowing the deal.
“We are pleased to have this lawsuit behind us and look forward to building the new American Airlines together,” said US Airways CEO Doug Parker, who will lead the combined carrier.
The deal will allow JetBlue access to Reagan National and Southwest Airlines the chance to buy gates at LaGuardia for the first time.
It currently leases gates at those airports. Both JetBlue and Southwest shares were higher on the news.
Bill Baer, assistant attorney general for antitrust, said the agreement “will disrupt the cozy relationships among the incumbent legacy carriers,” adding it “will dramatically enhance the ability of [low-cost carriers] to compete system wide.”
Shares of US Airways, which were briefly halted ahead of the announcement, gave up earlier gains and were trading slightly lower on the news.
But shares of American parent AMR were significantly higher following the announcement.
AMR has been in bankruptcy court since November 2011. The merger will allow American shareholders to be compensated, which is unusual for the stock of a bankrupt company.