AP Airlines Writer
POSTED: 7:03 p.m. HST, Nov 27, 2013
LAST UPDATED: 7:04 p.m. HST, Nov 27, 2013
A federal bankruptcy judge has cleared the way for American Airlines and US Airways to complete their merger and create the world's largest airline.
The judge ruled Wednesday that this month's settlement of an antitrust lawsuit filed by the federal government didn't upset American's bankruptcy-reorganization plan, which is built around the merger. He rejected a request by a group of consumers to block the deal temporarily.
American said immediately after the ruling that it plans to complete the deal on Dec. 9.
The Justice Department had sued to block the merger in August, saying that it would hurt competition and lead to higher prices. But regulators settled their case in exchange for the airlines' promise to surrender some coveted landing rights at Reagan National near Washington and LaGuardia in New York and a few gates at five other airports.
The new American Airlines will be slightly larger in revenue and passenger traffic than United Airlines, and four airlines -- American, United, Delta and Southwest -- will control more than 80 percent of the U.S. market. Since 2005, mergers will have cut the industry from nine big airlines to just those four.
U.S. District Court Judge Sean Lane in New York had approved the merge-and-emerge-from-bankruptcy plan of American parent AMR Corp. back in September, but said it was conditioned on the company winning or settling the lawsuit filed by the government.
At a hearing in Lane's courtroom Monday, a lawyer for a group of consumers asked the judge to block the merger until a trial could be held on his antitrust lawsuit, which made many of the same arguments that had been raised -- and dropped -- by the government.
Lane denied the request by the lawyer, Joseph Alioto of San Francisco, saying that his clients had failed to show that letting the airlines merge would hurt them. The judge said that if Alioto wins his lawsuit, he can demand additional divestitures by the two airlines but can't hold up the merger.
At the same time, the judge granted American's request that it be allowed to complete the merger without submitting the settlement with the Justice Department to a vote of creditors and shareholders. Lane called the settlement "fair and equitable" and said that the benefits for AMR creditors far outweighed any concessions that the company had to make.
AMR creditors pushed hard for the merger, and they stand to be repaid in full. Among the creditors: American's three labor unions, who will get stock and the new management that they wanted, led by US Airways CEO Doug Parker. Shareholders are usually wiped out in bankruptcy cases, but AMR's shareholders could wind up owning more than 30 percent of the new company, depending on future stock prices.
AMR filed for bankruptcy protection in November 2011 after losing billions of dollars in the previous decade. Almost immediately, US Airways began pursuing a merger. AMR management was initially reluctant, but the two sides announced a deal in February 2013. The new company will be called American Airlines Group Inc. and be based in Fort Worth, Texas.
A separate federal court will oversee a 60-day period in which the public can comment on the government's settlement with AMR and US Airways Group Inc., but that won't stop the merger.
Shares of US Airways rose 17 cents to close at $23.98, and AMR shares, which are traded only over the counter, gained 28 cents, or 2.3 percent, to $12.25 -- they were worth $1.62 the day before the company filed for bankruptcy.