The Deal: American, US Airways Come Out Ahead on Settlement

NEW YORK (The Deal) -- The Department of Justice extracted its pound of flesh from merger partners AMR Corp.  and US Airways (LCC), but the settlement deal with regulators announced Tuesday does little to change the competitive position of what is now on track to become the world's largest carrier.

US Airways and AMR, parent of American Airlines, when announcing their $11 billion combination back in February said the deal was necessary if the airlines were to compete against larger rivals United Continental Holdings  (UAL) and Delta Air Lines (DAL). The deal, which involves US Airways acquiring the larger AMR out of bankruptcy but keeping the American name, was put in doubt in August after regulators cried foul over the combination's heft and amid fears of diminished competition.

Justice managed to win weighty carve outs in a settlement announced on Tuesday, forcing significantly more to be divested than was required for Delta to win approval to buy Northwest Airlines in 2008 or what United's UAL Corp. gave up in 2010 to buy Continental Airlines Inc. Regulators also scored a major victory in their ongoing battle to open up crowded, slot-controlled airports in the Northeast to discount competition.

But for all the fear at the time that the lawsuit was announced that Justice's action could derail consolidation or require sacrifices too severe to make the deal palatable, an initial analysis of the settlement shows that the airlines, which post-deal will combine under the name American Airlines Group (AAG), got off relatively easy.

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