US Govt agrees to allow airline mega-merger

The US Justice Department says it has reached an agreement to allow American Airlines and US Airways to merge, creating the world's biggest airline.

The agreement requires the airlines to scale back the size of the merger at Washington's Reagan National Airport and in other big cities.

In August, the government sued to block the merger, saying it would restrict competition and drive up prices for consumers on hundreds of routes around the US.

The airlines have said their deal would increase competition by creating another big competitor to United Airlines and Delta Air Lines, which grew through recent mergers.

The settlement reached Tuesday would require approval by a federal judge in Washington. It would require American and US Airways to give up takeoff and landing rights or slots at Reagan National and New York's LaGuardia Airport and gates at airports in Boston, Chicago, Los Angeles, Dallas and Miami to low-cost carriers to offset the impact of the merger.

Attorney General Eric Holder said the agreement would ensure more competition on nonstop and connecting routes throughout the country. The department called the slot and gate divestitures at key airports "groundbreaking."

Doug Parker, the US Airways chief executive who will lead the new company, said, "This is very good news and we are grateful to all who have made it happen." He thanked politicians and business officials who had joined his airline in lobbying for the merger.

The companies expect to complete the merger in December.

Six states had joined the lawsuit to block the merger, fearing the loss of flights and jobs at their airports. The Justice Department said that American and US Airways agreed to maintain for three years the US Airways hubs in Charlotte, Philadelphia and Phoenix and American hubs at Miami, Chicago's O'Hare Airport, New York's John F. Kennedy International Airport and Los Angeles International.

If the settlement is accepted, the combined American and US Airways would operate 44 fewer daily departures at Reagan National and 12 fewer at LaGuardia. They run about 290 takeoffs a day at Reagan National about two-thirds of the airport's total and 175 at LaGuardia now.

When it sued in August, the Justice Department was joined by Texas, where American is based, and Arizona, home to US Airways. They said the deal would hurt consumers in their states.

But six weeks later, the Texas attorney general, a Republican who is running for governor next year, had a change of heart and pulled out of the lawsuit. Then the attorney general of Florida met with American CEO Tom Horton and expressed hope for a settlement, adding to the sense of crumbling opposition to the merger. Dozens of Democratic members of Congress implored the Obama administration to drop the lawsuit.

Last week, Holder confirmed that settlement talks were underway and added that he hoped a trial could be avoided. He seemed to set wide parameters on a possible compromise.

The tone of Holder's comments was much softer than the tough, line-in-the-sand language used in August by William Baer, the assistant attorney general for antitrust issues, who had said that stopping the merger was the only proper outcome.