Antitrust Law Daily Wrap Up, TOP STORY: EC clears American Airlines/US Airways merger subject to concessions on London-Philly route, (Aug 5, 2013)

By Jeffrey May, J.D.

In order to obtain European Commission (EC) clearance for their proposed merger, US Airways Group and AMR Corporation have agreed to concessions that are intended to preserve competition in the market for air travel between Philadelphia and London. The EC announced today that the carriers will release one daily slot pair at London Heathrow and provide further incentives, such as the possibility for a new entrant to acquire grandfathering rights after a certain period of time, in order to induce entry on the London-Philadelphia route. In addition, the carriers' transatlantic joint venture partners have committed to entering into special feed traffic agreements with the likely entrant airline. These concessions have satisfied the EC's antitrust concerns. As a result of the concessions, the parties avoided an in-depth, Phase II merger investigation.

The EC examined the competitive effects of the proposed merger on numerous transatlantic routes. However, the investigation found that the transaction would have led to a monopoly only on the London-Philadelphia route out of London Heathrow airport. US Airways and American Airlines through their membership in a "metal-neutral" joint venture with British Airways and Iberia are the only carriers offering non-stop flights on this route. The route is de facto operated by British Airways. US Airways operates a hub in Philadelphia.

The EC was satisfied that there was sufficient competition on all other transatlantic routes affected by the merger. According to the EC, the combined entity will continue to face competition from the North Atlantic Joint Venture (including Delta, Air France/KLM, and Alitalia) and the A++ JV (including Lufthansa, Air Canada, and United Airlines). Virgin Atlantic also would pose a competitive check against the merged entity.

American Airlines CEO’s Response

“We are very pleased that the EU has approved the merger between American Airlines and US Airways,” said Tom Horton, chairman, president and CEO of AMR, and incoming Chairman of the Board of the combined company. “This represents one of the final milestones on our path to becoming the new American Airlines.”

Continuing U.S. Department of Justice Investigation

The transaction remains under review at the Department of Justice Antitrust Division. In March, the Justice Department issued second requests to both parties, seeking additional documents in its investigation. At that time, the airlines said that they were “working cooperatively” with the Justice Department and that they expected that the combination would be completed in the third quarter of 2013.

Companies: AMR Corp.; US Airways Group

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