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US Airways, American clear merger hurdle

The Justice Department said Tuesday, Nov. 12, 2013,

The Justice Department said Tuesday, Nov. 12, 2013, that it has reached an agreement to allow the merger of US Airways and American Airlines. (Aug. 13, 2013) Credit: AP

DALLAS -- American Airlines and US Airways reached a deal with the government that lets the two form the world's biggest airline and opens up more room at key U.S. airports for low-cost carriers.

The settlement announced Tuesday -- if approved by a federal judge -- would end a fight with the U.S. Justice Department and head off a courtroom showdown later this month.

It preserves hub airports in Phoenix, Philadelphia, Charlotte and four other cities for at least three years. And it caps a series of mergers that have already eliminated four big U.S. airlines and stoked fear about higher travel prices.

American and US Airways were close to finishing the merger in August until the Justice Department and several states filed an antitrust lawsuit to block the deal, saying it would reduce competition on hundreds of routes around the country and lead to higher prices.

To avoid the uncertainty of a trial, the airlines agreed to give up about 15 percent of their takeoff and landing rights at Reagan National Airport near Washington, and a smaller number of slots at LaGuardia Airport. They also agreed to give up two gates each at Chicago's O'Hare Airport, Los Angeles International, Boston's Logan Airport, Dallas Love Field and Miami. That could help competitors grow at airports where gates are in short supply.

The Justice Department said it extracted the largest divestitures ever in an airline merger. Attorney General Eric Holder said the agreement would ensure more competition on nonstop and connecting routes throughout the country.

The airlines and some industry experts said the Justice Department had a weak case, especially after allowing four big airline mergers in the past eight years with few conditions. American and US Airways, however, were not willing to bet the fate of their multibillion-dollar merger on the decision of a single judge.

"We didn't think we should have to give up anything," said Doug Parker, the US Airways CEO who will run the new airline. "The lawsuit should not have been filed, but once it was, there is some risk in going all the way to trial. This settlement was worth doing rather than taking on that risk."

The new company, American Airlines Group Inc., will be slightly larger than United and Delta by passenger traffic and have about 100,000 employees and 6,700 daily flights to more than 300 destinations.

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