American Airlines and U.S. Airways Group Reach Settlement
According to press releases from each company, AMR (OTC: AAMRQ) the parent company of American Airlines and U.S. Airways (NYSE: LCC) have settled with federal regulators. In August, a lawsuit was initiated with the Department of Justice which attempted to block the two companies from joining forces in a $17.2 billion merger.
“This is an important day for our customers, our people and our financial stakeholders” Tom Horton, CEO of AMR said following the ruling. Horton added, “There is much more work ahead of us but we're energized by the challenge and look forward to competing vigorously in the ever-changing global marketplace.”
Doug Parker, the CEO of U.S. Airways, and incoming CEO of the combined airline expressed gratitude to its employees, customers and elected officials who have stood by the company during its legal fight.
In January 2012, U.S. Airways expressed interest in taking over the parent company of American Airlines, whose CEO expressed interest in a merger. The merger was expected to generate more than $1.5 billion a year in added revenue and cost savings.
More than a year later, in February 2013, American Airlines and U.S. Airways officially announced plans to merge, which would create one of the largest airlines in the world with 6,700 daily flights to 336 locations in 56 countries worldwide.
U.S. Airways shareholders approved the proposed merger on July 12. A month later on August 13, the United States Department of Justice, along with attorneys general from several states, filed a lawsuit to block the merger. Their arguments were that a newly-formed behemoth would result in substantial pricing power and less competition, especially in key markets.
Other airlines shared similar sentiments. Virgin America argued that a proposed merger would create a monopoly in several key markets and cause immense harm to customers.
JetBlue (NASDAQ: JBLU) announced on Tuesday morning a $55 fare sale with intent to send a message, not to fill seats. Promotional e-mails were sent to customers which stated: "Just to make sure Washington gets the message, we put together this nice sale for you! Fares from $55 to Boston, Fort Lauderdale, Orlando and Tampa. Hope you can 'slot' a trip in between November 12 and December 18! Tickets must be purchased by November 12."
Jet Blue felt that a merger would create an unfair advantage if the newly formed airline would not have to give up its "slots" at key airports such as Washington's Reagan National Airport.
Shares of AMR were trading higher by 18 percent following the news announcement. U.S. Airways were trading slightly lower by 1.2 percent, with Jet Blue trading higher by 6.5 percent.
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