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 104 flight slots at Washington Ronald Reagan National Airport and 34 at New York’s LaGuardia Airport, along with smaller divestitures at five other airports under the proposed settlement filed Tuesday by the department’s antitrust division in federal court in Washington. The accord positions the carriers to complete their combination in December, bringing American parent AMR Corp. out of bankruptcy.
While Attorney General Eric Holder said the settlement would create “a bigger foothold for low-cost carriers,” the airlines said their goal of $1 billion in savings and new revenue would remain intact.
Absent from the settlement was any requirement to maintain Advantage Fares, a US Airways discount offering that the Justice Department said in its lawsuit would be at risk in the merger. The two carriers served about 15 percent of all outbound passengers at Buffalo Niagara International Airport in September, accounting for about 23 percent of the airport’s flights.
There is little overlap among the routes out of Buffalo serviced by each airline, which means the impact of the merger could have less impact on travelers in Buffalo Niagara than those elsewhere in the country. American Airlines provides service to Chicago, while US Airways, which is based in Tempe, Ariz., flies to Boston, Philadelphia and other major East Coast airports.
“It’s really premature to see how this thing shakes out,” said C. Douglas Hartmayer, a spokesman for the Niagara Frontier Transportation Authority. “The devil could be in the details.”
Sen. Charles E. Schumer, who has been a proponent of increasing competition among airline providers, vowed to hold US Airways CEO Doug Parker’s feet to the fire to ensure the takeover doesn’t result in an increase in fares or a loss of jobs.
“We cannot let upstate New York fall back on the slippery slope that leads to higher airfares and poorer service,” said Schumer, D-N.Y.
“DOJ saw as they were going through that their case wasn’t nearly as strong as they thought it was when they filed the complaint,” Parker said.
Parker, 52, will become CEO of the combined carrier while AMR’s Tom Horton steps aside. The new airline will retain American’s name and headquarters in Fort Worth, Texas.
US Airways’ Reagan National dominance was among the objections to the merger in the department’s Aug. 13 lawsuit to block the tie-up. 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.
“This agreement has the potential to shift the landscape of the airline industry,” Holder said. “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 government had said the tie-up would harm consumers by damping competition, while the airlines said a merger was the only way they could compete with United Continental Holdings Inc. and Delta Air Lines Inc., the industry’s biggest carriers.
The combined carrier won’t be allowed to use smaller commuter planes, typically flown by a subsidiary or a partner airline, on flights between Reagan National and any of the top 29 airports.
News Business Reporter Samantha Maziarz Christmann contributed to this report.