Report: Airlines proposing settlement in merger lawsuit

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U.S. Airways and American Airlines are proposing a settlement with the Department of Justice (DOJ) in the ongoing lawsuit over their proposed merger, according to a report. 

The airlines are suggesting that they give up some of their combined gate space at Washington, D.C.’s Ronald Reagan National Airport in exchange for the Justice Department dropping its lawsuit to block the proposed merger, according to a Dow Jones report.

Federal officials regulate air traffic at Reagan – as well a pair of New York airports - because of airline congestion in the Northeast. The process, known as slots, calls for airlines to apply to the agency for the right to fly between the popular D.C. airport and particular destinations as the FAA seeks to control the airplane traffic flow into the nation’s capital.

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The airlines and the Justice Department agreed this week to mediation, according to documents that were filed with the Washington, D.C., U.S. District Court.

Justice has sought to block the proposed U.S. Air-American Airlines because it argues that companies have too many similar flight destinations.

The airlines have countered that less than 10 of their regular non-stop routes are identical, but the Justice Department says that flights with layovers should also be counted.

U.S. Air operates a hub out of Reagan Airport, and the combined airline would control a majority of the total flights out of the D.C. airport if no changes were made to its landing rights.

The trial between the airlines and the Justice Department is scheduled to begin on Nov. 25 if the companies cannot reach an agreement with the agency.

The airlines have said that their merger would create a company that is worth $11 billion if they are allowed to combine forces.

Attorney General Eric Holder has framed the lawsuit as an effort by the administration to protect airline passengers from price increases for flights.

However, aviation industry officials have argued that the Obama administration is overreaching in its attempt to stop the merger, citing other airlines, such as Delta and Northwest, and United and Continental airlines, that have been allowed to combine forces in recent years.