NEW YORK — American Airlines returns to U.S. Bankruptcy Court in Lower Manhattan Thursday morning asking a judge to approve its plan of reorganization to exit bankruptcy and merge with US Airways, despite a lawsuit from the Justice Department aiming to block the combination.
The lawsuit will be heard separately in Washington D.C. in the coming weeks.
“The big question is whether the merger is going to go forward,” said Terry Maxon, veteran aviation writer for The Dallas Morning News.
American had hoped it would get final approval Thursday morning to exit bankruptcy and merge with US Airways from U.S. Bankruptcy Judge Sean Lane.
Many expect him to consider one of two options:
Approve American’s exit from bankruptcy and merger with US Airways conditional on what happens with the Justice Department’s lawsuit
Set aside final approval until the lawsuit is settled
Either way, the merger is definitely delayed past the third quarter, when American had hoped to complete it. Both airlines just hope it doesn’t die.
If eventually approved, American would become the largest airline again, expanding from its five hubs to nine by adding Philadelphia, Washington, Charlotte and Phoenix.
Labor unions, creditors and the company would all benefit.
But the Justice Department says the combination will cost consumers, and argues that less competition means higher fares. That’s why it sued to stop the merger just 48 hours before it was to be approved.
“Everyone was headed down the final straightaway, and suddenly you have to pull into the pits,” Maxon said. “You don’t do that on the last lap.”
American’s attorneys blasted the Justice Department’s argument in a conference call with reporters on Wednesday afternoon.
“If they’re going to convince the court the sky is falling, they’re going to have to have more meat than they have shown so far,” said attorney Joe Simms.
American Airlines has already cut $2 billion from its bottom line, increased revenue, and reduced its workforce as it anticipates a mega-airline merger similar to ones the feds have previously approved.
“An antitrust expert we spoke to pointed out that the government's track record is mixed for a reason, and believed AA-US have a compelling case if this goes to court,” wrote Dan McKenzie, an analyst with The Buckingham Research Group.
Still, McKenzie now only gives the merger a 50-50 chance of eventually closing.