AMR, US Airways suit settled; merger completion expected in December

By Caroline Salls

Pittsburgh, Nov. 12 - American Airlines, Inc. parent AMR Corp. and US Airways Group, Inc. have settled the litigation brought by the Department of Justice (DOJ), the States of Arizona, Florida, Michigan and Tennessee, the Commonwealths of Pennsylvania and Virginia, and the District of Columbia challenging the merger of AMR and US Airways, according to a news release.

The settlement is subject to approval by the U.S. Bankruptcy Court for the Southern District of New York and other conditions. The airlines said they now expect to complete the merger in December.

"This agreement allows us to take the final steps in creating the new American Airlines," AMR chairman, president and chief executive officer and incoming chairman of the combined company Tom Horton said in the release.

As previously reported, AMR's plan of reorganization has been confirmed by the U.S. Bankruptcy Court for the Southern District of New York.

The company said previously that the effective date of the plan and its Chapter 11 emergence were expected to occur simultaneously with the closing of the planned merger with U.S. Airways, which has been delayed by the anti-trust lawsuit filed on Aug. 13.

Settlement terms

Under the settlement, the airlines will divest 52 slot pairs at Washington Reagan National Airport (DCA) and 17 slot pairs at New York LaGuardia Airport (LGA), as well as some gates and related facilities to support service at those airports.

The airlines also will divest two gates and related support facilities at each of Boston Logan International Airport, Chicago O'Hare International Airport, Dallas Love Field, Los Angeles International Airport and Miami International Airport. The divestitures will occur through a DOJ-approved process following the completion of the merger.

Despite the divestitures, the companies said the new American is still expected to generate more than $1 billion in annual net synergies beginning in 2015, as was estimated when the merger was announced in February 2013.

After completion of the required divestitures, the combined company expects to operate 44 fewer daily departures at DCA and 12 fewer daily departures at LGA than the roughly 290 daily DCA departures and 175 daily LGA departures that American and US Airways operate today.

The divestitures required by the settlement are not expected to impact total employment at the new American, the release said.

To ensure much of the service currently operated by the carriers to small- and medium-sized markets from DCA is maintained, the new American has agreed with the Department of Transportation to use all of its DCA commuter slot pairs for service to these communities.

The new company will announce the service changes that will result from the divestitures in advance of the sale of the DCA and LGA slots, so that the airlines acquiring those slots have the opportunity to maintain service to those impacted communities.

States agreement

Under a settlement agreement with the state attorneys general, the new American will maintain its hubs in Charlotte, New York (Kennedy), Los Angeles, Miami, Chicago (O'Hare), Philadelphia and Phoenix consistent with historical operations for a period of three years.

In addition, with limited exceptions, the new American will continue to provide for five years daily scheduled service from one or more of its hubs to each plaintiff state airport that has scheduled daily service from either American or US Airways.

A previous settlement agreement with the state of Texas will be amended to make it consistent with Tuesday's settlement.

Union response

Transport Workers Union of America air transport director Garry Drummond said in a separate release that the union is pleased with the settlement.

In addition, Drummond said the settlement will allow TWU members at American Airlines to gain long-delayed raises, and negotiations for members at US Airways can now move forward.

Drummond said the parties also can begin to move forward on working out final details related to combining the two airlines' work groups.

AMR Corp., the Fort Worth-based parent of American Airlines, filed for bankruptcy on Nov. 29, 2011. Its Chapter 11 case number is 11-15463.

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