Justice Department Settles Lawsuit, Clears Way For AA-US Airways Merger
NORTH TEXAS (CBS 11 NEWS) - After months of legal turbulence, it will soon be smooth flying for American Airlines and US Airways.
The U.S. Justice Department has settled its lawsuit, clearing the way for the airlines' $14 billion merger.
On a conference call with reporters, American's current CEO Tom Horton said the settlement makes sense for everyone, and called the agreement a "win-win-win."
For tens of thousands of union employees at both airlines, who pressured the Justice Department and members of Congress to approve the merger, this is a major victory for their jobs in the long-term.
Tom Hoban of the Allied Pilots Association, which represents American's pilots said, "Great news. This represents the removal of the final obstacle consummating this merger. It's good news for the company. It's good news for the employees, and we believe it's good for our passengers."
During his own conference call with reporters, Assistant U.S. Attorney General Bill Baer said, "This settlement addresses those concerns and opens up the marketplace like never before. It will disrupt today's cozy relationships among current legacy carriers and provide consumers with more choices and more competitive airfares."
Under the deal, the combined airline will have to give up 88 departures and arrivals at Reagan National Airport in Washington, D.C. and 24 flights at New York's LaGuardia -- both airports have restricted numbers of slots for take-offs and landings. It's the largest divestiture as part of a merger in the airline industry.
Mark Drusch, a former executive at Continental and Delta Airlines says the concessions American and US Airways are making are larger than United and Delta had to make when they were allowed to merge. "They clearly are giving up more and the reason they're giving up more is because they're the last ones to the party."
Even though the new American must lose flights at both Reagan National and LaGuardia, American can transfer those flights to its other airport hubs, including DFW International Airport, which is unaffected by the merger settlement. But no decisions have been made yet where those flights will be transferred.
American says as part of the agreement, the combined airline will still have 57-percent of the departures from Reagan National and 28-percent of the departures from LaGuardia. Drusch said, "Yeah, they're going to lose some market share they had at DC and LaGuardia, which are big markets, but don't get me wrong, they are still big players in both markets."
In addition, the merged airline will have to sell two of its gates at Dallas Love Field. The airline currently subleases them to Delta.
After flight restrictions end at Love Field on October 13, 2014, Dallas-based Southwest Airlines will continue to control most of the gates at Love Field, but will be able to fly non-stop anywhere in the continental U.S.
American will also have to sell off two gates each at Boston Logan, Chicago O'Hare, Miami International and LAX airports.
The soon to be CEO of the merged airline, Douglas Parker of US Airways, says the merger will allow American to compete with the larger Delta and United Airlines. "The real change in the competitive dynamic is we're putting these two airlines together and creating a stronger company that will be able to take more customers to more places and create a third global competitor to the other two global networks of United and Delta."
The merger is also considered a major victory for the labor unions at both airlines, especially at American. The pilots, flight attendants, and mechanics unions among others fought for a merger with US Airways against the wishes of American's management early on.
This past September, about a month after the Justice Department filed suit to block the merger, union workers at both airlines held a rally on Capitol Hill to gain support from members of Congress and to pressure the Justice Department.
Republicans and Democrats alike criticized the government's efforts to block the merger, and Democrats even wrote the White House, urging President Barack Obama to get the Justice Department to back-off.
Last week, Attorney General Eric Holder announced the government was trying to avoid the upcoming trial, which was due to start November 25, and was in the process of negotiating with the airlines.
Hoban of the Allied Pilots Association says, "It's really a victory for the front line employees. We put the full court press on Congress, the DOJ, all the constituents, and the Attorney General, who were opposed to this. We were able to have a considerable effect on this process and it's a positive thing."
A judge in Washington, D.C. has approved the settlement with the six other states who also filed suit against the airlines. Texas had dropped its lawsuit against the airlines last month after they agreed to put in writing what they already agreed to: keeping the newly combined airline based in Fort Worth, and continue flying to the smaller airports in Texas.
The judge will give final approval to the settlement agreement with the Justice Department.
Later this month, another judge will give American the final okay to exit bankruptcy after two years.
The airlines hope to close their merger by the first half of December, and plan on launching the new airline January 7.
American and US Airways have previously said it will took up to two years to fully merge their operations.
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