Judge OKs American’s settlement with Justice Department

Posted Wednesday, Nov. 27, 2013  comments  Print Reprints
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What’s next • Dec. 6: The last day for shares of American and US Airways to trade separately. • Dec. 9: The effective closing date of the merger. Shares of the new AAL will begin trading on Nasdaq. • Jan. 7: The airlines will allow frequent fliers to accrue miles on either airline through a reciprocity agreement. • Throughout 2014: The two airlines will integrate operations and systems and will likely apply for single-carrier status in the next 18 months. Brands for both airlines will continue during the transition to the new American brand.

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American Airlines and US Airways have set a date for their union.

The carriers notified the Bankruptcy Court that they plan to merge Dec. 9 after rulings by Bankruptcy Judge Sean Lane cleared a legal path. On Wednesday, Lane approved the airlines’ settlement with the government over an antitrust complaint.

“The Court finds that the benefits to allowing the merger to proceed are numerous, the most important being the consummation of the plan and the resulting distribution to the creditors and stockholders with an economic stake in these cases,” Lane wrote in his ruling.

The deal will create the world’s largest airline, with more than $38 billion in annual revenue, 6,500 daily flights to 336 destinations and 100,000 employees.

Lane rejected a request for a temporary restraining order by San Francisco attorney Joseph Alioto, who represents about 40 plaintiffs in an antitrust lawsuit trying to stop the merger.

Alioto had asked the court for the temporary restraining order while his case went to trial, arguing that the merger is anti-competitive and will concentrate 80 percent of U.S. air travel among three airlines.

In denying the request, Lane said during Wednesday’s hearing that the plaintiffs “had failed to establish irreparable harm.” He said that if Alioto’s lawsuit succeeds, he could get additional divestitures from the new airline after the merger closes.

For that reason, a restraining order is not necessary, Lane said. Granting it would hurt American Airlines and its creditors, leading to a decrease in the stock price and a decline in shareholder value, he said.

“The Court has no evidence whatsoever regarding who the Plaintiffs are, what the nature of their interest in the airline industry is, or how they will be individually harmed by the proposed merger,” Lane wrote.

“In failing to provide such evidence, the Plaintiffs ignore a key requirement for the relief they seek.”

In an interview, Alioto said he plans to appeal Lane’s denial.

“We will be filing it almost immediately,” Alioto said, noting that he will comply with any procedural requests from the court.

If Lane does not delay his ruling while Alioto appeals to the federal courts, Alioto will ask the appeals court to stay Lane’s ruling.

Fort Worth-based AMR Corp., American’s parent, filed for bankruptcy almost two years ago, on Nov. 29, 2011, declaring $24.7 billion in assets and $29.6 billion in debt. While in bankruptcy, the carrier trimmed its labor costs by 17 percent.

The new company, American Airlines Group, will have its headquarters in Fort Worth and will trade on the Nasdaq exchange under the ticker AAL. The last day for trading shares of AMR (ticker: AAMRQ) and US Airways (ticker: LCC) will be Dec. 6.

Shareholders of US Airways will receive 28 percent of the new company, while AMR creditors and shareholders will receive 72 percent. The AMR portion will be divided among creditors, labor unions and nonunion workers, and shareholders.

AMR shareholders will receive at least 3.5 percent of the new company, possibly more depending on the trading value of the AAL stock over the first 120 days.

Shares of AMR, which have soared since August as the prospects for a payoff brightened, closed up 2.3 percent Wednesday at $12.25.

Shares of US Airways closed up less than 1 percent at $23.98.

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

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