Update on American Airlines-US Airways Merger: Judge Approves American’s Bankruptcy Plan

by Marc Scribner on September 12, 2013 · 1 comment

in Economy, Features, Mobility, Regulation

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Today, Judge Sean Lane of the U.S. Bankruptcy Court for the Southern District of New York approved American Airlines’s reorganization plan to exit bankruptcy protection, predicated on approval for the proposed American Airlines-US Airways merger.

Last month, many were caught by surprise when the Department of Justice and a handful of states filed suit in an attempt to block the merger. This puts the Obama Justice Department to the left of the European Commission, which had approved the merger. I previously highlighted some of the absurdities of the DOJ’s case and noted that President Obama risks alienating his labor union allies by proceeding with its foolish attack on the airlines.

The airlines are also looking to extend their merger deadline from December 17 to a future date yet to be determined, signaling that American and US Air believe they will likely win their fight with the Justice Department. The DOJ originally tried to push back the start date of the trial on their lawsuit until March, in a clear effort to derail or at least dramatically increase the costs of the merger.

However, Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of Columbia said the DOJ’s proposed date was “too far off” and scheduled the hearing for November 25, much closer to the airlines’ requested date of November 12.

Last week, the DOJ filed an amended complaint, dropping three dozen routes from its flawed analysis. Both American and US Air filed responses on Tuesday that suggest the airlines will do a good job of undermining the credibility of DOJ’s analysis (or lack thereof) in court.

My favorite line from American’s response:

The Complaint presents no coherent rationale supporting its challenge to the merger. Rather, it cobbles together a collection of ad hoc contentions based on anecdotes involving small numbers of passengers and historical e-mails and other documents irrelevant to this transaction, while ignoring the central facts and economic realities of today’s airline industry. (p. 2)

My favorite line from US Air’s response:

But rather than considering how this merger will create robust competition in the future, or how blocking the merger will impede competitive forces, plaintiffs rely on rhetoric and innuendo. The Complaint makes broad, unsupported claims about past industry coordination and cobbles together out-of-context statements in an effort to suggest by anecdote what the plaintiffs cannot support with analysis. This skewed and incomplete focus ignores the current realities of the airline industry. (p. 5)

Peter R. Daikos September 26, 2013 at 8:03 am

I believe if US/AA went back to the drawing board and pledged to eliminate all ancillary fees that certainly would favorably by the USDOJ.

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