US Airways Group Inc (NYSE:LCC) has reached a preliminary settlement agreement with the Department of Justice in connection with a lawsuit over the company’s proposed merger with American Airlines. That’s according to Michael J. De La Merced of The New York Times, who cites a court document unveiled today.
Trading on shares of US Airways was halted briefly this morning so that the news could be announced.
American, US Airways to sell airport slots
Under the terms of the proposed deal, US Airways Group Inc (NYSE:LCC) and American Airlines would sell a number of their airport slots, including 104 slots at Regan National Airport in Washington and 34 slots at New York City’s La Guardia Airport. The airlines will also sell some of its assets at five additional airports, including Chicago’s O’Hare Airport, Boston Logan International Airport and Los Angeles International Airport. The Federal District Court still must approve these terms before the deal becomes final.
The lawsuit had been scheduled to go to trial this month, and it was the one major barrier standing between the two airlines and their proposed merger. U.S. Attorney General Eric Holder said earlier this month that any agreement they would reach with the airlines would require trade-offs in airport slots, especially Reagan National where together, the two airlines hold approximately two-thirds of the slots. Both airlines are hoping for the merger because it would give American Airlines’ parent a company a boost and lift it out of bankruptcy.
Airline stocks react to US Airways deal
After the preliminary settlement was announced, shares of airline companies started reacting. Shares of US Airways Group Inc (NYSE:LCC) declined 1%, while shares of American Airlines’ parent company, AMR Corporation (OTCMKTS:AAMRQ), surged. Southwest Airlines Co. (NYSE:LUV) shares rose about 3%, while JetBlue Airways Corporation (NASDAQ:JBLU) increased 7%.
Once the airport slots held by US Airways and American are put up for sale, these other airlines will be vying for those valuable slots and could see a significant increase in traffic, particularly through the highly coveted slots at Reagan National Airport.