AMR, US Airways settle lawsuit seeking to block merger

American Airlines and US Airways Group Inc. reached an agreement with the U.S. Justice Department over the government’s bid to block their merger, clearing the way to a tie-up that would create the world’s biggest carrier. More

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AMR, US Airways settle lawsuit seeking to block merger

COURTESY AMERICAN AIRLINES INC.
AMERICAN AIRLINES and US Airways Group Inc. agreed to surrender airport gates at several airports -- including Reagan International, LaGuardia and Boston Logan -- in a settlement with the U.S. Justice Department over the government’s bid to block their proposed merger. US Airways holds the second-largest share of passenger traffic – 22.4 percent in September – at Rhode Island’s T.F. Green Airport.
Posted 11/12/13

NEW YORK – American Airlines and US Airways Group Inc. reached an agreement with the U.S. Justice Department over the government’s bid to block their merger, clearing the way to a tie-up that would create the world’s biggest carrier.

The airlines must give up slots at Washington’s Ronald Reagan National Airport and New York’s LaGuardia Airport under the proposed settlement the department’s antitrust division filed today in federal court in Washington.

“This agreement has the potential to shift the landscape of the airline industry,” Attorney General Eric Holder said in an emailed statement. “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.”

The agreement puts the airlines back on track to combine, bringing American parent AMR Corp. out of bankruptcy. The U.S. sued to block the combination, saying it would harm consumers by reducing competition and raising ticket prices. The airlines maintain the merger is the only way they can compete with United Continental Holdings Inc. and Delta Air Lines Inc., the industry’s biggest carriers.

Shares rise

AMR, based in Fort Worth, Texas, rose 19 percent in over-the-counter trading $11.31 at 12:07 p.m. in New York. Tempe, Ariz.-based US Airways fell less than 1 percent to $23.07 in New York. to $23.07. US Airways, the fifth-largest U.S. airline, surged 72 percent this year before today on speculation that it would prevail in combining with No. 3 American.

AMR and US Airways also agreed to surrender two airport gates at Boston Logan, Los Angeles International, Chicago O’Hare, Dallas Love Field and Miami International.

US Airways holds the second-largest share of passenger traffic – 22.4 percent in September – at Rhode Island’s T.F. Green Airport. A merger between American Airlines and US Airways could mean more destinations for T.F. Green travelers, according to the R.I. Airport Corporation.

AMR, US Airways and the Justice Department had faced a Nov. 25 trial date in Washington on the lawsuit.

The concessions resolved regulators’ concern that the merged airline would control too many flights at Reagan National, where access is limited by federal law.

The airlines announced plans to merge on Feb. 14, after US Airways convinced AMR’s bankruptcy creditors and board that a combination would create a stronger carrier than an independent American. The U.S. challenge was filed Aug. 13, about two weeks before the carriers had hoped to celebrate closing the merger.

Labor costs

AMR sought bankruptcy protection on Nov. 29, 2011, after failing to secure union agreements that would help reduce its industry-leading labor costs. The company was the final large U.S. full-fare airline to seek court protection from creditors.

The judge overseeing AMR’s Chapter 11 case already endorsed its restructuring plan, contingent on resolving the federal antitrust suit.

The antitrust case is U.S. v. US Airways Group Inc., 13- cv-01236, U.S. District Court, District of Columbia (Washington).

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