Airlines say March trial date would put merger in jeopardy

Posted Wednesday, Aug. 28, 2013  comments  Print Reprints

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American Airlines and US Airways told a federal judge on Wednesday that waiting until March to start an antitrust trial would put their proposed merger in jeopardy and essentially allow the U.S. Department of Justice to “win” its case.

“The delay proposed by [the government] inherently puts the transaction at risk because two independent companies can be asked to stay in limbo for only so long before they need to make independent plans,” the airlines contended Wednesday in a court filing.

The carriers again requested a Nov. 12 trial date, saying it gives the government attorneys plenty of time to prepare.

Judge Colleen Kollar-Kotelly, in Washington, D.C., has scheduled a conference between the airlines and government attorneys for Friday, at which she may decide when the trial is scheduled.

Responding to the government’s request for a later trial date, the airlines described a “fragile” airline industry where profits turn into losses if the price of jet fuel jumps.

“Whether plaintiffs just don’t understand the industry or choose to misleadingly focus on the trees instead of the forest, the fact is that American today continues to be fully subject to the ebbs and flows of the airline industry, and is even more vulnerable until it can emerge from bankruptcy,” the filing said.

American and its parent company, AMR Corp., have been operating in bankruptcy court since November of 2011 and have undergone a broad financial restructuring to trim costs. Earlier this year, the company reached an agreement to merge with US Airways as part of its reorganization plan. Attorneys for the airlines are expected to urge U.S. Bankruptcy Judge Sean Lane to approve that plan at a hearing in New York today.

Shareholders and creditors have signed off on the proposed merger, but the government filed suit to block it earlier this month, saying it will harm consumers by resulting in higher fares and reduced service.

AMR’s Unsecured Creditors Committee, which was instrumental during the merger negotiations as part of the bankruptcy process, also supports a November trial date to minimize uncertainty among American’s lenders.

In a separate filing made Wednesday, the UCC characterized the government’s antitrust arguments as “completely wrong,” “fanciful,” and “factually unsubstantiated.”

On Tuesday, the Justice Department asked the court to schedule the trial in March, saying it needs the time to assemble evidence and experts for the case. The government has also argued that American’s recent profitability points to a successful restructuring and that it could compete as a stand-alone carrier.

The UCC, which was instrumental during the merger negotiations, disagrees.

“The government is completely wrong to suggest that exacerbating the uncertainty regarding AMR’s future is of no moment because AMR has a standalone plan of reorganization. On the contrary, AMR’s current plan of reorganization, which is based on the Merger Agreement, is the only plan proposed to and voted on by creditors and stakeholders that is before the [bankruptcy court],” the filing said. “There is no “Plan B” with regard to reorganization.”

Andrea Ahles, 817-390-7631 Twitter: @Sky_Talk

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