U.S. Tentatively OKs American’s AirCal Takeover : Transportation Dept. Says It Is Unlikely to Lessen West Coast Competition
The federal Department of Transportation gave tentative approval Friday to the proposed $225-million acquisition of AirCal by American Airlines, saying “it is not likely to substantially lessen competition and is not inconsistent with the public interest.”
The transaction, which was announced in November, would provide American with access to some West Coast markets where it has not had a major presence.
When announcement of the merger was made, it came as something of a surprise to airline analysts, since American’s traditional position was that it planned to grow from within. However, it altered its strategy in response to the actions of other airlines.
“Since Delta purchased Western Airlines and United plans to beef up its West Coast operations,” said Anthony Hatch, an airline analyst with Argus Research of New York, “American felt obligated to gain access to a key marketing area in which it had a minimal presence.”
The Department of Transportation gave interested parties 15 days to file comments or objections to the merger. American and AirCal will have 10 days to answer, and a final ruling is expected soon thereafter.
Complaints on Orange County
In December, Trans World Airlines and America West Airlines filed some objections to the acquisition, but neither opposed it outright. One complaint involved alleged anti-competitive effects at Orange County’s John Wayne Airport.
In its tentative ruling Friday, the agency said that if the acquisition is approved American will control 37% of the 66 permanently authorized slots at John Wayne, where operations are severely limited because of environmental concerns and the relatively small size of the airport.
“However,” the U.S. order said, “DOT (the Department of Transportation) tentatively concluded that airline service offered at other Los Angeles area airports, especially Los Angeles International Airport, will provide effective competition for Orange County travelers in long-haul markets.”
The department also said the proposed merger appears unlikely to reduce competition substantially on three routes previously served by both carriers until American recently pulled out of them. These are San Diego-San Jose, San Jose-Seattle and Ontario-Sacramento.
