Justice Department Approves American, U.S. Airlines Merger

The Justice Department approved an airline merger Tuesday that will create the world's largest carrier. AMR, the parent of American Airlines, and U.S. Airways agreed to divest a number of slots and gates at key airports in order to enhance competition.

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The merger of American Airlines and US Airways will be allowed to go through under a deal announced today by the Justice Department. If approved by a judge, it will create the world's largest airline. But the agreement requires the two airlines to give up dozens of takeoff and landing slots at some of the country's busiest airports, giving more access to low-cost carriers. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: Justice Department officials, as well as some state regulators, had argued that the merger would hurt competition and drive up fares. And they were prepared to go to court to stop it. The trial was to start later this month. The settlement will allow the deal to go through. And Tom Horton, who heads American Airlines' parent company, breathed a sigh of relief.

TOM HORTON: This will benefit our customers, our people and our investors. It's a win-win-win.

ZARROLI: Under the deal, the two airlines will take something of a hit. They will be forced to give up more than a hundred takeoff and landing slots at Washington's Reagan National Airport. The two airlines now control about two-thirds of the slots there. They also must sell 34 others at New York's LaGuardia, as well as slots at Chicago O'Hare, Los Angeles and Boston.

William Baer, assistant attorney general for the antitrust division, said the deal will have big ramifications for travelers.

WILLIAM BAER: This agreement has the potential to shift the landscape of the airline industry.

ZARROLI: Baer said the settlement opens up the marketplace and disrupts the cozy arrangements among big carriers. He also said it would help low-cost carriers. He said, when airlines like JetBlue and Southwest begin serving a route, it almost always drives fares down. For instance, he says, fares dropped 10 percent after Southwest began serving Newark Liberty Airport after the United-Continental merger. But Baer said low-cost carriers can't always get enough slots to make a difference and that limits their growth.

BAER: The divestitures we are announcing today change that limiting dynamic.

ZARROLI: Low-cost carriers will be given the opportunity to acquire some of the slots the two merging airlines are being forced to give up. Herbert Hovenkamp, a professor of law at the University of Iowa, says that will enable discount airlines to connect to more cities.

HERBERT HOVENKAMP: By expanding their route maps, a restructuring like this can enable those carriers to compete a little more effectively over a larger area of territory.

ZARROLI: U.S. officials filed suit against the merger in August. At the time, the suit came as something of a surprise, since U.S. officials had allowed other big airline mergers to sail through. But Hovenkamp says the Justice Department has revised its policies on big mergers and it was pretty much forced to try to block the deal. But Hovenkamp said both sides faced uncertain prospects in court. And he says it was in the Justice Department's interest to settle.

HOVENKAMP: They had to weigh their own litigation risk against what they could get out of a settlement. And I think - just on first eyeball, I think the Justice Department got a pretty favorable deal here.

ZARROLI: But the deal still faces some hurdles. It has to be approved by a federal court judge in Washington, as well as the judge who's overseeing American Airlines' bankruptcy. The airlines expect that to happen by mid-December. Jim Zarroli, NPR News, New York.

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