U.S. Tentatively Approves USAir’s Acquisition of PSA

The U.S. Department of Transportation gave tentative approval Tuesday to USAir Group’s $400-million bid for Pacific Southwest Airlines and suggested that the proposed merger would not reduce competition on the three routes where the two airlines compete.

The department also tentatively rejected a request by the Teamsters Union that USAir be required to adopt “labor protective provisions” to ensure the income of PSA’s 3,184 Teamster members if jobs are lost after the two airlines are merged. Regulators suggested instead that income protection guarantees are best determined by the private sector.

USAir has made the acquisition contingent on PSA winning changes in the protective provisions of its labor contracts, a position not affected by Wednesday’s tentative ruling by the Transportation Department.

USAir has indicated that it will provide such protection to the workers but is not willing to include them in union contracts.

The Justice Department, which makes recommendations but does not have final power of approval on such mergers, concluded earlier this month that the USAir-PSA deal would not lessen airline competition. PSA, based in San Diego, and USAir, which has its headquarters in Arlington, Va., compete only on three Los Angeles routes: to and from Phoenix, San Francisco and San Diego.

However, because of the proposed deal’s size, the department declined to give final approval to the acquisition without further review. It instituted a “show cause” proceeding that gives opponents two weeks to make objections.

The two airlines do not anticipate any objections from competing carriers because no complaints were raised when USAir and PSA filed their initial application with the Department of Transportation, according to Dennis O’Dell, PSA vice president and general counsel.

The tentative rejection of the Teamsters’ request “is pretty much in keeping with the Transportation Department’s practice in previous merger and acquisition cases,” O’Dell said Wednesday.

The Teamsters negotiated the labor protective provisions into 1984 contracts covering PSA flight attendants, machinists, ground personnel and reservations agents. The union maintains that USAir must include those provisions in labor contracts covering former PSA employees after the merger.

PSA’s pilots last week agreed to labor-contract modifications demanded by USAir. The 700 pilots are represented by the Air Line Pilots Assn.