American, US Airways Maneuver for Merger Approval in Europe

European competition regulators have pushed back a final decision on the proposed merger of American Airlines parent AMR Corp. AAMRQ +1.22% and US Airways Group Inc. LCC -0.16% until next month after the carriers offered concessions to gain approval for the deal.

The proposed remedies weren’t disclosed and the European Commission isn’t viewed by analysts as a significant roadblock for the deal, which would create the world’s largest airline. Meanwhile, in the U.S. the carriers have steered clear of discussing possible concessions as the transaction is reviewed by the Justice Department.

The European Commission cleared without conditions the last two big U.S. airline mergers—those creating United Continental Holdings Inc. UAL +2.37% and an enlarged Delta Air Lines Inc. DAL +3.21% It has continued to probe the competitive impact of the three big marketing alliances that dominate trans-Atlantic travel, requiring some member carriers to give up takeoff and landing slots at congested airports.

AMR and US Airways submitted their proposed concessions to the commission on Tuesday, and the executive branch of the European Union extended its provisional deadline to make a decision on the merger by 10 days to Aug. 6, according to Jean Paul Poitras, a lawyer at Latham & Watkins in Brussels representing US Airways.

AMR declined to comment, and the commission didn’t respond to a request for comment.

Any action by the commission will be closely monitored in Washington amid growing cooperation between airline competition officials on both sides of the Atlantic, though the combined carrier would rank only fourth by seat capacity on routes between Europe and the U.S., according to a study by Buckingham Research Group.

A lack of overlapping routes has been a central lobbying point for AMR and US Airways in their effort to avoid having to make concessions in their domestic market to win Justice Department approval. The airlines expect to close their planned deal in the third quarter.

The two carriers serve five common European airports, all from different U.S. hubs, and the combined carrier would have a market share of more than 20% to only two destinations—Madrid and Manchester—and rank the second largest carrier to both.

The enlarged airline would strengthen the Oneworld marketing alliance, which already counts American as a member alongside British Airways, IAG.MC +3.46% but have only a minimal impact at London’s congested Heathrow Airport, which has been the focus of action by Brussels in approving some previous airline deals.

US Airways has just 28 weekly slots at Heathrow this summer while American has 210, giving them a combined 2.5% share, trailing both United and Delta following the latter’s planned joint venture with Virgin Atlantic Airways. Oneworld members would still rank third on North Atlantic routes after the rival Star and SkyTeam groupings, according to Buckingham Research.
The Wallstreet Journal, July 17, 2013