Air Travel News
DOJ vs. AA-US Airways: Hints of a settlement?
The Justice Department’s civil antitrust suit seeking to block the American-US Airways merger took a new twist last week as lawyers from both sides hinted that a settlement between the parties might be possible. Meanwhile, American’s bankruptcy judge seems to be looking favorably at the prospect of a merger.
In the U.S. District Court for the District of Columbia, DOJ and the two airlines made a joint filing in which Justice said it was “open to a settlement that addresses the anticompetitive harms posed by the merger,” but it noted that no such proposal has yet been forthcoming from the two airlines.
In the same filing, the two airlines told the court that they had discussed possible ways to meet Justice’s concerns before the antitrust suit was filed — obviously without success — but that they “continue to believe there ought to be a realistic possibility of settlement.”
Previously, many observers had taken Justice’s aggressive legal action against the AA-US Airways combination as a sure sign that it was determined to put a halt to any further consolidation in an industry that has seen three major mergers in the past several years.
In order for a settlement to be reached, Justice and the two airlines would have to reach agreement on how much market presence the carriers would cede in their combined network in order to satisfy the government that a healthy competitive environment would be preserved.
The biggest bone of contention has always been Washington Reagan National Airport, where US Airways gained dozens of additional takeoff and landing slots in a swap with Delta a couple of years ago. Without some adjustments, a combined American-US Airways would control 69 percent of the slots at DCA. That airport is slot-controlled, so other competitors can’t move into it unless an incumbent sells them some slots. Southwest and JetBlue, for instance, have been eagerly seeking more access to DCA.
In other developments, the two airlines and the Justice Department remain at odds over the scheduling of a trial on the antitrust suit, assuming no settlement is reached. Two weeks ago, the airlines told the court they would be ready to begin in mid-November. But last week, the Justice Department said in a filing that it wouldn’t be prepared to present its complicated case until early March 2014.
The Justice Department suit has stalled action in American’s Chapter 11 bankruptcy case in New York. All parties had been hoping for court approval of the company’s reorganization plan — which is based on a US Airways merger — in mid-August, but the judge put off a decision, uncertain about how to proceed in the face of the Justice Department antitrust suit.
American has continued to urge the bankruptcy court to press ahead in spite of the government action, and last week federal bankruptcy judge Sean Lane said in court that he found the airline’s arguments in favor of approving the plan to be “fairly persuasive.” Still, he did not immediately rule on it.
One of the government’s arguments against the merger — in addition to the primary allegation that it would reduce competition and hurt consumers — is that the airlines are perfectly capable of continuing to compete effectively as separate entities. American may have provided some justification for that view last week when it reported the highest monthly profit in its history. The company said that even after reorganization-related costs of $57 million during July, it still managed a $292 million profit for the month.
Although the merger is far from certain at this point, US Airways last week moved its operations at New York JFK — which only amount to a few flights a day — from Terminal 7 to American’s Terminal 8.