US Airways

American, US Air seek November 12 trial date for merger lawsuit

PUBLISHED : Friday, 23 August, 2013, 11:27am
UPDATED : Friday, 23 August, 2013, 11:27am

American Airlines and US Airways are seeking a 10-day trial that would begin November 12 in US federal court to fight the challenge by the US Justice Department to their proposed merger, which would form the world’s biggest carrier.

In a court filing on Thursday, the carriers said the proposed date would give the Justice Department 90 days of trial preparation. By contrast, the 180 days requested by the government would be “far longer than any of its other merger trials in the century,” the filing added.

The bankruptcy status of American, which has been operating under Chapter 11 protection since late 2011, adds to the airlines’ urgency to have the lawsuit heard, the airlines stated in their filing. The merger would be the mechanism by which American parent AMR Corp exits bankruptcy.

The Justice Department sued last week to block the merger, saying it would reduce competition and lead to higher airfares.

US Airways and American have vowed a vigorous defence of the merger, which would cap recent industry consolidation that has help put US airlines on a more solid financial footing.

The carriers included information in their filing showing that other US government merger challenges took 17 days to 106 days from filing of a complaint to the start of trial.

For example, 55 days elapsed between the filing and first day of trial of an antitrust lawsuit by the Federal Trade Commission against Whole Foods Market in 2007, according to a table in the carriers’ filing. Whole Foods later settled the lawsuit.

The carriers “face unusual and pronounced burdens while they await their day in court,” the filing said. The document also added that the merger accord includes a termination clause that would allow either carrier to end the deal as of December 13.

American and its creditors face a deadline on Friday to file briefs on why a judge should confirm American’s bankruptcy exit plan despite the Justice Department’s challenge to the merger.

Judge Sean Lane, in US Bankruptcy Court in New York, last week refused to sign off on the plan, citing the Justice Department’s opposition. He gave parties until Friday to file briefs on the best course of action.

AMR, its unsecured creditors committee, and its three primary unions all favour the tie-up. Already one union, representing groundworkers, has filed papers urging Lane to approve, saying the Justice Department’s lawsuit is not relevant to whether the plan can or should receive a judge’s blessing.

“Confirming the plan at this juncture will satisfy one of the most fundamental and important conditions precedent to the effectiveness of the plan,” the Transport Workers’ Union said in court papers.

AMR and its creditors committee each plan to file papers on Friday. US Airways will not file a brief, according to a source close to the matter.

Chapter 11 restructuring plans must gain approval by bankruptcy judges, and must also meet a number of other conditions specific to the plan being proposed. In AMR’s case, one of those conditions is regulatory approval.

AMR and the creditors committee will argue that, due to that condition, Lane is free to confirm the plan, because his approval would not trigger implementation of the merger, said the source, who declined to be named because discussions are private.

Rather, Lane’s approval would allow the parties to focus squarely on resolving the antitrust challenge, the parties will argue.