American Airlines Turns Focus to Department of Justice Lawsuit

With American Airlines’ bankruptcy plan finally approved, the airlines and other interested parties are now turning their focus to the lawsuit filed by the Department of Justice to block the airline’s planned merger with US Airways.

Bankruptcy Judge Approves Planned Merger of American Airlines, US Airways

On October 21, United States Bankruptcy Judge Sean Lane formally ruled on the airline’s reorganization plan, approving the airline’s proposal to emerge from Chapter 11 bankruptcy.  There were questions on whether Judge Lane would approve the bankruptcy plan because of the antitrust lawsuit filed by the Department of Justice.  That lawsuit alleges the airline’s planned merger with US Airways would leave too little competition in many markets, which would lead to higher ticket prices for consumers.

Attorneys for the airline had argued with Judge Lane that he should evaluate the bankruptcy plan on its own merits, regardless of the eventual outcome of antitrust lawsuit.  Judge Lane hinted in early September that he was leaning toward that route.  On the ruling he issued on Monday, that is exactly what he did when he issued a Confirmation Order approving the bankruptcy plan but making it clear he was not speaking to any position on the antitrust lawsuit.

“Nothing in this Confirmation Order shall be construed as an adjudication of any causes of action asserted in the DOJ Action or as otherwise expressing the Court’s position with respect to the DOJ Action,” Judge Lane noted in his ruling.

Mayors Send Letter to US Attorney General Concerning DOJ Lawsuit

The mayors of the hub cities served by American Airlines and US Airways signed a letter addressed to US Attorney General Eric Holder asking that he allow the planned merger between the two airlines to move forward.

“As mayors of some of the largest cities in the United States, we know the airline industry creates jobs, supports local business, attracts new business, and promotes infrastructure growth.  Nowhere are these benefits more apparent than in cities—like ours—with airline hubs,” began the letter that the airlines released to the media.  “But the Justice Department’s recent action seeking to block the combination of American Airlines and US Airways puts those benefits at risk… We write to ask you to reconsider this ill-conceived lawsuit.”

Those signing the letter included the mayors of Charlotte, Chicago, Dallas, Fort Worth, Miami-Dade County, Philadelphia, and Phoenix.

The letter continued by refuting the claims in the lawsuit filed by the Department of Justice and the attorney generals for six states that the merger would hurt competition and result in higher ticket prices.  Rather, the letter noted that prevention of the merger is what would hurt competition and the economic growths of the airlines’ hub cities.

“Without this merger, American and US Airways will be at a permanent competitive disadvantage to Delta and United, each of which has been allowed to build superior route networks through mergers that were cleared by the Justice Department, the latter under your watch,” continued the letter.  “Failure to clear the combination of American Airlines and US Airways will put our cities at an unnecessary competitive disadvantage to Atlanta, Newark, and other hubs that directly benefit from the Delta and United mergers.”

The trial for the antitrust matter is scheduled to begin on November 25.

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Mark

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.