Phoenix, AZ (Tuesday, November 12, 2013) - - Arizona Attorney General Tom Horne is today announcing a settlement with American Airlines and US Airways regarding their impending merger. The settlement includes the US Department of Justice and the six states that were also plaintiffs, including Arizona. The settlement requires US Airways Group Inc. and American Airlines’ parent corporation, AMR Corp. to divest slots and gates at key constrained airports across the country to low cost carrier (LCC) airlines in order to enhance system-wide competition in the airline industry resulting in more choices and more competitive airfares for consumers.
State-specific relief includes maintenance of the Phoenix hub, consistent with its historical operations for three years, and continued daily service for five years to each airport in Arizona that American and US Airways serviced at the time the suit was
“Competition in the airline industry has been preserved by this settlement,” said Attorney General Tom Horne. “The required divestitures of key assets at airports across the country will spur competition by allowing other airlines, most notably low cost carriers, to enter and expand service to cities across the country. Arizona consumers will be able to travel to more places with nonstop or connecting routes than they had before. It guarantees that US Airways’ Phoenix hub will be maintained for the next three years and the airlines will continue service for the four Arizona airports (Phoenix, Tucson, Yuma and Flagstaff) with cities they currently serve for five years.”
The department said the proposed settlement will increase the presence of the LCCs 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. Providing the LCCs with the incentive and ability to invest in new capacity and permitting them to compete more extensively nationwide will enhance meaningful competition in the industry and benefit airline travelers.
Six state attorneys general–Arizona, Florida, Pennsylvania, Michigan, Tennessee and Virginia–and the District of Columbia joined in the department’s proposed settlement, which was filed in the U.S. District Court for the District of Columbia. If approved by the court, the settlement will resolve the department’s competitive concerns and the lawsuit.
On Aug. 13, 2013, the department, six state attorneys general and the District of Columbia filed an antitrust lawsuit against US Airways and American alleging that US Airway’s $11 billion acquisition of American would have substantially lessened competition for commercial air travel in local markets throughout the United States. The department alleged that the transaction would result in passengers paying higher airfares and receiving less service. In addition, the department alleged that the transaction would entrench the merged airline as the dominant carrier at Reagan National, where it would control 69 percent of take-off and landing slots, thus effectively foreclosing entry or expansion by competing airlines.
The settlement requires US Airways and American to divest slots, gates and ground facilities at key airports around the country. Specifically, the settlement requires the companies to divest or transfer to low cost carrier purchasers approved by the department:
- All 104 air carrier slots (i.e. slots not reserved for use only by smaller, commuter planes) at Reagan National and rights and interest in other facilities at the airport necessary to support the use of the slots;
- Thirty-four slots at LaGuardia and rights and interest in other facilities at the airport necessary to support the use of the slots; and
- Rights and interests to two airport gates and associated ground facilities at each of Boston Logan, Chicago O’Hare, Dallas Love Field, Los Angeles International and Miami International.
The Reagan National and LaGuardia slots will be sold under procedures approved by the department. Under the terms of the settlement, JetBlue at Reagan National and Southwest at LaGuardia will be given the opportunity to acquire the slots they currently lease from American. The remaining 88 slots at Reagan National and 24 slots at LaGuardia plus any JetBlue or Southwest decline to acquire will be grouped into bundles, taking into account specific slot times to ensure commercially viable and competitive patterns of service for the recipients of the divested slots. The parties will divest these slot bundles and all rights and interests in any gates and other ground facilities (e.g., ticket counters, baggage handling facilities, office space and loading bridges) as necessary to support the use of the purchased slots.
The gates at the five airports will be transferred on commercially reasonable terms to the new acquirers. The acquirers of the slot and gate divestitures also require approval of the department. Preference will be given to airlines at each airport that do not currently operate a large share of slots or gates.
The proposed settlement allows the department to appoint a monitoring trustee to oversee the divestitures or transfers of the slots and gates. The settlement also prohibits the merged company from reacquiring an ownership interest in the divested slots or gates during the term of the settlement. The companies must also provide advance notice of any future slot acquisition at Reagan National regardless of whether or not it is a reportable transaction under the premerger notification law and further provides for waiting periods and opportunities for the department to obtain additional information in order to review the transaction.