The Department of Justice, American Airlines parent AMR Corp. (NASDAQOTH: AAMRQ), and US Airways Group (NYSE: LCC) today announced a settlement that would allow for the completion of the merger between the two airlines following approval from a U.S. Bankruptcy Court. The merged is expected to be completed next month.
The settlement requires the airlines to divest slots and gates at seven airports to low-cost airlines "in order to enhance systemwide competition in the airline industry resulting in more choices and more competitive airfares for consumers," according to the Department of Justice press release. It said the divestitures would improve competition in the airline industry and benefit travelers, with an increased presence of low-cost carriers at Boston Logan International, Chicago O'Hare International, Dallas Love Field, Los Angeles International, Miami International, New York LaGuardia International, and Ronald Reagan Washington National.
The settlement will cause the merged company, which will retain the American Airlines name and branding, to divest 52 of its slot pairs at Washington Reagan National Airport (DCA), which will result in 44 fewer daily departures compared to the 290 daily departures it currently has. It will also result in 17 slot pair divestitures at New York LaGuardia Airport (LGA), resulting in 12 fewer departures per day, versus the 175 the two airlines currently have. The companies noted that "despite the divestitures, the new American is still expected to generate more than $1 billion in annual net synergies beginning in 2015, as was estimated when the merger was announced in February."
In addition to the DCA and LGA divestitures, American Airlines will also cede two gates at each of the following airports; Boston Logan International Airport (BOS), Chicago O'Hare International Airport (ORD), Dallas Love Field (DAL), Los Angeles International Airport (LAX), and Miami International Airport (MIA).
"This agreement has the potential to shift the landscape of the airline industry," said Attorney General Eric Holder in a statement. "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."
Tom Horton, chairman, president, and CEO of AMR, and incoming chairman of the board of the combined company, added; "This is an important day for our customers, our people and our financial stakeholders. This agreement allows us to take the final steps in creating the new American Airlines."
The government had sued to block the merger in August, saying it would restrict competition and drive up prices for consumers on hundreds of routes around the country. 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.
-- Material from The Associated Press was used in this report.