U.S. Seeking Divestitures from American, US Airways

U.S. antitrust authorities want American Airlines and US Airways Group Inc to agree to a broad package of divestitures at key U.S. airports in order to win approval of a merger that would create the world's largest air carrier, a source familiar with the matter said on Sunday.

The airlines and the U.S. Justice Department have begun talks about a possible settlement ahead of a trial later this month about the government's effort to block the merger.

The source, who was not authorized to speak publicly, said the two sides were discussing the possibility of the airlines giving up takeoff and landing slots at Washington's Ronald Reagan National Airport and other airports around the country.

In a complaint filed in August, the Justice Department had focused on Reagan National Airport, where the two carriers control a combined 69 percent of takeoff and landing slots. The airport is used by many members of Congress to travel to and from their home districts.

But antitrust authorities are seeking additional concessions from American's parent AMR Corp and US Airways to ensure that the merger would not limit consumer choices on nonstop and connecting flights, or result in higher fares, the source said.

In its complaint, the federal government also listed more than 1,000 city pairings where the two airlines dominate the market and where a merger could drive up prices or cut flight numbers.

The airlines are hoping to reach a settlement with the U.S. Justice Department before the trial, which is slated to begin November 25.

Officials with American Airlines and US Airways declined comment.

News that antitrust officials are seeking a broad package of divestitures was first reported by the Wall Street Journal on Sunday evening.

The newspaper, citing people familiar with the matter, said the opening of settlement talks suggested the trial was not a certainty. But it cautioned that the airlines might resist the broad concessions that the government is seeking.

The two sides last week agreed to use a mediator, according to a court filing. Both the airlines and the Justice Department have said that they are open to a settlement.

(Reporting by Diane Bartz; Writing by Andrea Shalal-Esa; Editing by Stephen Coates)