US Airways, American Airlines merger could make largest airline in world
CHARLOTTE, N.C. —
American Airlines parent AMR Corp. plans to ask a bankruptcy judge on Thursday to approve its turnaround plan that includes a merger with US Airways, even though the federal government has sued to block the deal.
The hearing in New York had been expected to be one of the final steps before AMR could close the merger and exit bankruptcy protection after nearly two years.
But AMR could spend several more months in bankruptcy court while it fights to save the merger. The U.S. Justice Department and six states sued to block the deal on Tuesday, saying it would hurt competition and cause consumers to pay higher fares.
AMR executives "would have preferred that (Thursday's) hearing be the final episode in this long effort," said Joe Sims, an antitrust lawyer in Washington who was hired by American. "It's not going to be now, and they will deal with that."
AMR filed for bankruptcy protection in November 2011 after losing billions of dollars in the previous decade. The company, which also owns the American Eagle regional airline, has used the bankruptcy process to rework labor contracts and claim other cost savings. Last month, it reported its first second-quarter profit in six years.
In February, it announced plans to merge with US Airways, a deal that would make American the world's biggest airline in terms of miles flown by passengers.
Opponents of the merger are concerned that creating the biggest airline in the country would mean higher prices for travelers, but attorneys for the airlines say the merger would actually mean lower prices because the deal would allow the new American Airlines to reduce costs and offer lower fares to more destinations.
The merger would allow AMR to emerge from bankruptcy, but the justice department says the two airlines could survive independently.
U.S. Sen. Richard Burr is pushing for the merger to happen, while many consumer advocates think blocking the deal will keep ticket prices cheaper.
“This is really good news for consumers because we were going to lose an incredible amount of competition within the United States, and when we lose competition that's never good when it comes to price control,” said Charlie Leocha of the Consumer Travel Alliance.
Burr countered, “It may be bad for competition for US Air and American, but it is certainly not bad for consumers."
Attorneys for the airlines admit it may take until the end of the year to resolve the lawsuit.