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Airline's plan nears confirmation

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By The Associated Press
Friday, Aug. 30, 2013, 12:01 a.m.

NEW YORK — A federal judge signaled on Thursday that he is leaning toward approving American Airlines' emergence from bankruptcy protection but wants more time to reflect.

“I'm finding the arguments in favor of confirmation fairly persuasive,” Judge Sean H. Lane said from the bench. He could sign off on American's restructuring plan at the next hearing on Sept. 12 or in a written decision before that.

Such a decision would leave only one obstacle — albeit a big one — to American's proposed merger with US Airways: an antitrust lawsuit filed by the government this month.

That suit filed by the Department of Justice, six states and the District of Columbia argues that the merger would leave four airlines controlling more than 80 percent of domestic air traffic and drive up prices.

That case is at least two months away from being resolved, unless the airlines and government reach an out-of-court settlement first.

Lawyers for American's parent company, AMR Corp., and for its creditors told the bankruptcy judge that the lawsuit should not have any bearing on his decision. They noted that his acceptance of the restructuring plan — one OK'd by American's shareholders — is subject to regulators' approval.

Stephen Karotkin, a lawyer with Weil, Gotshal & Manges who represents American, said the airline's creditors and shareholders stand behind the restructuring plan.

Not approving it, Karotkin said, would inject an “unwarranted element of uncertainty” into American's fate. Even if the merger fails, he said it is “inconceivable” that the airline would face liquidation or need further court-approved restructuring.

The Department of Justice was particularly concerned that the newly combined airline would account for 69 percent of the takeoffs and landings at Ronald Reagan Washington National Airport. It looked — for the first time — beyond nonstop routes, saying connecting flights between 1,043 city pairs would no longer have an acceptable level of competition.

Some of those routes have very few passengers. For instance, there are five people, on average, each day flying between Little Rock and Harrisburg, and five flying in the other direction, according to government data.

The Department of Justice has suggested bringing the case to trial no sooner than March 3. American and US Airways say such a delay would cost them millions of dollars and potentially kill the merger. They have proposed a start date of Nov. 12 for the trial in Washington. U.S. District Court Judge Colleen Kollar-Kotelly will meet with the parties on Friday.

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