Justice Department OKs US Airways/America West Merger

The U.S. Justice Department on Thursday cleared the way for US Airways to merge with America West Airlines, saying the proposed deal would not reduce competition for air travelers.

The combination of the two airlines "will enable the merged airline to offer U.S. consumers more and better service to more destinations," R. Hewitt Pate, the assistant attorney general who heads the department's antitrust division, said in a statement.

The Justice Department approval is the first and one of the largest hurdles the airlines must clear to close the deal. Antitrust regulators helped block a proposed merger between US Airways and United Airlines in 2001 over worries that the combined carrier would smother competition, especially on the East Coast.

While the United deal attracted criticism from consumer advocates and politicians, there has been no such outcry with the US Airways-America West proposal.

The link-up between the two carriers would combine US Airways' strength along the East Coast and Caribbean with America West's reach in the Western U.S. The airline would keep US Airways' name and have major hubs in Charlotte, Philadelphia and Phoenix, with smaller hubs in Las Vegas and Pittsburgh.

Next week, the airlines will learn if rival bidders will try to trump America West's deal with US Airways, which is operating under bankruptcy protection. Decisions on the merger by a federal loan board, the Transportation Department and US Airways' bankruptcy judge could follow within weeks.

In a joint statement, US Airways and America West said they remain on track to secure all the needed approvals this summer. They hope to complete the deal by the fall.

With the Justice Department's approval, the tracks are well-greased for the merger's consummation -- but not completely clear, said Mike Boyd, an airline consultant in Colorado.

"The only mine they have left to step over would be if there's any skeletons in US Airways' closet," he said, "either legal issues or the discovery that US Airways' revenue issues are getting worse."

Since proposing the merger last month, the airlines' leaders have touted its virtues. They've said the new airline can weather high oil prices and will have plenty of money, thanks to fresh infusions of cash from investors and vendors.

Yet the same factor that led the Justice Department to approve the deal quickly -- the lack of overlapping routes -- also has prompted some analysts to doubt that the merger can save much money. The companies are expected to release more financial details next week.

In announcing its approval, the Justice Department said little about its decision, other than to note that the airlines have little overlap.

In looking over potential mergers, Justice Department regulators are swayed more by formulas than by lobbying, industry observers say. The department looks especially at the market share of a combined company and whether fares likely would rise.

Fares are already too low for most airlines to make a profit. Hard-charging low-cost carriers have aggressively dropped fares, making it more difficult for any airline to jack up prices.

In other US Airways news Thursday, the airline said it has decided to exercise an option to transfer 28 small jets and landing slots at busy airports to Republic Airways Holdings Inc. for about $100 million. Republic would fly the planes under the US Airways Express name and would lease the slots back to US Airways.

The deal might result in a few hundred layoffs of pilots and flight attendants in US Airways' Mid-Atlantic division, based in Pittsburgh.

Next week: Companies release financial information on merger, receive rival bids.

July 7: Bankruptcy judge asked to approve winning bidder.

Summer: Decisions on merger by Transportation Department, federal loan board, US Airways creditors, America West shareholders.

Fall: Deal closes, companies start combining.

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