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US Air, American Drawing Up Proposed Settlement

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US Airways and American Airlines will offer to give up some takeoff and landing slots at Washington's Reagan National Airport as part of a attempt to get the US Justice Department to allow their merger to proceed, a Dow Jones report said on Wednesday, citing people familiar with the process.

US Airways, AMR and the Department of Justice all declined to comment on the report.

The companies' stock prices have been buoyant recently as investor sentiment has increased that a deal can be reached to create the world's largest air carrier.

In a complaint filed in August aimed at stopping the proposed transaction, the Justice Department focused on Reagan National. The two carriers control a combined 69 percent of takeoff and landing slots at the airport, which is used by many members of Congress to travel to and from their home districts.

In its complaint, the federal government also listed more than 1,000 city pairings where the two airlines dominate the market and where a merger could conceivably drive up prices or cut the number of flights.

Dow Jones reported that one of the two people familiar with the proposed settlement said that the airlines still expected to go to trial, set to begin November 25.

The two sides this week agreed to mediation. Both the airlines and the Justice Department have said that they are open to a settlement agreement.

Wednesday's reported development came as the carriers and interested parties, including unions, continue a full-court lobbying press in favor of the merger.

Business leaders, mayors and members of Congress representing many of the cities where the airlines have hubs have this month thrown their support behind a deal.

Four unions allied with airlines, many of whose workers would get raises if the deal goes through, took out a full-page advertisement in The New York Times on Wednesday supporting the merger.

Unions of flight attendants, pilots and others have held rallies in Washington and other cities where American and US Airways have hubs in recent months and pressed attorneys general in states that joined the government lawsuit to drop out.

Texas Attorney General Greg Abbott withdrew from the US lawsuit earlier this month, raising the prospect that other states might follow.

Other states still involved in the suit include Arizona, Florida, Michigan, Pennsylvania, Tennessee and Virginia, as well as the District of Columbia.

Tom Hoban, an American pilot and Allied Pilots Association spokesman, said earlier on Wednesday that the lobbying will likely continue.

"That's part of the overall strategy. We want to compel those that initially came out in support of DOJ and help them get religion on the subject," he said.

US Airways' spending on lobbying has seen a surge during the fight to win approval for the merger. The company spent USD$1.68 million on lobbying in 2011, USD$2.8 million in 2012, as it was ramping up for the deal, and USD$4.2 million in the first three quarters of 2013 according to the Senate Lobbying Disclosure Act database.

(Reuters)

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