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American, US Airways to drop airport slots for merger

Doug Parker (L), Chairman and CEO of US Airways, and Thomas Horton, Chairman, President and Chief Executive Officer of American Airlines speak during a news conference to announce the merger of the two airlines February 14, 2013 in Dallas Texas
Doug Parker (L), Chairman and CEO of US Airways, and Thomas Horton, Chairman, President and Chief Executive Officer of American Airlines speak during a news conference to announce the merger of the two airlines February 14, 2013 in Dallas Texas

American Airlines and US Airways on Tuesday agreed to give up valuable airport slots to low-cost airlines to proceed with their merger, settling an antitrust lawsuit with the Justice Department.

The Justice Department cleared the merger, which would create the world's largest airline, after the two agreed to give up slots and other rights at seven key airports.

American's parent, AMR Corp., and US Airways will divest the slots and gates to "low-cost" airlines "in order to enhance system-wide competition in the airline industry resulting in more choices and more competitive airfares for consumers," the department said in a statement.

The two airlines will have to cede a significant number of takeoff and landing slots at two of the busiest airports on the East Coast -- New York's La Guardia and Washington's Reagan National.

They will also give up gate and other rights at Boston's Logan International, Chicago's O'Hare, Dallas Love Field, Los Angeles International, and Miami International, as well as at La Guardia and Reagan National.

"This agreement has the potential to shift the landscape of the airline industry," Attorney General Eric Holder said in the statement.

"By guaranteeing a bigger foothold for low-cost carriers at key US airports, this settlement ensures airline passengers will see more competition on nonstop and connecting routes throughout the country," he said.

The proposed agreement was joined by six states and Washington DC, which also sought to block the merger on antitrust grounds. The deal still requires court approval.

AMR Corp. and US Airways welcomed the removal of the last major barrier to the $11 billion merger announced last February.

"This is an important day for our customers, our people and our financial stakeholders. This agreement allows us to take the final steps in creating the new American Airlines," said Tom Horton, chairman, president and chief executive of AMR, and incoming chairman of the combined company.

Doug Parker, chairman and CEO of US Airways, and incoming CEO of the combined airline, said: "We are pleased to have this lawsuit behind us and look forward to building the new American Airlines together."

Despite the divestitures, the companies said, the new American is still expected to generate more than $1 billion in annual net synergies beginning in 2015, as was estimated in February.

US Airways shares were down 1.6 percent after the announcement, while AMR shares, traded over the counter as the company emerges from bankruptcy reorganization, gained 18.3 percent.

American won approval from the bankruptcy court in September to go ahead with the merger.

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