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European Union: Commission Gives Green Light to Proposed Merger Between Two U.S. Air Carriers

(Aug. 8, 2013) On August 5, 2013, the European Commission approved a proposed merger between US Airways Group and AMR Corporation, including AMR’s main subsidiary American Airlines, Inc. The proposed merger could potentially infringe European Union competition rules if it resulted in a monopoly on the London-Philadelphia route, for which US Airways and American Airlines (through its membership in a joint venture with British Airways and Iberia) are the only air carriers operating non-stop flights. (Press Release, Mergers: Commission Approves Proposed Merger Between US Airways and American Airlines’ Holding Company AMR Corporation, Subject to Conditions, IP/13/764, EUROPA (July 5, 2013).)

On reviewing the deal, the Commission also examined any potential anticompetitive effects on other transatlantic routes. On those routes, the Commission reached the conclusion that the new entity would continue to face competition from other air carriers, 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. The Commission gave its approval to the proposed merger after the air carriers involved agreed to release one daily slot pair at London Heathrow and Philadelphia airports. Other commitments made by the new entity included its agreement to allow new air carrier entrants to the route to acquire grandfathering rights after a certain period of time. (Id.)

The Commission’s authority to review whether the proposed merger has an EU dimension is derived from article 1 of the EC Merger Regulation. (Council Regulation (EC) No 139/2004 of 20 January 2004 on the Control of Concentrations Between Undertakings (the EC Merger Regulation), 2004 O.J. (L 24) 1, EUROPA.) Under the Regulation, a merger, or “concentration” in EU parlance, has an EU dimension when it meets the following two criteria: (a) the combined aggregate worldwide turnover of all the undertakings of the parties concerned is more than €5 billion and (b) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than €250 million. An exemption from this rule exists when each of the undertakings concerned achieves more than two-thirds of its aggregate EU-wide turnover within one and the same Member State. (Id.)

The Commission was initially notified of the proposed merger on June 18, 2013. (Press Release, supra.) It then had 25 days to reply to the parties involved. (EC Merger Regulation, supra.)