NEW YORK — Overruling its own administrative law judge, the Transportation Department on Friday approved the $1.59-billion acquisition of Piedmont Aviation by USAir Group. The transaction will be the highest-priced consolidation resulting from the airline industry's post-deregulation merger mania.
After three years of merger frenzy, it is also believed to be one of the last industry marriages.
In a 37-page decision, the department said "the acquisition is not likely to substantially lessen competition or be inconsistent with the public interest." Last month, Transportation Law Judge Ronnie A. Yoder said essentially the opposite.
The merger will be closed next Wednesday, a USAir spokesman, David Shipley, said. But Piedmont will be operated under its own name for at least nine months. USAir Chairman Edwin I. Colodny said he had been "confident" that the merger would be allowed.
USAir acquired Pacific Southwest Airlines in May and operates it as a wholly owned subsidiary. Piedmont and USAir have been two of the most financially successful post-deregulation airlines, during a decade of furious competition. If the merger had been denied the, two carriers probably would not have survived in competition with the mega-carriers resulting from earlier mergers.
USAir had been the nation's eighth-largest airline in terms of revenue passenger miles (the number of paying passengers multiplied by the number of miles flown.) Piedmont was ninth. Combined, they will be the seventh-largest American carrier, ranked between Trans World Airlines and Pan American World Airways.
Consolidated revenues for USAir, once the merger has been completed, are estimated by analysts to top $5 billion. Of this, 57% would be generated by a the combined USAir/PSA operation and 43% by Piedmont.
57 Cities in Common
USAir's route network is predominately in the Northeastern United States, centering on Pittsburgh and Philadelphia hubs. Piedmont has a strong Southeastern network.
USAir has 1,100 daily departures. It operates at 77 airports in 31 states, Washington and three Canadian cities. It has eight departures at Los Angeles International Airport. USAir has 157 airplanes.
Piedmont, headquartered in Winston-Salem, N.C., operates 1,300 flights daily from 92 airports to 29 states, Washington, and Canada and the United Kingdom. It operates four flights to Los Angeles and this will be doubled in December. It has 177 aircraft.
The two airlines serve 57 cities in common.
One difficulty the new entity will face is the lack of a major computerized reservation system, an important competitive factor in the consolidated industry. Allegis Corp., the parent of United Airlines, has said, however, that it wished to sell 49% of its Apollo/Covina computerized reservation system.
Also lacking would be a mid-continent hub to tie the East and West Coast operations together.
Phoenix-based America West had challenged the merger before the Transportation Department on the grounds that the merged airlines would monopolize Washington National Airport and LaGuardia in New York, where landing rights are controlled. The department said the question of landing slots would be addressed "in a separate forum." American West said late Friday that it will oppose the merger in court.
USAir, then known as All American Aviation, was the first air carrier certificated by the Civil Aeronautics Board, in 1938. It began passenger service on March 7, 1949. Its name was subsequently changed to Allegheny Airlines and in 1974, to shed its small-town image, to USAir. Piedmont was founded in 1940 as an aircraft sales and service company. It began flying in 1948.