News Column

American, US Airways Merger Clear for Takeoff

November 27, 2013

By Linda Loyd, The Philadelphia Inquirer

A merger between American and US Airways can move forward.
A merger between American and US Airways can move forward.

A federal bankruptcy judge Wednesday approved the antitrust settlement reached between the U.S. Justice Department and American Airlines and US Airways Group, clearing the way for the airlines to close the deal and create the world's largest airline.

Judge Sean H. Lane also denied a request for a temporary restraining order by a San Francisco attorney that would have delayed the merger.

US Airways, Philadelphia's dominant airline, and American expect to complete their merger in December.

Lane heard arguments on Monday from San Francisco attorney Joseph M. Alioto, who filed a lawsuit on behalf of 40 consumers, seeking to block the merger on the grounds it would reduce competition and hike fares.

The claims were similar to those raised by the Justice Department, which settled its lawsuit Nov. 12 after the airlines agreed to give up some operating rights at major airports to low-fare competitors.

Lane had confirmed American's reorganization plan in September, including the merger, conditional on clearing an antitrust challenge by the Justice Department.

On Monday, Lane was briefed on the settlement terms, and a separate agreement by the carriers with the U.S. Transportation Department to continue flights to small- and mid-size communities from Washington Reagan National Airport.

Lane considered the impact of the settlement on the financial recoveries by creditors and American parent AMR Corp. shareholders under American's reorganization plan.

US Airways transports 73 percent of the air travelers in Philadelphia. The new American, as the combined carrier will be called, has pledged to maintain all the airlines' hubs, including Philadelphia.

U.S. District Court Judge Colleen Kollar-Kotelly in Washington, D.C., last Wednesday set out a timetable, through March 10, for making public the terms of the Justice Department settlement, including publishing in the Federal Register and three newspapers.

The order did not preclude the merger from closing, once the airlines got Lane's approval, attorneys in the case said.

"We now have all the antitrust approvals that we need to close the transaction," said a person familiar with the deal, speaking on the condition of anonymity. "We can close the transaction immediately after Judge Lane approves the settlement."

Lawyers for American, its unsecured creditors committee, and American's labor unions had urged the judge to confirm the plan, ending American's nearly two years under bankruptcy protection.

In the settlement with the Justice Department, American and US Airways agreed to give up dozens of takeoff and landing slots to competitors, including 52 slot pairs at Reagan National Airport, 17 slot pairs at New York's LaGuardia Airport, and gates and facilities at those airports.

The airlines also agreed to divest, or sell, two gates and associated facilities at Boston Logan, Chicago O'Hare, Dallas Love Field, Los Angeles, and Miami international airports.

The Justice Department said in August the merger would reduce competition and increase fares and fees, and the combined carrier would have a monopoly on too many flights at certain airports, in particular at Reagan National, where the new American would control 68 percent of the slots, which are takeoff and landing rights.

Original headline: Bankruptcy judge clears way for American, US Airways merger


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