Merger Deal a Victory for US Air, AMR
Last week’s decision by the U.S. Justice Department to drop its lawsuit to block the merger of AMR and US Airways Group didn’t come without conditions, but antitrust experts and analysts for the most part agree that it came as a resounding victory for the airlines. Largely left intact by the deal reached between Justice and the airlines, the merger would close in December, creating the largest carrier in the world.
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. The divestitures required by the settlement will not affect total employment at the newly merged airline, according to a joint statement issued by US Airways and American.
To ensure much of the service currently operated by the carriers to small- and medium-sized markets from DCA remains intact, the new American has agreed with the DOT to use all of its DCA commuter slot pairs for service to those communities. The company said it intends to announce the service changes resulting from the divestitures in advance of the sale of the DCA and LGA slots, so that the airlines acquiring those slots have the opportunity to maintain service to the affected communities.
In the settlement agreement with the state Attorneys General, the new American agreed to maintain its hubs in Charlotte, New York JFK Airport, Los Angeles, Miami, Chicago O’Hare, Philadelphia and Phoenix “consistent with historical operations” for a period of three years. Furthermore, with limited exceptions, for a period of five years the new American will continue to provide daily scheduled service from one or more of its hubs to each plaintiff state airport with scheduled daily service from either American or US Airways. The parties plan to amend a previous settlement agreement with the state of Texas to make it consistent with last week’s settlement.