Yesterday, I wrote that “[The U.S. Department of Justice] had better get some significant asset divestitures besides a few Washington Reagan National slots or they will look incredibly silly.” The details are now in and the DOJ effectively threw up the white flag in its antitrust case against the US Airways/American Airlines merger. Which is to say the Obama Justice Department looks very, very, very silly at the moment.

In August, the DOJ sued, contending that the proposed merger was broadly anticompetitive. The third paragraph of the complaint the DOJ filed states:

This merger will leave three very similar legacy airlines — Delta, United, and the new American — that past experience shows increasingly prefer tacit coordination over full-throated competition. By further reducing the number of legacy airlines and aligning the economic incentives of those that remain, the merger of US Airways and American would make it easier for the remaining airlines to cooperate, rather than compete, on price and service. That enhanced cooperation is unlikely to be significantly disrupted by Southwest and JetBlue, which, while offering important competition on the routes they fly, have less extensive domestic and international route networks than the legacy airlines.

The Justice Department also highlighted the particular problem of the combined carriers’ landing and takeoff large slot holdings at capacity-constrained Washington Reagan National Airport (DCA).

Fast forward three months, and here’s what US Airways and American Airlines are actually giving up and agreeing to do and not to do:

• Southwest Airlines and JetBlue get to buy the slots at market rates at Washington Reagan National and LaGuardia (LGA) that they are currently leasing from American.

• The combined carrier has to give up (sell off) another 44 sets of slots at DCA and 12 sets of slots at LGA. There are also some technical restrictions on how the combined carrier can use its remaining 250ish Reagan National slot sets, including a requirement that the combined airline must continue serving all existing smaller communities.

• Give up two gates each at Boston Logan International, Chicago O’Hare International, Dallas Love Field, Los Angeles International, and Miami International airports.

• Agreed to not eliminate service to any destination in Arizona, Florida, Michigan, Pennsylvania, Tennessee, Virginia that the airlines currently serve for five years. (Those were the six states that joined the DOJ in the lawsuit.)

• Agree to not eliminate any hubs for three years.

That’s it. 10 gates and 12 slots apparently are enough to address the DOJ’s concern that this deal hurts competition anywhere in the country besides Washington Reagan National. The amount of slots given up at DCA could be higher than what most analysts would have predicted going a few months ago. (I’ll discuss the implications of the DCA provisions in a different post.) Still, the DOJ could almost certainly have gotten this same deal back in August without suing.

Incredibly, the DOJ is spinning this major retreat as a huge advance for competition generally. From the DOJ’s press release:

“The extensive slot and gate divestitures at these key airports are groundbreaking and they will dramatically enhance the ability of LCCs to compete system-wide,” said Assistant Attorney General Bill Baer of the Department of Justice’s Antitrust Division. “This settlement will disrupt the cozy relationships among the incumbent legacy carriers, increase access to key congested airports and provide consumers with more choices and more competitive airfares on flights all across the country.”

What a joke. Neither American nor US Airways currently flies to Love Field. It seems that the main impact there seems to be to drive Delta from the airport (!). Neither Southwest nor JetBlue currently flies to Miami, which isn’t exactly short of gates anyway. Boston hasn’t been a key airport for American or US Airways several years now. LAX is among the most competitive airports in the country, with an intense battle between Delta, United, American, and Southwest in which Southwest is dominate in many western markets.

You’ll also note that Charlotte isn’t on the list of airports where US Airways and/or American Airlines has to give up a token number of gates. US Airways is already very dominate at Charlotte Douglas International Airport and the merger will just make the soon-to-be-combined carrier’s position even stronger. And the DOJ is apparently quite OK with that. As the Charlotte Observer reports:

Consumer advocates said the Justice Department’s settlement doesn’t go far enough. Diana Moss, vice president of the American Antitrust Institute – which strongly opposes the merger – said the deal’s heavy focus on Washington Reagan National Airport and minimal changes elsewhere in the country mean cities such as Charlotte are likely to see higher fares.

“The remedy is loaded up on Washington National,” Moss said. “To hell with the rest of the U.S.”

“(The settlement) just completely obscures the harms that would impact other parts of the country, including Charlotte,” she said. “Having Charlotte not make the short list of remedied airports is glaring.”

It’s not as if there aren’t many additional small things the DOJ could have insisted on if they really wanted to try to promote competition. An obvious example is the gate situation here at CLT. American has two gates of the 12 gates on Concourse A. Those are a bit of a haul to any of 85 gates US Airways uses on the airport’s other four concourses. Concourse A also houses United, Delta, Air Canada, and Southwest. It’s pretty heavily used, with the resident airlines wanting more gates. Given the confusion over who actually runs the airport, when any sort of future expansion happens is a bit iffy at the moment. Requiring American to give up its two gates would provide more space for everyone besides US+AA to grow at CLT. (The effective gain could be reduced to one gate if JetBlue were to move A — it currently uses a gate on the Concourse D.) Even if the airlines on A didn’t immediately add flights, an additional gate or two would help them operate more efficiently here, which isn’t a bad thing when fighting an 800-pound gorilla.

I’m so not impressed quote of the moment: Also from the Charlotte Observer article:

At Charlotte Douglas, US Airways senior vice president of marketing and planning Andrew Nocella said he hopes to see growth.

“I’m bullish about Charlotte,” Nocella told the Observer. “I think I’d like to see the hub at 700” daily flights.

US Airways and American Airlines combined for 676 flights a day from CLT this past summer.

Bonus silly quote: Also from the UPoR:

“We fully intend to keep the hub and spoke structure we have forever,” said [US Airways CEO Doug] Parker. “Of course things can change so you can’t agree to that forever.”

Right. Sure. Which is exactly what every airline executive says as they are trying to get a merger approved. Ask the good citizens of Memphis or Cincinnati how things have worked out for them since Delta and Northwest merged. The requirement to keep hubs intact for three years comes in response, presumably to placate Arizona, which sued, fearing US Airways Phoenix hub might go away.

The five-year guarantee for current cities served in states that sued is the same sort of thing. And no, there’s no real chance that the combined airlines is going to completely drop places Tampa, Tuscon, or Richmond. However, it could have some value for some of the smaller markets. Of the destinations served from Charlotte in the states that joined the lawsuit, Melbourne, FL and Daytona Beach, FL come to mind.