US Airways, American to|Settle Merger Challenge

(CN) - US Airways and American Airlines struck a deal with the Department of Justice that requires them to scale back at key airports in order to proceed with their planned $11 billion merger, the agency said Tuesday.

"This agreement has the potential to shift the landscape of the airline industry," Attorney General Eric Holder said in a statement. "By guaranteeing a bigger foothold for low-cost carriers at key U.S. airports, this settlement ensures airline passengers will see more competition on nonstop and connecting routes throughout the country."

The department, along with the attorneys general of six states and the District of Columbia, filed a federal antitrust action against US Airways and American's parent company AMR Corp. in August. They claimed the merger would likely mean higher ticket prices, fewer seats and more fees for passengers.

As part of the preliminary agreement, the Justice Department said it was requiring the legacy airlines to "divest slots and gates at key constrained airports" nationwide.

By ceding some of their gates, slots and ground facilities to low-cost carriers, the legacy airlines will open the door to increased competition from low-cost carriers at Boston Logan International, Chicago O'Hare International, Dallas Love Field, Los Angeles International, Miami International, New York LaGuardia International and Ronald Reagan Washington National airports, the department said.

"This settlement will disrupt the cozy relationships among the incumbent legacy carriers, increase access to key congested airports and provide consumers with more choices and more competitive airfares on flights all across the country," said Assistant Attorney General Bill Baer of the Department of Justice's Antitrust Division.

The tentative deal, which still needs to be approved by a federal judge in Washington, D.C., forestalls a trial scheduled for late November, according to media reports.

The airlines are expected to complete the merger by December, after American Airlines exits from Chapter 11 bankruptcy.

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