US Airways, American consider merger settlement: sources

Reuters
An American Airlines jet takes off while U.S. Airways jets are lined up at Reagan National Airport in Washington
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An American Airlines jet takes off while U.S. Airways jets are lined up at Reagan National Airport on …

By Diane Bartz and Karen Jacobs

WASHINGTON (Reuters) - US Airways Group and American Airlines are considering giving up takeoff and landing slots at Washington's Ronald Reagan National Airport to win regulator approval of their $11 billion merger, two people familiar with the matter said.

The airlines are hoping to reach a settlement with the U.S. Justice Department before the trial, due to begin November 25, paving the way for a deal that would create the world's largest air carrier, the sources said.

The companies' stock prices have climbed in anticipation of a deal, and they rose further on Wednesday after a Dow Jones report on a potential proposal to overcome regulatory concerns. American Airlines' parent company AMR Corp closed up 4.3 percent at $7.30 and US Airways Group Inc ended 0.94 percent higher at $22.58.

US Airways and AMR declined to comment. The Department of Justice did not respond to a request for comment.

In a complaint filed in August aimed at stopping the proposed transaction, the Justice Department focused on Reagan National. The two carriers control a combined 69 percent of takeoff and landing slots at the airport, which is used by many members of Congress to travel to and from their home districts.

In its complaint, the federal government also listed more than 1,000 city pairings where the two airlines dominate the market and where a merger could conceivably drive up prices or cut the number of flights.

Dow Jones reported that one of the two people familiar with the proposed settlement said that the airlines still expected to go to trial.

Earlier this week, the two sides agreed on a mediator, according to a court filing. Both the airlines and the Justice Department have said that they are open to a settlement.

Wednesday's developments came as the carriers and interested parties, including unions, continue a full-court lobbying press in favor of the merger.

Business leaders, mayors and members of Congress representing many of the cities where the airlines have hubs have this month thrown their support behind a deal.

Four unions allied with airlines, many of whose workers would get raises if the deal goes through, took out a full-page advertisement in The New York Times on Wednesday supporting the merger.

Unions of flight attendants, pilots and others have held rallies in Washington and other cities where American and US Airways have hubs in recent months and pressed attorneys general in states that joined the government lawsuit to drop out.

Texas Attorney General Greg Abbott withdrew from the U.S. lawsuit earlier this month, raising the prospect that other states might follow.

Other states still involved in the suit include Arizona, Florida, Michigan, Pennsylvania, Tennessee and Virginia, as well as the District of Columbia.

Tom Hoban, an American pilot and Allied Pilots Association spokesman, said earlier on Wednesday that the lobbying will likely continue.

"That's part of the overall strategy. We want to compel those that initially came out in support of DOJ and help them get religion on the subject," he said.

US Airways' spending on lobbying has surged during the fight to win approval for the merger. The company spent $1.68 million on lobbying in 2011, $2.8 million in 2012, as it was ramping up for the deal, and $4.2 million in the first three quarters of 2013, according to the Senate Lobbying Disclosure Act database.

The case at the U.S. District Court for the District of Columbia is No. 1:13-cv-1236.

(Additional reporting by Soyoung Kim; Editing by Stephen Coates)

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