Coverage of the merger between American Airlines and US Airways

Judge Likely to Approve AMR Bankruptcy Exit

By Scott Mayerowitz
|  Thursday, Aug 29, 2013  |  Updated 11:26 PM CDT
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The judge in American Airlines'  bankruptcy case strongly hinted he will approve the airline's turnaround plan. But the plan depends on a successful merger with US Airways.

Scott Gordon, NBC 5 News

The judge in American Airlines' bankruptcy case strongly hinted he will approve the airline's turnaround plan. But the plan depends on a successful merger with US Airways.

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Still No Decision in American Airlines Bankruptcy Case

A bankruptcy judge has yet to rule on the reorganization plan of AMR.
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A federal judge signaled Thursday that he is leaning toward approving American Airlines' emergence from bankruptcy protection but wanted more time to reflect.

"I'm finding the arguments in favor of confirmation fairly persuasive," Judge Sean H. Lane said from the bench. He could sign off on American's restructuring plan at the next hearing on Sept. 12 or in a written decision prior.

Such a decision would only leave one obstacle -- although a big one -- to American's proposed merger with US Airways: an antitrust lawsuit filed by the government earlier this month.

That suit filed by the U.S. Department of Justice, six states and the District of Columbia argues that combining American and US Airways would leave four airlines controlling more than 80 percent of U.S. air traffic and drive up prices.

That case is at least two months away from being resolved, unless the airlines and government reach an out-of-court settlement first.

Lawyers for American's parent company, AMR Corp., and for its creditors told the bankruptcy judge that the lawsuit should not have any bearing on his decision. They noted that his approval of the restructuring plan -- one approved by American's shareholders -- is already subject to regulatory approval.

"We are pleased the judge found our arguments in favor of confirmation persuasive. While we await the Court’s decision on our Plan of Reorganization, we are focused on the need for a mid-November trial and challenging the DOJ’s position so we can complete our planned merger with US Airways," said Mike Trevino, with American Airlines.

Stephen Karotkin, a lawyer with Weil, Gotshal & Manges who represents American, said that the airline's creditors and shareholders all stand behind American's restructuring plan.

Not approving it now, Karotkin said, would inject an "unwarranted element of uncertainty" into American's fate. Even if the merger fails, he said it is "inconceivable" that the airline would face liquidation or need further court-approved restructuring.

The Department of Justice was particularly concerned that the newly-combined airline would have 69 percent of the takeoff and landings at Ronald Reagan Washington National Airport. It also -- for the first time -- looked beyond non-stop routes, saying connecting flights between 1,043 city pairs would no longer have an acceptable level of competition.

Some of those routes see very few passengers. For instance, there are five people, on average, each day flying between Little Rock, Ark. and Harrisburg, Pa., and another five flying in the other direction, according to government data.

The Department of Justice has suggested bringing the case to trial no sooner than March 3. American and US Airways say such a delay will cost them millions of dollars and potentially kill the merger. They have proposed a start date of Nov. 12 for the trial in Washington, D.C. U.S. District Court Judge Colleen Kollar-Kotelly will meet with the parties Friday.


American Airlines Merger:
Complete coverage of the merger between American Airlines and US Airways into the newly-formed Fort Worth-based company, American Airlines Group (AAL). Click here for more.

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