NEW YORK Lawyers for American Airlines pressed a judge Thursday to approve the companys plan to merge with US Airways and exit bankruptcy protection, but the judge delayed a ruling because of the federal governments lawsuit against the merger.
This was supposed to be Americans victory lap the day that a judge would remove the last hurdle for a merger that would make American the worlds biggest airline.
Instead, it was a sideshow.
The U.S. Justice Department ruined Americans plans at least temporarily on Tuesday by filing a lawsuit against the merger, which it said would hurt competition and increase prices for consumers by leaving four airlines controlling more than 80 percent of the U.S. air-travel market.
In court Thursday, lawyers for American parent AMR Corp. and its unsecured creditors said the Justice Departments case shouldnt stop the bankruptcy judge from approving AMRs reorganization plan.
But Judge Sean Lane wasnt so sure. He said he had lingering doubts about approving the turnaround plan and even considered postponing Thursdays hearing. Instead, he went ahead with the hearing but delayed a decision on AMRs plan until at least Aug. 29.
American and US Airways had hoped to close their merger by late September, but executives for both companies say that is unlikely now. They vowed to fight the Justice Department in court, but that could take months. If the government wins, AMR could be forced to dust off a plan to emerge from bankruptcy as a stand-alone company another long process.
The merger was supposed to cap an era of consolidation that has helped the airline industry limit seats, raise prices and return to profitability. Although it would leave one fewer airline, American and US Airways argued that their merger would increase competition by creating a stronger rival to industry leaders United Airlines and Delta Air Lines. Charlotte Douglas International Airport would be the new Americans second-largest hub, behind Dallas/Fort Worth.
Judge Lane also delayed a ruling on a $20 million severance award for AMR CEO Tom Horton, who would serve briefly as chairman before leaving the new company. The U.S. trustees office, which oversees bankruptcy cases for the Justice Department, said the payment violates bankruptcy-law limits designed to prevent executives from getting big rewards not available to regular employees.
Susan Golden, a lawyer for the trustee, said the new company shouldnt bear the cost of paying Horton for work he did on AMRs reorganization. Hes being paid for work already performed, she said.
But Stephen Karotkin, a lawyer for AMR, said creditors and shareholders approved the merger knowing that it contained Hortons payment. He said the payment in cash and stock would ensure that Horton sticks around long enough to help smooth the process of combining two airlines.
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