The European Commission has approved the proposed merger between US Airways and American Airlines' parent company, AMR Corp.
As a condition of its approval, the EC is requiring the new combined carrier to give up one daily take-off and landing slot between London Heathrow and Philadelphia. Currently US Airways operates one daily flight between London and Philadelphia, while American's oneworld alliance partner, British Airways, operates two daily flights between the cities.
"The commitments include a corresponding slot at London Heathrow as well as far-reaching feeder arrangements to induce entry by a new competitor on the route," said EC official Joaquin Alumnia in a statement. "We are therefore satisfied that the competitive dynamics will be maintained so as to ensure choice and quality of air services for passengers on this route."
With clearance from the EC, the merger is awaiting approval from the U.S. Department of Justice and for confirmation of AMR's restructuring plan in bankruptcy court. Both airlines expect to close the merger by September.
Keep reading for the full release from the EC.
UPDATE: Here is a statement from US Airways and American about the EC approval.
Tom Horton, chairman, president and CEO of AMR, and incoming Chairman of the Board of the combined company, said, “We are very pleased that the EU has approved the merger between American Airlines and US Airways. This represents one of the final milestones on our path to becoming the new American Airlines.”
Doug Parker, chairman and CEO of US Airways, and incoming CEO of the combined company, said, “The clearance by the European Commission is an important step toward closing this merger. The new American will benefit customers in the United States, Europe and across the world by enhancing connectivity within the oneworld alliance and creating more options for travel both domestically and internationally. We look forward to providing access to the best destinations in the world as the new American Airlines.”
The European Commission has cleared under the EU Merger Regulation the proposed merger between US Airways Group and AMR Corporation, including its main subsidiary American Airlines, Inc, all of the United States. Both US Airways and American Airlines are major US flag commercial airlines providing scheduled air passenger services. The transaction would lead in particular to a monopoly on the London-Philadelphia route, where US Airways and American Airlines through its membership in a metal neutral joint venture with British Airways and Iberia (the "Transatlantic Joint Business", see background) are the only carriers offering non-stop flights (the route is de facto operated by British Airways). The decision is conditional upon the release of one daily slot pair at London Heathrow and of other commitments in order to induce entry on the London-Philadelphia route. In light of these comprehensive commitments, the Commission concluded that the transaction would not raise competition concerns.
Commission Vice President in charge of competition policy Joaquín Almunia said: "The Commission could clear this transaction in the first phase given the commitments offered by the parties which address the competition concern we identified on the London-Philadelphia route. The commitments include a corresponding slot at London Heathrow as well as far-reaching feeder arrangements to induce entry by a new competitor on the route. We are therefore satisfied that the competitive dynamics will be maintained so as to ensure choice and quality of air services for passengers on this route."
The Commission examined the competitive effects of the proposed merger on numerous transatlantic routes (one non-stop/non-stop overlap on the London-Philadelphia route, 27 non-stop/one-stop overlap routes and 39 one-stop/one-stop overlap routes).
The Commission’s investigation found that the transaction, as initially notified, would have led to a monopoly on the London-Philadelphia route out of London Heathrow airport as US Airways and American Airlines through their membership in the Transatlantic Joint Business (de facto British Airways operates this route) are the only carriers offering non-stop flights on this route.
The Commission's investigation confirmed that on all other transatlantic routes affected by the merger the combined entity will continue to face competition from other strong competitors, notably from other metal neutral joint ventures such as the North Atlantic Joint Venture, a partnership including Delta, Air France/KLM, and Alitalia, and the A++ JV, a transatlantic partnership including Lufthansa, Air Canada and United Airlines. In addition, for certain routes it will continue to face strong competition from Virgin Atlantic, in particular following Delta's acquisition of joint control over the Virgin Group (see IP/13/587) and from other air scheduled carriers not belonging to transatlantic metal-neutral joint ventures.
US Airways and American Airlines submitted commitments to release one daily slot pair at London Heathrow and Philadelphia airports, and also provided further incentives such as the possibility for a new entrant to acquire grandfathering rights after a certain period of time. Furthermore, the parties, supported by their joint venture partners of the Transatlantic Joint Business, committed to entering into special feed traffic agreements with the likely entrant airline.
These commitments adequately address the competition concerns identified by the Commission and should facilitate new entry on the London-Philadelphia route. The Commission therefore concluded that the proposed transaction would not significantly impede effective competition in the European Economic Area (EEA) or a substantial part of it. This decision is conditional upon full compliance with the commitments.
The transaction was notified to the Commission on 18 June 2013.
Companies and products
AMR Corporation is a holding company having as main subsidiary American Airlines, Inc., a U.S. flag commercial airline providing scheduled air passenger and air cargo transport services. American Airlines offers approximately 3 400 flights daily to more than 250 destinations worldwide. American Airlines is a member of the oneworld alliance. In addition, alongside with British Airways and Iberia, it is a member of a metal neutral joint venture (the "Transatlantic Joint Business") whereby the partners have agreed to have common fares, capacity, schedules, sales and marketing, share overall revenues and sell each other's products and services on transatlantic routes without regard to which party is operating the aircraft. The Commission has assessed the agreements establishing the Transatlantic Joint Business in its BA/AA/IB decision of 14 July 2010 (see IP/10/936) under Article 101 of the Treaty on the Functioning of the European Union (TFEU), that prohibits anticompetitive agreements.
US Airways is a U.S. flag commercial airline providing scheduled air passenger and air cargo transport services. It offers more than 3 100 flights daily to more than 200 destinations worldwide.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).