Justice Dept. Approves US Airways Merger

Combined, Arlington-based US Airways and Arizona's America West would be the nation's largest discount carrier.
Combined, Arlington-based US Airways and Arizona's America West would be the nation's largest discount carrier. (By Matt York -- Associated Press)
By Michael Barbaro and Keith L. Alexander
Washington Post Staff Writers
Friday, June 24, 2005

The Justice Department yesterday cleared the proposed merger of US Airways Group Inc. and America West Holdings Corp., finding that any overlap between the carrier's routes would not hurt competition in the hyper-competitive budget airline industry.

The ruling removes a key hurdle before the merger, which would create the nation's largest discount airline, with service throughout the United States and overseas. The same government agency killed US Airways' previous merger attempt, with United Airlines in 2001, forcing the Arlington-based airline to pare down costs in a last-ditch effort to survive on its own.

The merger is probably a "done deal" now, said airline analyst Michael Boyd of the Denver-based Boyd Group -- unless America West decides at the last minute to back away because it "found a skeleton in US Airways' closet."

Several potential pitfalls remain. The deal still requires approvals from the America West shareholders, US Airways creditors, the U.S. Bankruptcy Court, the Securities and Exchange Commission and the Air Transportation Stabilization Board, which granted both airlines federal loan guarantees.

New buyers for US Airways could also emerge before bidding closes on July 1, executives said.

"There is quite a bit more to do," said Zoe Guynn, a spokeswoman for America West, who said the company "feels the process is on track."

In its ruling, the Justice Department said US Airways found there was "very little overlap" between the airlines. US Airways operates primarily on the East Coat, while America West covers the West Coast.

The decision was issued by outgoing Assistant Attorney General R. Hewitt Pate of the department's antitrust division, who led the opposition to the United deal. At the time, Pate argued that merger would impede competition by triggering fare increases.

In his decision yesterday, Pate said this deal would "enable the merged airline to offer U.S. consumers more and better service to more destinations throughout the country."

Separately, the bankruptcy court approved the restructuring of a lease agreement with General Electric Co. to accommodate the merger.

The proposed merger would bring together the nation's seventh-largest airline, US Airways, and the eighth-largest, America West.

The airline is expected to retain most of its 1,970 Washington area employees, but it is unclear how many managers will remain. The airline is expected to operate under the US Airways name, but its headquarters would move from Crystal City to Tempe, Ariz., the home of America West.

Employees are optimistic but still cautious about the proposed merger and its impact on their jobs.

"If everything happens the way it is supposed to, it could provide some real promise," said Jack Stephan, spokesman for the US Airways unit of the Air Line Pilots Association.

But he added that "there are a lot of ifs."

"We'll wait and see what happens," said Lisa Tyma-Ambrosini, a US Airways gate supervisor at Reagan National Airport. "It seems like a positive step."

Staff writer Mark Chediak contributed to this report.

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