American Airlines and US Airways agreed to guarantee continued service at multiple hubs and small cities to secure approval to merge into a single carrier.
The service guarantees come on top of a mandate for the merged carrier to divest slots to low-cost competitors at two key airports, including 104 at Washington Reagan National and 34 at New York LaGuardia combined, according to the US Department of Justice.
The “new American” also agreed to continue to serve small- and medium-sized markets from National airport, using all of its commuter slot pairs currently assigned for that purpose, the carriers say in a media release.
Both agreements persuaded US Attorney General Eric Holder to drop a lawsuit and allow the merger to move forward. Holder’s department had sued to block the merger in mid-August, claiming the combination would reduce competition for commercial air travel.
American and US Airways also signed a settlement agreement with the attorneys general of six states and the District of Columbia, which had joined the lawsuit filed by the US Department of Justice.
The agreement with the states requires that the merged carrier maintain service at levels “consistent with historical operations” for three years at seven major hubs – Charlotte, New York John F. Kennedy, Los Angeles, Miami, Chicago O’Hare, Philadelphia and Phoenix.
Secondly, the states also require American to continue providing daily service for five years from at least one of its hubs to each airport that is served today by either American or US Airways. The states covered under the agreement are Arizona, Florida, Pennsylvania, Tennessee and Virginia, plus Washington, D.C.
Despite the concessions, American and US Airways re-affirmed that the proposed merger should create more than $1 billion in net synergies annually starting in 2015.
The US Bankruptcy Court now must approve the terms of the settlement agreements, but both carriers expect to complete the merger in December.