Pressure builds for approval of US Airways merger

Posted: October 29, 2013

A well-orchestrated effort to persuade the Justice Department to drop its lawsuit opposing the US Airways-American Airlines merger has stretched from the halls of Congress to the office of the U.S. attorney general.

Employees of both airlines recently rallied near the Capitol, expressing enthusiastic support for the deal. Later, 68 Democratic members of Congress petitioned Attorney General Eric H. Holder Jr. to settle the case.

On Wednesday, seven big-city mayors, including Mayor Nutter, urged Holder to let the merger go through. The next day, 26 chambers of commerce and business groups sent a letter urging the Justice Department to allow US Airways, Philadelphia's dominant carrier, and American's parent, AMR Corp., to form the world's largest airline.

"I think momentum is building for a settlement," said Seth Kaplan, managing partner of Airline Weekly, a trade publication. He thinks a deal could be approved if American and US Airways give up some landing slots at Reagan National Airport outside Washington, where the two carriers combined would control 67 percent of the takeoff and landing rights.

"A settlement would probably involve slot divestitures," Kaplan said. "It's hard to imagine them allowing the two airlines to keep all the slots that they have there."

On Aug. 13, the government sued to block the merger, arguing that the deal would reduce competition and raise fares for consumers.

Saikat Chaudhuri, a management professor at the University of Pennsylvania's Wharton School, said the Justice Department could let the deal go through, but with significant concessions on routes and flights.

He pointed to the government's lawsuit in January seeking to block Anheuser-Busch InBev's acquisition of the Mexican brewer Grupo Modelo, the maker of Corona.

Regulators signed off when AB InBev, based in Belgium, agreed to sell Modelo's U.S. business, including Corona, to a competitor. Antitrust officials had argued that together the companies would control about 46 percent of U.S. beer sales.

"I think that it's designed to extract substantial concessions," Chaudhuri said of the US Airways-American antitrust case. "The question is: Will the combined airline and the government be able to find a compromise, where the government extracts sufficiently substantial concessions to satisfy their needs while, at the same time, the airlines get what they want out of it?

"This one is very hard to call."


lloyd@phillynews.com

215-854-2831

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