US Airways, AMR reach antitrust settlement on merger

WASHINGTON/NEW YORK (Reuters) - US Airways Group Inc and American Airlines will give low-cost competitors more access to a half dozen key U.S. airports, including New York and Washington, D.C., in exchange for permission to merge and create the world's largest airline.

The agreement announced on Tuesday settles a government lawsuit filed in August that argued that US Airways and AMR Corp, parent of bankrupt American Airlines, should be forced to scrap the merger because it would hinder competition and lead to higher fares.

It is a compromise for the airlines, which will divest a number of takeoff and landing slots at Reagan National Airport just outside Washington, D.C., and at New York's LaGuardia Airport, both busy airports with limited capacity.

At Reagan, the airlines will shed 52 slot pairs of nearly 300 total held by the two carriers, a move that affects 44 daily departures, said AMR spokesman Casey Norton said.

A slot pair is a set of scheduled times for a takeoff and a landing at the same airport.

The carriers agreed to divest 17 slot pairs at LaGuardia, including five that are already being sub-leased to Southwest Airlines and its AirTran unit.

Competing low-cost carriers will also be given more access to airports in Boston, Chicago, Dallas, Los Angeles and Miami, the government said.

Department of Justice officials termed the settlement a boost to the competitive landscape of the U.S. airline industry, although the impact will cover only about 112 flights out of about 6,700 daily flights for US Airways and American.

"The extensive slot and gate divestitures at these key airports are groundbreaking and they will dramatically enhance the ability of low cost carriers to compete system-wide," said Assistant Attorney General Bill Baer of the Department of Justice's Antitrust Division.

Shares of US Airways were volatile following news of the settlement, briefly surging to the highest point since late 2007 before falling. The were almost unchanged, down a cent at $23.26, in afternoon trading on the New York Stock Exchange. AMR shares surged 24 percent to $11.84, their highest level since 2008.

Investors bid up low-cost carriers that stand to benefit from greater access. Shares in Southwest Airlines rose 1 percent and JetBlue shares jumped 5 percent.

The government said in its competitive impact statement that the divestiture of carrier slots at Reagan National and LaGuardia would deliver "substantial additional benefits," specifically to Southwest and JetBlue.

Delta Air Lines made its own bid for expansion at Reagan National, saying in a statement that it wants to acquire slots there, and was "best positioned to continue competitive nonstop flights from Reagan National to small- and mid-sized cities."

Tuesday's settlement came as the airlines and the government stared down a November 25 deadline, at which point the antitrust case would have gone to trial in District Court.

(Reporting by Soyoung Kim, Diane Bartz, Karen Jacobs and Alwyn Scott, writing by Ros Krasny; Editing by Gerald E. McCormick, John Wallace and Tim Dobbyn)