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American, US Airways settle DOJ lawsuit; merger to close in December
Just 13 days before an antitrust
trial was scheduled to start in
a US federal court, American
Airlines and US Airways settled with the US Department
of Justice (DOJ) in November,
agreeing with DOJ to divest
slots and facilities at several
airports—including 52 slot
pairs at Washington National
Airport (DCA)—to enable the
mega-merger of the two airlines to proceed.
DOJ had filed a surprise
antitrust lawsuit in August
to stop the planned merger,
but ultimately backed down
and accepted a settlement
the department said would
“enhance systemwide com-
petition in the airline industry
resulting in more choices and
more competitive airfares for
consumers.”
US Attorney General Eric
Holder stated, “This agreement
has the potential to shift the
landscape of the airline indus-
try. By guaranteeing a bigger
foothold for low-cost carriers
at key US airports, this settle-
ment ensures airline passen-
gers will see more competition
on nonstop and connecting
routes throughout the country.
The department’s ultimate
goal has remained steadfast
throughout this process—to
ensure vigorous competition in
airline travel.”
According to American and
US Airways, the airlines have
agreed to divest 52 slot pairs
at DCA and 17 slot pairs at
New York LaGuardia Airport
(LGA). The airlines also will
divest two gates and related
support facilities at each of
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).
“The divestitures will occur
through a DOJ approved process following the completion
of the merger,” the airlines said.
“Despite the divestitures, the
new American is still expected
to generate more than $1 bil-
lion in annual net synergies
beginning in 2015, as was esti-
mated when the merger was
announced in February [2013].”
The divestures were “neces-
sary to get on with the merger,”
American chairman, president
and CEO Tom Horton told
ATW during a conference call
with journalists. The impact of
those divestitures is “mostly
going to be regional flying to
small markets,” Horton said,
adding that the overall network
strength of the combined US
Airways-American and the
merger’s value “are very much
intact.” Even at DCA, the new
American will have “more flying … than US Airways does
now,” where it is the largest
carrier, according to Horton.
Though the airlines were
“disappointed” by the DOJ
lawsuit attempting to block the
merger, “We think we’ve made
a very common sense
deal here that address-
es [DOJ] concerns and
allows us to move for-
ward with the merger,”
Horton said, adding
that the airlines did not
give up too much. “I
don’t think this settle-
ment is terribly differ-
ent from what I would
have anticipated early
on,” he explained. “We
do [still] expect to be
the biggest airline in
the world … It’s going
to be a great global
network.”
US Airways chair-
man and CEO Doug
Parker, designated as
the CEO of the new American,
conceded that the merged
airline would “still like to have
all of these assets” being
divested, but added that “the
new American will still have
the greatest network in the
world.” He said the divestitures
“by no means compromise
anything we talked about [in
terms of overall benefits] when
we announced this merger” in
February 2013.
Parker said “the overall
outpouring of support [for the
merger] was phenomenal”
after the lawsuit was filed “and
it couldn’t help but be noticed
… Most noteworthy by far was
employee support.”
US Airways president
Scott Kirby said US Airways
and American will essentially
become “a single airline for
customers” by Jan. 7, 2014,
with reciprocal frequent flyer
benefits put in place. “Then
we’ll be in a normal integration
process,” he added. “Our labor
deals are largely done, so that
process will be much smoother
than you see in other mergers.”
American and US Airways
said the combined carrier will
“operate 44 fewer daily depar-
tures at DCA and 12 fewer
daily departures at LGA than
the approximately 290 daily
DCA departures and 175 daily
LGA departures that American
and US Airways operate today.
The divestitures required by
the settlement are not expect-
ed to impact total employment
at the new American.”
Explaining the settle-
ment, DOJ assistant attorney
general-antitrust division Bill
Baer said, “The extensive slot
and gate divestitures at these
key airports are groundbreak-
ing and they will dramatically
enhance the ability of LCCs
to compete systemwide. This
settlement will disrupt the
cozy relationships among the
incumbent legacy carriers,
increase access to key con-
gested airports and provide
consumers with more choices
and more competitive air-
fares on flights all across the
country.”
A
MR
US Airways and American Airlines tails
Union rejection means 777X may be built
outside Washington state
Boeing union workers in Washington state voted to reject a
proposed labor contract extension, casting doubt on whether
the 777X will be built at Boeing Commercial Airplanes’
facilities in the Seattle area.
The rank-and-file membership of the International
Association of Machinists & Aerospace Workers (IAM)
District 751 voted by a 67% to 33% margin to reject an eight-year labor contract extension to 2024. Boeing had already
won significant tax incentives from Washington state lawmakers to build the 777X in the Seattle area, and indicated
that a positive vote by IAM workers would cement 777X production in Washington state.
But after the workers rejected the labor deal, Boeing
Commercial Airplanes president and CEO Ray Conner said in
a statement that the company is “left with no choice but to
open the process competitively and pursue all options for
[a location to build] the 777X … We had hoped for a
different outcome.”
