Concessions on routes likely to get U.S. Air-AMR off the ground

Wed Feb 13, 2013 3:12am EST
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By Diane Bartz and Karen Jacobs

WASHINGTON/ATLANTA (Reuters) - US Airways and American Airlines are likely to win approval to create the world's biggest carrier, with regulators expected to focus on concessions to preserve competition in Washington, Charlotte, Dallas and other airports where they are dominant, antitrust experts say.

AMR Corp's AAMRQ.PK American and US Airways LCC.N are in the final stages of negotiating an $11 billion merger and a deal is expected to be announced later this week. If approved, it would mark the third major U.S. airline merger since 2008, raising the specter of higher ticket prices and fewer choices for consumers as a handful of airlines dominate the skies.

To preserve competition, antitrust experts say, the Justice Department is likely to ask for divestitures in US Airways' hub at Washington's Reagan National and Charlotte, N.C., and AMR's hub in Dallas. Outside these areas, the carriers fly different routes for the most part.

"Overlapping routes are bad, and connecting routes are good," said Herbert Hovenkamp, who teaches antitrust at the University of Iowa College of Law.

"If you put these two airlines on a map you're going to see a lot of complementary routes but you're not going to see very many where the two of them fly on the same route," he added.

The Justice Department has rarely challenged an airline merger in recent years. The last one to be challenged was a proposed United-US Airways deal in 2000-2001.

Alison Smith, an antitrust lawyer with McDermott Will & Emery law firm, said regulators are likely to approve an AMR-US Air merger if they agree to sell some routes. "That is a likely scenario," she said.

But she would not completely rule out regulatory opposition, saying a spate of mergers in recent years have left consumers with fewer flight choices. "The fact that the market has changed means that they might take a tougher line," said Smith.   Continued...

A view of two US Airways Express planes next to an American Airlines plane (background) at the Ronald Reagan Washington National Airport in Arlington County, Virginia, February 10, 2013, as negotiations continue this week between parent companies US Airways Group Inc and AMR Corp on a possible $11 billion merger, creating what would be the world's largest airline. REUTERS/Mike Theiler