American Airlines and US Airways announced they expect to complete their merger on December 9 following Wednesday’s approval by the U.S. Bankruptcy Court for the Southern District of New York of a lawsuit settlement reached between the airlines and the U.S. Justice Department. The court also ruled that the airlines may execute the merger despite the existence of a still unadjudicated private antitrust lawsuit.
The ruling effectively removes the final hurdle in American’s effort to reorganize. The plan, originally proposed some two years ago, encountered resistance from antitrust regulators, who over the summer filed a court challenge to block the merger on the grounds that it would upset the airline industry’s competitive balance and lead to higher air fares. However, after months of negotiation, the airlines and Justice Department settled the suit on November 12. The bankruptcy court ruled that the settlement did not materially affect the reorganization plan, thereby clearing it for final execution without a new vote by creditors and shareholders.
Under the terms of the settlement, the airlines will divest 52 slot pairs at Washington Reagan National Airport (DCA) and 17 slot pairs at New York La Guardia Airport (LGA), as well as certain gates and related facilities to support service at those airports. The airlines also have agreed to divest two gates and related support facilities at Boston Logan International Airport, Chicago O’Hare International Airport, Dallas Love Field, Los Angeles International Airport and Miami International Airport. Despite the divestitures, the “new” American expects to generate more than $1 billion in annual net “synergies” beginning in 2015, the same amount it estimated when it first announced the merger in February.
After completion of the required divestitures, the combined company expects to operate 246 of the 290 departures US Airways and American now offer at DCA and 163 of the 175 daily departures they now operate out of La Guardia.