The Justice Department announced today it is settling its lawsuit against the merger of American Airlines and US Airways by requiring the combined airline to give up slots at key airports across the country to low-cost competitors.
The department filed papers in U.S. District Court in the District of Columbia to announce the settlement that will avoid a trial scheduled to start Nov. 25.
The settlement clears the way for American and US Airways to become the world's largest airline, nearly two years after American filed its bankruptcy case to reorganize.
The settlement will increase presence of low-cost airlines in Boston, Chicago's O'Hare, Dallas Love Field, Los Angeles, Miami, New York's LaGuardia and Washington's Reagan National airports.
"This agreement has the potential to shift the landscape of the airline industry," Attorney General Eric Holder said. "By guaranteeing a bigger foothold for low-cost carriers at key U.S. airports, this settlement ensures airline passengers will see more competition on nonstop and connecting routes throughout the country."
"This is very good news and we are grateful to all who have made it happen," said Doug Parker, CEO of US Airways, and incoming CEO of the combined airline. "We are pleased to have this lawsuit behind us and look forward to building the new American Airlines together."
Under the terms of the settlement, the airlines will divest 52 slot pairs at Reagan and 17 slot pairs at LaGuardia. The airlines will also surrender two gates at Boston's Logan airport, O'Hare, Dallas Love Field, Los Angeles and Miami.
After completion of the required divestitures, the combined company expects to operate 44 fewer daily departures at Reagan and 12 fewer daily departures at LaGuardia than the approximately 290 daily DCA departures and 175 daily LGA departures that American and US Airways operate today.
But the airlines said the changes wouldn't reduce total employment at the new company.
"This is an important day for our customers, our people and our financial stakeholders," said Tom Horton, CEO of American. "This agreement allows us to take the final steps in creating the new American Airlines."
The companies now expect to complete the merger in December 2013. Completion of the merger remains subject to the approval of the settlements by the U.S. Bankruptcy Court.
To maintain its service to small and medium-sized airports that US Airways warned might suffer from a reduction in slots at Reagan and LaGuardia, the combined company announced plans to use its gates at Reagan to serve those communities.
Another part of the settlement also committed the combined American to maintain its hubs in Charlotte, New York's JFK, Los Angeles, Miami, Chicago O'Hare, Philadelphia and Phoenix. For a period of five years, the merged company will continue daily service from those hubs to each of the states participating in the lawsuit: Arizona, Florida, Pennsylvania, Michigan, Tennessee and Virginia.
Shares of American Airlines (AMR) surged more than $2 per share, or more than 22%, to $11.68 on the news of the merger's approval. Shares of U.S. Airways fell 0.6%, or 15 cents to $23.12.
Shares of other major U.S. airlines also surged on the news. United Airlines jumped $1.12, or 3.2%, to $36.43. JetBlue soared 54 cents, or 7.2%, to $8.23. And Southwest Airlines rose 48 cents, or 2.7%, to $18.29.
Contributing: Adam Shell