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Update on the American Airlines Merger with US Airways

Posted by bvalaw on August 26, 2013

As discussed in an earlier entry, AMR Corporation’s proposed $11 billion mega-merger with US Airways was called into question recently when the United States Department of Justice (“DOJ”), six state attorneys general and the District of Columbia filed a civil antitrust lawsuit to stop it. The merger, after all, would create the world’s largest airline, which leads to serious concerns about decreased competition, decreased services and increased fares.

Since American’s Chapter 11 reorganization plan hinges on this merger, time is clearly critical. The merger agreement reportedly contains a termination clause, which allows either carrier to terminate as of December 13. As such, American and US Airways have requested a 10-day trail setting, starting on November 12. This setting, however, would provide the DOJ with only 90 days for trial preparation, in contrast to the 180 days it requested.

Meanwhile, the bankruptcy court judge must confirm American’s plan of reorganization. Briefs on that are pending. The DOJ’s lawsuit was filed on August 13, a mere two days prior to the court’s expected final approval of the plan. AMR and others would like to see the plan confirmed in spite of the pending DOJ matter.

The bottom line is that regardless of when the plan is approved, regulatory approval is also a condition of the merger. So, even if approved now, the plan would not be effective — if at all — until the antitrust issue is resolved.