Preliminary deal reached in airlines merger lawsuit

New York TimesNovember 12, 2013 

The Justice Department has reached a preliminary agreement to settle its fight with American Airlines and US Airways over their proposed merger, according to a court document filed Tuesday.

Under the proposal, American and US Airways would sell 104 takeoff and landing slots at Ronald Reagan National Airport in Washington, 34 slots at La Guardia Airport in New York, and various assets at five other airports, including O'Hare Airport in Chicago, Los Angeles International Airport and Boston Logan International Airport.

The settlement still needs to be approved by the U.S. District Court in the District of Columbia.

Shares in US Airways were halted for pending news Tuesday morning. They had risen 3.5 percent after Bloomberg News reported that a settlement had been reached. They resumed trading at 11:51 a.m. ET, and shares closed Tuesday at $23.52, down 25 cents.

The preliminary settlement forestalls a trial on the Justice Department’s lawsuit scheduled for later this month.

U.S. Attorney General Eric Holder had indicated Nov. 4 that any agreement would revolve around concessions on airport takeoff and landing slots, particularly at Reagan National Airport. The two airlines control about two-thirds of the slots at that airport.

The agreement paves the way for American Airlines to exit bankruptcy and complete the merger with US Airways. They now expect to complete the merger by December, the airlines said Tuesday.

In September, Judge Sean Lane of the U.S. Bankruptcy Court in Manhattan approved American’s exit from its two-year bankruptcy proceeding, a process during which American agreed to merge with US Airways. That move had gained the backing of creditors as well as its three main labor groups.

But Lane’s ruling came with the condition that the Justice Department approve the merger. Antitrust regulators had challenged the combination in August on the ground that it would harm competition and passengers. A trial was scheduled for late November.

As part of the settlement agreement, the combined airline has agreed to maintain hubs in Charlotte; Kennedy Airport in New York; Los Angeles; Miami; Chicago O'Hare Airport; Philadelphia; and Phoenix for a period of three years “consistent with historical operations.”

After it completes the sale of its assets, the merged airline said it expected to operate 44 fewer daily departures from Reagan National Airport and 12 fewer daily departures at La Guardia. American and US Airways currently have 290 departures every day from Reagan National and 175 from La Guardia.

The Justice Department said the agreement would increase the presence of low-cost carriers at major airports throughout the country.

“Compared to all the noise at the time of the filing, and maybe that was just positioning themselves, it doesn’t seem to me that the government secured that much from the settlement,” said Carl Tobias, a professor at the University of Richmond School of Law.

He said the sales of landing slots and gates should expand competition but added, “It’s hard to see how overall this is an enormous benefit to consumers.”

And in a statement, Thomas Horton, chief executive of AMR, American’s parent company, and the incoming chairman of the combined company, said: “This is an important day for our customers, our people and our financial stakeholders. This agreement allows us to take the final steps in creating the new American Airlines.”

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