Abbott settles Texas challenge to airline merger

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Associated Press

Posted on October 1, 2013 at 1:00 PM

Updated Wednesday, Oct 2 at 5:32 AM

GRAPEVINE, Texas (AP) — The Texas attorney general added his support to the merger of American Airlines and US Airways, reversing a position he took six weeks ago when he joined a federal lawsuit aimed at blocking the deal.

Greg Abbott changed his position after the airlines put into writing promises that they had made, including a vow to keep the combined carrier's headquarters in Texas and maintain a hub at Dallas-Fort Worth International Airport.

Abbott said it was critical that the airlines agreed to preserve service to 22 cities in Texas for at least three years after the merger. Some of those are small cities, from Abilene to Wichita Falls, with limited air service.

In mid-August, Texas and several other states sided with the U.S. Department of Justice in filing an antitrust lawsuit to block the merger, which they argued would limit competition and drive up prices.

Business groups criticized Abbott for siding against a major Texas employer. Abbott, a Republican, is running for governor in the 2014 elections and could face state Sen. Wendy Davis, a Fort Worth Democrat who backed the merger and asked the Justice Department to drop the lawsuit.

Abbott announced what he called a settlement of Texas' part of the lawsuit Tuesday as he sat next to Tom Horton, the CEO of American Airlines parent AMR Corp., during a DFW Airport news conference.

Abbott said the settlement was a legally enforceable promise to keep American's headquarters in Fort Worth and preserve thousands of jobs in the state, something that had been "merely a stated intention." He said other airlines had broken similar promises after they went through mergers.

Talks between the airlines and Abbott started before the lawsuit and picked up after it was filed. "We always prefer to resolve matters without litigation," he said. "We wanted to achieve that here."

Mark Jones, a political science professor at Rice University in Houston, said Abbott will get credit in smaller cities such as Beaumont for helping secure a promise of continued air service. And any resentment among merger supporters in the Dallas-Fort Worth area will probably be forgotten by November 2014, he said.

"The fact that he resolved it removes it as an issue for Wendy Davis," Jones said. "She could have used it as a weapon in the (Dallas-Fort Worth) metroplex."

With Texas off the case, six states remain supporting the Justice Department's lawsuit, including Arizona, the home of US Airways Group Inc., which would lose a headquarters.

Horton said American has "regular discussions" with the Department of Justice, but he declined to say whether a settlement was likely. A trial is set for Nov. 25. "We stand ready to make our case in court," he said.

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