American Airlines, US Airways Reach Merger Agreement with Justice Department

Nov. 12--They've finally reached a deal.

The U.S. Justice Department said Tuesday it has reached an agreement to allow American Airlines and US Airways to merge, a change that will form the world's biggest airline.

In August, the government sued to block the merger, saying it would restrict competition and drive up prices for consumers on hundreds of routes around the country. Six states -- Pennsylvania, Arizona, Florida, Michigan, Tennessee and Virginia -- as well as the District of Columbia also joined the lawsuit to block the merger, fearing the loss of flights and jobs at their airports.

The airlines have said their deal would increase competition by creating another big competitor to United Airlines and Delta Air Lines, which grew through recent mergers.

Still needing approval from a federal judge in Washington, the settlement requires that the airlines scale back, giving up taking off and landing rights at Reagan National and New York's LaGuardia Airport and gates at airports in Boston, Chicago, Los Angeles, Dallas and Miami to low-cost carriers to offset the impact of the merger.

While Doug Parker, chairman and CEO of US Airways, and incoming CEO of the combined airline, said in a call Tuesday that divesting those slots wasn't ideal, it was worth it to make the merger happen.

Under the settlement, the airlines will divest 52 slot pairs at Washington Reagan National Airport and 17 slot pairs at New York LaGuardia Airport, and certain gates and related facilities at those airports. They also will 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.

After all is said and done, the combined company expects to operate 44 fewer daily departures at Reagan National Airport and 12 fewer daily departures at LaGuardia. They currently run about 290 takeoffs a day at Reagan National -- about two-thirds of the airport's total -- and 175 at LaGuardia.

Despite all the divestments, the new airline is still expected to generate more than $1 billion in annual net synergies beginning in 2015, officials said Tuesday in a statement. The divestments will happen after the completion of the merger, expected to be completed in December.

Also as part of the settlement, the airlines would maintain their hubs Charlotte, New York (Kennedy), Los Angeles, Miami, Chicago (O'Hare), Philadelphia and Phoenix for three years.

"This agreement allows us to take the final steps in creating the new American Airlines," said Tom Horton, chairman, president and CEO of AMR and incoming chairman of the board of the combined company. "With a renewed spirit, we are about to create the world's leading airline that will offer, along with our one-world partners, a comprehensive global network and service by the best people in the business. There is much more work ahead of us but we're energized by the challenge and look forward to competing vigorously in the ever-changing global marketplace."

Others also express gratitude for the settlement.

"This is very good news and we are grateful to all who have made it happen," Parker said. "We are pleased to have this lawsuit behind us and look forward to building the new American Airlines together."

Parker also said that they still need several "important approvals," according to that from the U.S. Bankruptcy Court. He said he expects that to happen in the coming weeks.

Horton said they expect to close the merger in the first half of December, with Jan. 7 being the first day the airlines will become a single entity for customers.

Local officials have mixed reactions.

"There is good news and bad news in this announcement," said Allegheny County Chief Executive Rich Fitzgerald. "The airlines guaranteed that the number of flights provided at Pittsburgh International will remain the same for the next five years. That is a big win for our region, and we're hopeful that the changes for other airports may result in the addition of more flights for Pittsburgh.

"Unfortunately, we were unable to get any guarantees for the operations or maintenance facilities at the airport. We will continue to make the case that Pittsburgh is the best place for these facilities and look forward to working with the leadership of the new airline as they grow into the future."

Allegheny County Economic Development Director and Airport Authority Board member Dennis Davin said that while there's no guarantee regarding the operations or maintenance facilities, they're not giving up just yet -- especially because these facilities represent 1,800 local jobs.

"We have made, and will continue to make, the case that our employees and facilities here in Pittsburgh are second to none, and that there is much to be gained by the airlines if they keep these facilities operating, or expanding them, in Pittsburgh," Davin said. "There are 1,800 jobs that are located in those two facilities and we know that those employees, and their families, rely upon those positions staying in Pittsburgh and we will continue to do everything we can to keep them here."

The Associated Press contributed to this report.

Copyright 2013 - Beaver County Times, Pa.