GRAPEVINE, Texas -

The Texas attorney general says the state has reached a settlement of its challenge to the proposed merger of American Airlines and US Airways.

Attorney General Greg Abbott had led Texas into the lawsuit with the U.S. Justice Department and five other states in August. He cited expectations that consolidation would lead to higher fares and fees.

At a news conference Tuesday at Dallas-Fort Worth International Airport, however, Abbott says the carriers have agreed to maintain present levels of service in Texas and to keep its North Texas headquarters.

Abbott was joined by American Airlines chief executive Tom Horton at a DFW Airport American Airlines Admirals Club.

Abbott's opposition was notable because Fort Worth, Texas-based American is a major employer in the state.

Abbott is seeking the Republican nomination for governor.