AMR Corp. and US Airways Group have received permission from the European Commission for the $11 billion merger of American Airlines and US Airways conditional upon the release of a daily slot pair at Heathrow Airport.
The commission approved the deal, but said the merger would lead to a monopoly on the London-Philadelphia passenger route, where the carriers have paired up in a joint venture with British Airways and Iberia, so it is calling for the slot release and “other commitments” to increase competition on the route. Aside from that one lane, the commission has ruled that the proposed deal clears the EU Merger Regulation guidelines.
On all other routes, the merger would still face sharp competition from other airlines, the European Union found. This competition will come from two carrier consortia — the A++ JV and the North Atlantic Joint Venture — as well as Virgin Atlantic.
"The commission could clear this transaction in the first phase given the commitments offered by the parties which address the competition concern we identified on the London-Philadelphia route," said EC Commissioner Joaquín Almunia in a statement. "The commitments include a corresponding slot at London Heathrow as well as far-reaching feeder arrangements to induce entry by a new competitor on the route. We are therefore satisfied that the competitive dynamics will be maintained so as to ensure choice and quality of air services for passengers on this route."
A number of hurdles still exist, however. Regulatory bodies in the United States still have to approve the deal, but officials have given an indication that they will approve the merger by Oct. 1. The U.S. Bankruptcy Court for the Southern District of New York also still has to confirm American's reorganization plan. Creditors for the carrier approved the reorganization deal on Aug. 1, and the court is expected to rule on Aug. 15. Almost 100 percent of the carrier's shareholders approved the deal, and 88 percent of the ballots received by eight creditor classes came out in support of the reorganization.
American and US Airways officials are still targeting a third-quarter closing of the deal.
“The clearance by the European Commission is an important step toward closing this merger. The new American will benefit customers in the United States, Europe and across the world by enhancing connectivity within the oneworld alliance and creating more options for travel both domestically and internationally," US Airways Chief Executive Officer Doug Parker, who will serve as incoming CEO of the new American, said. "We look forward to providing access to the best destinations in the world as the new American Airlines.”
Officials at both carriers have been meeting behind the scenes to hammer out details of what the combined carrier, which will carry the American Airlines name, will look like when fully formed. Post-merger leadership for the carrier, as well as American Airlines Cargo, has already been decided upon. The two carriers are still operating as separate entities, however, and will be until the merger is complete. - Jon Ross