US Airways And American Airlines Lobbying For Merger
US Airways Group Inc (NYSE:LCC) is in talks with American Airlines to make an offer to win regulators’ approval of the proposed merger for the two giants. The two airlines are hoping to reach an agreement with the regulators prior to the court date set for November 25th, although it is doubtful as to whether this will happen.
Proposal To Relinquish Slots At Ronald Reagan National Airport
The two airlines are working on a deal that will allow them to give up some of their takeoff and landing slots at Washington’s Ronald Reagan National Airport. The companies are hoping this will be enough to allow regulators to approve their $11 billion merger.
According to a complaint filed against the merger in August, the two companies control 69 percent of the takeoff and landing slots at the airport. The Justice Department focused on Reagan specifically, and this airport is used by many members of Congress. The congressmen and women fly to and from their home areas from the airport.
New Company Could Monopolize Some Markets
Aside from Washington, there are more than 1,000 other cities where the two giants of the air dominate the market. The fear of regulators is that a merger between the two could cause a spike in prices, leaving the new company in a monopoly situation. Majority control of a particular market would enable the new company to cut the number of flights, driving ticket prices up.
Settlement Not Expected Prior To Court Date
According to the report from Dow Jones, the two sides of the matter are not expecting to resolve the issue prior to the court date. Both sides did agree to have a mediator appointed earlier this week. The Justice Department and both airlines have also said they are open to a settlement that satisfies both parties. In the meantime, both airlines and unions are pressuring for a merger, as it will benefit the employees.
Airlines Spending Big Bucks On Lobbying
According to the Senate Lobbying Disclosure Act database US Airways spent $1.68 million on lobbying in 2011. This number jumped to $2.8 million in 2012, as the company was preparing to initiate the merger. This year, spending has increased to $4.2 million in just the first three quarters. It is evident that the airline is desperate to push the merger through. However, it is doubtful if this will happen prior to the court date next month.
Disclosure: The author has no position in the stocks mentioned in this article, and does not intend to initiate any position in the next 48 hours
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