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Deal reached on airline merger

The world's biggest airline may be formed with the merger of American Airlines and US Airways. The U.S. Justice Department had been threatening court action on antitrust grounds to stop the complex business transactions needed for the combining of the country's third- and fifth-largest airlines that service passengers in Texas and throughout much of the rest of the world. However, if as is expected a federal judge approves the settlement between the carriers and the Justice Department, more takeoff and landing slots should become available at several major U.S. airports for low-cost airlines. Also expected is greater competition involving nonstop and connecting routes.

The deal would preserve airports that serve as hubs in Philadelphia, Charlotte, Phoenix and four other cities for a minimum of three years. Regulators and consumer advocates had expressed concern over this transaction, the latest in a series of mergers between carriers that resulted in the elimination of four major U.S. airlines and caused fear of higher ticket prices.

The agreement helps each of the merging airlines to achieve important financial goals. AMR Corporation, the parent company of American Airlines, would be able to come out of bankruptcy protection. Shareholders in U.S. Airways Group Inc. would be awarded 28 percent of the new company created by the merger. Good news would also be in store for employees who could receive higher pay, and for executives who would find themselves operating an airline that would be larger than its other competitors.

Mergers and acquisitions can lead to the attainment of business goals that may not have been otherwise possible. An understanding of the legal and regulatory considerations involved in these types of transactions may help them go more smoothly.

Source: KIII, "Gov't reaches agreement to allow airline merger", David Koenig, November 12, 2013

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