NEW YORK--A judge on Monday said he'd decide within the next few
days on whether to approve the antitrust settlement between the
Justice Department and merging airlines AMR Corp. (AAMRQ) and US
Airways Group Inc. (LCC).
The blessing of Judge Sean H. Lane of U.S. Bankruptcy Court in
Manhattan would be the last major hurdle for the merger, which
under current market prices gives stakeholders more than $13.1
billion in value, AMR lawyer Stephen Karotkin said in court
Monday.
Mr. Karotkin, of Weil Gotshal & Manges, called the
bankruptcy of American Airlines' parent company "perhaps the most
successful Chapter 11 airline case in recent history, if not
ever."
Judge Lane appears likely to approve the settlement, but said he
wants to take some time to rule, and will do so by Wednesday.
The judge heard more than an hour of objections from a lawyer
representing airline customers, who thinks the merger would hurt
airline competition. The judge also will consider an attempt by the
lawyer, Joseph M. Alioto, to get a restraining order to block the
merger. Judge Lane appeared skeptical of Mr. Alioto's arguments,
frequently telling him that for all his talk, he was presenting no
evidence of how customers may be harmed.
In September, the judge approved AMR's plan to exit bankruptcy
through the merger with US Airways. However, the proposal was
contingent upon regulatory approval, so the airlines had to wait to
either win the antitrust lawsuit or settle with the Justice
Department, which sued in August.
The department's antitrust division had said the deal would
stifle competition and hurt customers, and the two sides prepared
for a trial that would have begun Monday. But earlier this month
the two sides settled, with US Air and AMR agreeing to give up
space at major airports in the U.S., most notably reducing their
combined daily departures at Reagan National Airport near
Washington D.C. by about 15% and at La Guardia Airport in New York
by about 7%.
The carriers also pledged to retain the big hubs that underlie
their combined network and to continue service to certain smaller
cities.
From a legal perspective, Judge Lane will be making three
decisions: whether to approve the settlement, whether the merger
can be consummated, and whether to grant Mr. Alioto's restraining
order request.
The judge must decide whether the settlement materially changes
the specifics of the plan he approved in September. The airlines
and creditors say it doesn't.
The merger in its current form would repay AMR bondholders in
full and give the company's existing shareholders at least 3.5% of
the combined airline, a rare outcome in Chapter 11 cases.
In all, the proposal would give 72% of the combined airline to
AMR shareholders, unsecured creditors, labor unions and some
employees. The rest would go to US Air's shareholders.
AMR filed for bankruptcy protection in November 2011, citing the
need to cut operational and labor costs. The company negotiated
deep concessions from its main labor unions after a lengthy trial,
cutting about $1 billion in annual labor costs.
AMR initially planned to exit bankruptcy as an independent
airline, but the company eventually succumbed to the advances of
suitor US Airways. The Justice Department suit threw both the
merger and AMR's near future into uncertainty, but the settlement
means the deal could close as early as next month, as long as Judge
Lane approves the settlement.
If approved, the combined company will be called American
Airlines Group Inc.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to )
Write to Joseph Checkler at joseph.checkler@wsj.com
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