(Adds details of state AG concerns, details on deal)
By Diane Bartz and Karen Jacobs
WASHINGTON, July 1 (Reuters) – A group of 19 attorneys
general, led by Texas, has joined a U.S. Justice Department
probe of a planned merger of American Airlines Inc
and US Airways Group Inc, three sources close to the
discussions told Reuters.
Some of the states involved worry that they will lose a hub
because of the planned transaction, which would create the
world’s largest airline, while others are concerned about
service cutbacks to smaller cities because of the transaction,
two sources said.
US Airways has hubs in Philadelphia, Charlotte, Washington,
DC and Phoenix while American has hubs in Dallas/Fort Worth, New
York, Miami, Chicago and Los Angeles.
US Airways announced on Feb. 14 that it planned to merge
with American, which is emerging from bankruptcy, in an $11
billion stock deal. The companies hope to wrap up the merger by
the end of September.
The state attorneys general are working with the Justice and
Transportation Departments, both of which must approve the deal.
A sticking point in talks between the Justice Department and
the companies is whether the airlines will agree to sell slots –
takeoff and landing rights – to reduce their dominance at Reagan
National Airport outside Washington, D.C., according to two
sources.
The involvement of the state attorneys general and the fact
that the Justice Department is taking depositions indicates
broad concern that the proposed merger creates antitrust
problems, antitrust experts said.
The Justice Department can approve a deal on condition of
asset sales or, rarely, will sue to stop it. It can also approve
a deal without any conditions.
All sources spoke privately to protect business
relationships.
Texas is leading the state effort, two sources said. The
other attorneys general involved are from Arkansas, Arizona,
California, Washington DC, Florida, Iowa, Illinois, Minnesota,
Mississippi, Nebraska, New York, Oklahoma, Pennsylvania, South
Carolina, Tennessee, Virginia, Wisconsin and West Virginia.
Service to smaller cities has been curbed in recent years as
tough economic times and high fuel costs have spurred major
carriers to pare flying to unprofitable markets and focus more
on big cities. For example, Delta Air Lines Inc last
month said it would scrap a hub in Memphis that it gained when
it bought Northwest in 2008.
A focal point of the Justice Department has been Reagan
National Airport, just outside Washington, DC.
If the deal is approved, the new airline would have 68
percent of the slots at Reagan, far more than Delta Air Lines
with 12 percent, United Airlines with 9 percent and the
11 percent held by other airlines, according to a report by the
U.S. Government Accountability Office.
The companies have pushed back hard against any suggestion
that takeoff and landing slots at Reagan National be sold.
US Airways CEO Doug Parker told lawmakers in congressional
testimony last month that requiring the combined company to
surrender slots could mean fewer flights to small- and
medium-sized cities.
(Reporting by Diane Bartz; Editing by Gary Hill, Bernard Orr)
