US Airways chief warns lawmakers of potential service cuts

By Diane Bartz

WASHINGTON (Reuters) - Forcing a combined American Airlines <AAMRQ.PK> and US Airways Group <LCC.N> to surrender slots at Reagan National Airport would risk fewer flights to small and medium-sized cities, US Airways CEO Doug Parker told lawmakers on Wednesday.

Parker was testifying to a Senate subcommittee on the impact of the proposed merger of the two airlines.

Servicing larger cities is more profitable and thus the airlines, which together have two-thirds of the take-off and landing slots at Reagan National, near Washington D.C., would cut service to smaller cities if the Justice Department or Transportation Department required divestitures as a condition of the deal, he said.

"This doesn't mean to sound threatening. We want to fly to these communities," Parker told the Senate Commerce Committee's subcommittee on Aviation Operations, Safety and Security.

US Airways announced on February 14 that it planned to buy the struggling carrier to create an $11 billion airline that would be the largest in the United States. The companies hope to complete the deal by the end of September.

Antitrust experts have said the Justice Department could request divestitures of some slots at Reagan National and a small number of other airports. Outside these hubs, the carriers fly different routes, for the most part.

The nonpartisan U.S. Government Accountability Office said in a report issued on Wednesday that the two airlines overlapped on 12 non-stop domestic U.S. flights, and that there were no competitors on seven of them.

At Reagan National, the new airline would have 68 percent of slots, far above Delta Airlines <DAL.N> with 12 percent, United Airlines <UAL.N> with 9 percent and the 11 percent held by other airlines, the GAO said.

Senators Maria Cantwell of Washington state, Democratic chair of the subcommittee, and New Hampshire's Kelly Ayotte, the top Republican, worried about the loss of service to smaller cities. Cantwell noted possible follow-on economic losses for those cities and surrounding communities if flights are cut.

West Virginia Senator Jay Rockefeller, chair of the full Commerce Committee, also expressed concern.

"Other airline CEOs have repeatedly promised that merging their airlines would lead to more choices for travelers in small and rural communities. I have found that not to be the case, at least in West Virginia," he said in a statement.

In late May, more than 100 members of Congress asked U.S. regulators to allow the new American to keep all the slots at Reagan National. The airport is used by many members of Congress to travel to and from their home districts.

The U.S. airline industry has seen five years of rapid consolidation. Delta acquired Northwest Airlines in 2008, United merged with Continental in 2010 and Southwest Airlines <LUV.N> bought discount rival AirTran in 2011.

With fewer carriers competing, ticket prices have risen. The average fare rose about 8 percent to $375 in the third quarter of 2012, compared with $346 in 2008, according to the U.S. Bureau of Transportation Statistics.

AMR filed for bankruptcy in 2011 and initially opposed a merger, but agreed to explore one under pressure from creditors and unions.

IBN