Texas AG Abbott Drops Opposition to American-US Airways Merger

Oct. 01--Texas Attorney General Greg Abbott announced Tuesday that he is dropping the state's opposition to a merger between American Airlines and US Airways after gaining pledges that the carriers will preserve jobs and service in Texas.

During a news conference with American's CEO Tom Horton at DFW Airport, Abbott said the carriers committed to continuing air service to 22 Texas communities including several rural airports and keeping the company's headquarters in Texas for three years.

Since the airline announced plans for the merger earlier this year, executives have said that the combined airline would put its headquarters in Fort Worth and had reiterated their plan to keep Dallas/Fort Worth Airport as one of their main hubs.

When the U.S. Department of Justice filed its antitrust suit against the merger in August, Abbott led a group of states which said the deal is anti-competitive, would cut service at some airports and would hurt consumers with higher ticket prices and fees.

Texas, Arizona, Tennessee, Virginia, Florida, Pennsylvania, Michigan and the District of Columbia were all part of the suit that is scheduled to go to trial on Nov. 25 in a federal court in Washington D.C.

The announcement of Texas' withdrawal from the suit was made Tuesday afternoon at American's Admirals Club in Terminal D.

Abbott, who is running for governor, said it was critical to receive assurances from the carriers to protect the nearly 25,000 employees who work in Texas and to maintain service to rural airports, particularly those close to military bases such as Killeen-Fort Hood and Abilene.

"The primary thing was absolute certainty and security that the 20 or more airports, especially the rural airports, that they were not to suffer from lack of daily service," Abbot said.

Abbott's comments Tuesday were an about-face from his harsh criticism of the merger less than two months ago. At the time the suit was filed, Abbott was named the lead state attorney general on the case and said the merger would allow the airlines to pile on more bag fees and ticket change fees.

"We believe that actions by the airlines and their officials violate antitrust laws. In fact, the legal violations appear so overt that it would offend my oath of office not to take action," Abbott said then.

Texas Democrats, who expect state Sen. Wendy Davis to run against Abbott, called Abbott a flip-flopper on the merger.

"Abbott's statement today is just a weak play to change his position to match what Wendy Davis has always supported," said Texas Democratic Party executive director Will Hailer. "The supposed "settlement" Abbott presented actually settles nothing new that wasn't settled before."

Gimme Credit high-yield bond analyst Vicki Bryan said DFW was never at risk of losing its hub status because it is too important in the combined carriers' network. With the exit of Texas, other state attorneys may drop out of the suit as well, she wrote in a note to investors on Tuesday.

"We see this as Texas seeking to bow out from a deteriorating position while saving face. [The DOJ] has effectively now lost its First Officer on the eve of one of its biggest battles ever," Bryan said.

Horton said he was pleased the carriers were able to reach an agreement with Texas but would not say if they were talking to other states or the DOJ about settlements. He reiterated that the carriers were ready to make their case in court on why the merger is beneficial to consumers and airline employees.

"What protects the headquarters and what protects service to communities and people in the long run is a strong, successful, competitive American Airlines and one that can compete head to head with Delta and United Airlines and all the global airlines around the world," Horton said. "That's what's good for the people of Texas."

In Washington, U.S. District Judge Colleen Kollar-Kotelly denied a request from the U.S. Department of Justice to temporarily halt the antitrust trial because of the government shutdown.

The government attorneys had said in a two-page filing that they are prohibited from working because of the lack of funding from Congress that reaulted in a partial government shutdown today.

"Although we greatly regret any disruption caused to the Court and the other litigants, the United States hereby moves for a stay of all proceedings in this case until funding is restored and Department of Justice attorneys are permitted to resume their usual civil litigation functions," the filing said.

In her two-page ruling, Kollar-Kotelly said a stay would be inappropriate and that there is a "need for the prompt resolution of this matter."

At a pre-trial hearing earlier today, U.S. District Judge Colleen Kollar-Kotelly said that the trial will continue as previously scheduled. Arguments should take twelve to fifteen days with the trial wrapping up in mid-December.

The judge also indicated that she would hear closing arguments on Jan. 6 and might not rule on the case until Jan. 10.

The carriers had hoped a decision on the antitrust suit would come before the holidays but Horton said the carriers appreciate the judge's decision to keep the trial on an expedited schedule.

Andrea Ahles, 817-390-7631 Twitter: @Sky_Talk

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