Fitch: AMR/US Air Antitrust Settlement Positive for Industry
NEW YORK -- November 13, 2013
The settlement agreement between the Department of Justice and AMR Corp./US
Airways Group, Inc. (US) is a positive for the two companies and for the
industry as a whole, according to Fitch Ratings.
A successful merger of US and AMR continues the trend of improved U.S. airline
credit profiles over the last five years that have been driven by a more
sustainable industry structure. The strongest carriers have also benefitted
from disciplined capacity management practices, higher passenger yields and
better revenue fundamentals. Concessions included in the DOJ settlement are
viewed as relatively minor considering the scale of the merger, and leave
intact much of the benefit expected from a combined US/AMR route structure.
As part of the settlement, the combined companies will divest 52 slot pairs at
Washington Reagan airport (DCA), where US Airways currently has an estimated
55% market share. Slot pairs refer to the right to take off or land at a given
time, and are separate from gates. Despite the divestiture, the merged airline
is expected to hold a greater market share at that airport than US Airways had
on a stand-alone basis, maintaining a competitive advantage in the D.C.
market. The company has agreed to use all of its DCA commuter slot pairs to
service small and medium sized communities, but the agreement appears flexible
in defining the communities to be served, allowing the company to focus on its
more lucrative routes.
Other conditions in the settlement are essentially in line with plans
announced prior to the DOJ's lawsuit. These include the agreement to maintain
the company's primary hubs for at least three years and to continue providing
daily service to markets where that level of service currently exists.
Fitch currently rates US Airways at 'B+/Positive Outlook' while AMR is rated
at 'D' as it remains in bankruptcy. Ratings will be reviewed following the
official close of the merger and American's exit from bankruptcy, which is
expected in early December.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit
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