A judge asked American Airlines' lawyers to explain why he should
approve the company's plan to merge with US Airways and exit bankruptcy
protection while the merger is being challenged by the federal government.
Until this week, it was expected that U.S. Bankruptcy Judge Sean Lane would rule Thursday on American's turnaround plan, paving the way for a merger that would make American the world's biggest airline.
But the U.S. Justice Department upset American's strategy Tuesday by filing a lawsuit against the merger, saying that it would hurt competition and increase prices by leaving four airlines in control of more than 80 percent of the U.S. air-travel market.
That threatened to delay or scuttle the deal.
At a hearing in New York, Lane asked lawyers for American parent AMR Corp. and other parties to submit briefs on whether he can do anything before the Justice Department lawsuit is resolved.
Lane said he had "lingering doubts" about approving the plan while the merger is being challenged.
One of AMR's lawyers, Stephen Karotkin, said that the company planned to fight the lawsuit.
He said that the lawsuit shouldn't stop the judge from approving AMR's reorganization plan.
The hearing drew a huge crowd. Lawyers packed the courtroom's five rows and 30 more people stood along the walls.
An extra courtroom and conference room were setup to handle the overflow.
The judge was expected to consider objections to AMR's reorganization plan, including a Justice Department protest against a proposed $20 million severance payment for AMR CEO Tom Horton.
The merger was supposed to cap an era of consolidation that has helped the airline industry limit seats, raise prices and return to profitability.
American and US Airways argued that their merger would increase competition by creating a stronger rival to industry leaders United and Delta Air Lines.
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