WASHINGTON – The Justice Department says it has reached an agreement to allow American Airlines and US Airways to merge, creating the world’s biggest airline.
The agreement requires the airlines to scale back the number of flights they currently operate at Washington’s Reagan National Airport and several other major “hub” cities. The prospect of fewer flights to and from Reagan National had been a cause of concern for some smaller airports that currently enjoy nonstop service, including Portland and Bangor.
The five-year deal announced Tuesday requires the airlines to maintain 100 percent of their “commuter slots” on smaller aircraft from Reagan National Airport to small, medium-sized and non-hub airports, designations that include both Portland and Bangor. The agreement does not require the merged airlines to serve specific communities, however, meaning that “New American” could change the list of airports it services.
Portland International Jetport Director Paul Bradbury said he did not believe the merger is likely to have a major impact in Portland.
“I believe it will be a net positive to PWM, and I am pleased the merger is going through,” he said in an email Tuesday.
US Airways is the largest carrier at Portland’s jetport, serving about 30 percent of the market share. It has a total of 12 daily arrivals and departures. American does not currently operate out of Portland.
One positive aspect of the merger, Bradbury said, is that Portland will now be represented by all three major international airline alliances – Star, Sky Team and One World. Additionally, he said, Portland could add service to the existing American network.
One potential downside, he said, is the loss of some capacity to Reagan National Airport in the Washington, D.C., area.
Members of Maine’s congressional delegation said the impacts of the merger on Maine were unclear Tuesday.
U.S. Rep. Mike Michaud, D-Maine, co-wrote a letter to the Justice Department voicing concerns about loss of service to smaller airports if the two airlines were forced to give up some of their slots at Reagan National. More than 100 lawmakers – including U.S. Rep. Chellie Pingree, D-Maine – signed on to the letter.
“It’s too early to tell what this means for Maine,” Michaud said in a statement. “While the agreement does speak to the need to preserve service to small and mid-size communities, the devil is always in the details.”
Pingree said nonstop service between Maine and cities such as Washington was “critical to continued economic development” in the state.
“The ability to make a quick trip to places like New York or Washington is important for many Maine small businesses and for families who want to take a vacation,” Pingree said in a statement. “We have kept in touch with the airlines and I’ll continue to urge them to preserve that service.”
In August, the government sued to block the merger, saying it would restrict competition and drive up prices for consumers on hundreds of routes around the country.
The airlines have said their deal would increase competition by creating another big competitor to United Airlines and Delta Air Lines, which grew through recent mergers.
The settlement reached Tuesday would require approval by a federal judge in Washington and eliminate the need for a trial that had been set to begin Nov. 25. It would require American and US Airways to give up takeoff and landing rights or slots at Reagan National and New York’s LaGuardia Airport and gates at airports in Boston, Chicago, Los Angeles, Dallas and Miami to low-cost carriers.
Attorney General Eric Holder said the agreement would ensure more competition on nonstop and connecting routes throughout the country. The department said the divestitures were the largest ever for an airline merger.
The companies expect to complete the merger in December. As soon as the deal closes, the airlines will coordinate prices and schedules as if they were one, but combining the fleets will take months or years, executives said.
Six states had joined the lawsuit to block the merger, fearing the loss of flights and jobs at their airports. The Justice Department said that American and US Airways agreed to maintain for three years the US Airways hubs in Charlotte, Philadelphia and Phoenix and American hubs at Miami, Chicago’s O’Hare Airport, New York’s John F. Kennedy International Airport and Los Angeles International.
If the settlement is accepted, the combined American and US Airways would operate 44 fewer daily departures at Reagan National and 12 fewer at LaGuardia than they would have without concessions. But the new American will still be the biggest carrier at Reagan National. The two airlines run about 290 takeoffs a day at Reagan National – about two-thirds of the airport’s total – and 175 at LaGuardia now.
Standard & Poor’s analyst Jim Corridore said the airlines gave up more than he expected but the settlement shouldn’t change the financial benefits of the merger to the companies.
The companies and some airline industry experts said the Justice Department had a weak case, especially after allowing four big airline mergers in the past eight years with few conditions.