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Regulators may add conditions to US Airways-American merger

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By The Dallas Morning News
Tuesday, March 5, 2013, 7:24 p.m.
 

For much of his 36 years in Congress, former U.S. Rep. James Oberstar kept a close eye on the nation's airline industry. Often, he didn't like what he saw, particularly as the number of players kept shrinking through mergers.

For a number of reasons, he hopes that Congress and the Justice Department take a close look at the proposed merger of American Airlines Inc. and US Airways Inc.

"The real victim in this process is the traveling public," said the Minnesota Democrat, who lost his bid for a 19th term in the 2010 elections. "The reduction of choices, the increasing power of the fortress hub makes it unlikely that other carriers would enter those markets where both American and US Airways serve, because they'll be competing with a much bigger presence, with more power to serve those markets."

Despite his misgivings, the chances of the deal being blocked appear minimal, particularly on the heels of four mergers of major carriers since 2005: US Airways and America West Airlines Inc. in 2005, Delta Air Lines Inc. and Northwest Airlines Inc. in 2008, Continental Airlines Inc. and United Airlines Inc. in 2010, and Southwest Airlines Co. and AirTran Airways Inc. in 2011.

But regulators may put conditions on the sale if they decide the two carriers have too much market share on certain routes or at certain airports.

A particular point of interest for regulators will be the airports where the federal government limits the number of takeoffs and landings permitted by the carriers.

In past cases, regulators have required airlines to give up slots to create more competition.

That's how Southwest got a foothold at the Newark airport in 2011. Regulators pushed Continental to lease the Dallas-based carrier sufficient slots to begin service at Newark and operate 18 departures a day.

Similarly, in 2010, the Department of Transportation conditioned its approval of an American-British Airways PLC alliance with a requirement that they surrender a handful of slots at London Heathrow Airport to permit other U.S. airlines to compete with them.

If regulatory eyebrows are raised anywhere, it's most likely to be at Ronald Reagan Washington National Airport, where US Airways has a clear lead in market share with its mainline flights and an even bigger lead with its commuter partners included.

US Airways' mainline flights handled 18.5 percent of Washington's passengers in 2012. And combined with US Airways Express flights offered by three regional carriers, the airline carried more than double that number.

Delta and American each carried just under 12 percent of National's passengers, but American's share climbed to nearly 15 percent if American Eagle flights were included.

Add the mainline and regional partners together, and US Airways and American would have around half of Washington's passengers.

When the two airlines announced their merger on Feb. 14, US Airways chairman and chief executive Doug Parker played down potential problems.

"Adding American to US Airways' current operation at (Washington National) doesn't, we believe, raise anything that should remotely concern the Department of Justice," Parker told reporters. "But we'll see."

In contrast with their market share at Washington National, the combined American and US Airways would still trail Delta at New York LaGuardia, another airport where the government apportions takeoff and landing slots. Delta carried 36.3 percent of LaGuardia's passengers in 2012, to 19.7 percent for American and 12.7 percent for US Airways.

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