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To Merge, American, U.S. Airways Must Give Up Slots

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STEVE INSKEEP, HOST:

NPR's business news starts with a merger cleared for takeoff.

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INSKEEP: The Justice Department has agreed to a deal with American and US Airways that would create the world's biggest airline. The settlement requires the airlines to give up several dozen coveted takeoff and landings slots at major airports. The government had previously sued to prevent American and US Airways from merging at all, but it now says this arrangement will benefit passengers.

NPR's Wendy Kaufman reports.

WENDY KAUFMAN, BYLINE: The government says low cost airlines, like Jet Blue and Southwest, will get those take off and landing slots and expand service at Regan National in Washington, La Guardia in New York and other airports.

Assistant Attorney General Bill Baer says many passengers will see lower fares.

ASSISTANT ATTORNEY GENERAL WILLIAM BAER: These divestitures will allow low cost carriers to fly many more direct and connecting flights throughout the country each day. This agreement has the potential to shift the landscape of the airline industry.

KAUFMAN: Both Southwest and Jet Blue - potentially big winners here - issued statements, saying they are looking forward to expanding their service in New York and Washington.

Travel industry analyst Henry Harteveldt of Hudson Crossing, says while some travelers will see lower fares, the government's assertion that this deal changes the industry's competitive landscape is a bit of a stretch.

HENRY HARTEVELDT: The airlines are giving up a small number of slots in comparison to the total number they have at each airport, it certainly is good they are doing this, it will help, but this doesn't shift the landscape by any stretch of the imagination.

KAUFMAN: Another industry observer, Rick Seaney, the CEO of Fare Compare, adds that this merger and the overall consolidation of the industry will likely mean higher fares for those in smaller cities.

RICK SEANEY: If you were in a small regional city that had two or three legacy airlines that took you to their hub city and you only one left, there is going to be no incentive to discount in the future.

KAUFMAN: The merger between American and US Airways is slated to become final by the end of the year.

Wendy Kaufman, NPR News. Transcript provided by NPR, Copyright NPR.