* AMR Corp shares spike up 24.5 percent
* US Airways stock reaches highest level in nearly 6 years
* Holder - could resolve merger concerns before scheduled
By Diane Bartz
WASHINGTON, Nov 4 The U.S. Justice Department
wants US Airways and American Airlines to divest landing and
take-off slots at Reagan National and other "key" U.S. airports
as a condition to drop its effort to block a proposed merger,
Attorney General Eric Holder said on Monday.
Share prices in the airlines jumped as Holder seemed to
offer a path to an agreement, three weeks before the scheduled
start of a trial on Nov. 25.
The bankrupt AMR Corp, parent of American
Airlines, closed up 24.5 percent in heavy volume, while those of
US Airways at one point rose more than 5 percent to
their highest in almost six years before retreating to close up
Holder said that talks with the companies were ongoing and
he hoped for an agreement before the trial is due to start.
The Justice Department's complaint focused on the carriers'
dominant position at Reagan National, outside Washington, and on
more than 1,000 city pairings that American and US Airways now
dominate. It said the merger would reduce choice for travelers
and lead to higher fares.
Holder would not elaborate on Monday about whether the
government has a specific number of slots in mind that the
carriers need to sell to advance the deal. There were a "number
of ways" to address the government's concerns, he said.
"What we have tried to focus on is to make sure that any
resolution in this case necessarily includes divestitures of
facilities at key constrained airports throughout the United
States," Holder said.
"We hope that we will be able to resolve this short of
trial, but if we do not meet those demands that we have, we are
fully prepared to take this case to trial," he said. "We will
not agree to something that does not fundamentally resolve the
concerns that were expressed in the complaint."
Experts said it is unusual for an attorney general to
comment at length in the middle of antitrust battle.
"I think it's a positive sign (of potential settlement), but
it's important not to over-read it," Herbert Hovenkamp, an
antitrust expert who teaches at the University of Iowa's College
of Law, said of Holder's comments.
Several antitrust specialists were surprised by the share
price increases, which suggested that investors saw Holder's
utterances as a tipping point in favor of the merger.
Three said Holder essentially backed up previous comments
from his antitrust deputy, Bill Baer, by insisting that the
merger created antitrust problems in a number of markets
"Bill Baer can now sit there and say "'You heard from the
boss. What can I do?'...This is a message to the parties," said
Steve Axinn, a Justice Department veteran now at the law firm
Axinn Veltrop and Harkrider LLP.
Seth Bloom, a former staffer for the Senate Judiciary
Committee's antitrust subcommittee, agreed the comments did not
necessarily signal that a quick settlement was in the works.
"He's saying you need divestitures nationally...and so the
airlines have to make a fundamental change in their merger
proposals," he said. "It's a very difficult case to settle."
Three weeks before the scheduled start of the trial, US
Airways and American Airlines can agree to a package of
divestitures, prepare to litigate, or abandon a merger that has
been years in the making, Hovenkamp said.
"The government is asking for a lot and the parties want to
give up as little as possible," Hovenkamp added.
DOMINANT AT REAGAN NATIONAL
The two carriers control a combined 69 percent of takeoff
and landing slots at Reagan National, an airport used by many
members of Congress to fly to their home districts.
Roughly 55 percent of slots at the airport are held by US
Airways and 14 percent held by American. Airline officials have
said privately that they are willing to cede some slots, but not
scale back by the equivalent of the entire 14-percent American
US Airways declined comment on Holder's remarks. American
Airlines did not respond to requests for comment.