American Airlines and US Airways Group Inc. are in exploratory talks with the U.S. about settling the government’s lawsuit seeking to block their proposed merger, two people familiar with the matter said.
The discussions are taking place between lawyers for the airlines and top officials at the Justice Department’s antitrust division, said the people, who asked not to be named because the conversations are confidential. The airlines are offering to divest gates and landing and takeoff rights at Washington’s Reagan National Airport as part of a settlement package, one of the people said.
The talks are still preliminary may not lead to settling the suit, the people said.
“Any discussions about settlement to resolve this litigation, whether internal, with DOJ directly or through the mediator would be private and we are not going to comment on them in any way,” Jill Zuckman, a spokeswoman for US Airways, said in an e-mailed statement.
The airlines and the Justice Department said on Oct. 28 that they agreed to submit the lawsuit to mediation as suggested by U.S. District Judge Colleen Kollar-Kotelly, who’s overseeing the case. A trial is set to begin Nov. 25.
Rich Parker, an attorney for US Airways, declined to comment on the mediation or settlement prospects when he spoke with reporters Wednesday outside federal court in Washington following a status hearing in the case.
“We have always said that our side is open to discussions but I’m not going to talk about any aspect of settlement,” Parker said. He said Kollar-Kotelly “asked for a mediator. When the judge asks us to do that, we do that.”
The Justice Department sued American parent AMR Corp. and US Airways in August, claiming the planned merger, which would create the world’s largest airline, would reduce competition and lead to higher prices.
The U.S. said in its complaint that the merged airline would control 69 percent of Reagan’s take-off and landing rights, known as slots, almost six times more than its closest competitor, effectively blocking other airlines from entering or expanding there to increase competition. A carrier that wants to begin or expand service at Reagan must buy or lease slots from another airline.
American, which has been in bankruptcy since November 2011, was set to exit court protection by merging with Tempe, Arizona- based US Airways when the Justice Department and a group of states sued to block the deal Aug. 13.
AMR, based in Fort Worth, Texas, would have to start over in its reorganization if the U.S. wins a court order stopping the tie-up, the committee representing the carrier’s unsecured creditors said in a court filing Oct. 28.
American’s Chief Executive Officer Tom Horton said reaching a “reasonable settlement” of the case would be better for both sides than going to trial, speaking at a conference in New York Oct. 29.
“It’s incumbent on us to make a very strong case and be ready to help bring about a sensible settlement,” Horton said, without elaborating on what an accord might entail. “I think there’s a way to do that.”
The airlines tried to reach a settlement with the U.S. before the lawsuit was filed, said Ed Stewart, a US Airways spokesman.
“The concessions we were willing to offer were designed to address competitive concerns that DOJ had raised during the investigation,” Stewart said in an e-mail.
Michael Trevino, a spokesman for American, declined to comment on a settlement.
“We have been saying and continue to say we remain open to a settlement but we can’t comment any further than that,” he said.
Gina Talamona, a Justice Department spokeswoman, also declined to comment on settlement talks with the airlines.
The antitrust case is U.S. v. US Airways Group Inc., 13-cv- 01236, U.S. District Court, District of Columbia (Washington). The bankruptcy case is In re AMR Corp., 11-bk-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
© Copyright 2014 Bloomberg News. All rights reserved.