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Judge to rule this week on US Airways-American merger

U.S. Bankruptcy Judge Sean Lane is expected to decide by Wednesday whether he will approve an antitrust settlement covering the US Airways’ merger with American, clearing the way for the airlines to close the deal.

But first, he must rule on a request for a temporary restraining order that would delay the merger.

On Monday, Lane heard oral arguments from attorneys on the two motions, and said he would take the matter under advisement and issue either a verbal or written ruling prior to the Thanksgiving holiday.

Several times during the hearing, Lane interrupted San Francisco attorney Joseph Alioto, who filed a class-action lawsuit challenging the merger, and asked him to answer specific legal questions instead of making a broad anti-competition argument against the deal. Lane wanted to know if Alioto’s clients, numbering about 40, would be individually harmed by the merger.

“I am not interested in hearing about what may or may not have gone on in [the DOJ] case,” Lane told Alioto, who was relying on anti-competitive arguments made by the government in its antitrust complaint which has now been settled. “I want you to limit your remarks to what I have in front of me.”

Charlotte Douglas International Airport would become American’s second-largest hub if the deal goes through.

Alioto was the only party to object to the settlement reached earlier this month between the airlines and the Department of Justice. He is asking the court for a temporary restraining order to block the merger as his lawsuit proceeds, arguing that it would allow 80 percent of air travel to be dominated by three carriers.

During the hearing, Alioto said the merger would leave 24 airports with only one carrier and 475 airports in the U.S. would go from three airlines to two. He also argued that both airlines, which have posted profitable quarters this year, can operate independently.

Attorneys for the airlines argued that the merger would benefit consumers by offering more flights to more destinations. Creditors and shareholders will also benefit from the merger, receiving a value in excess of $13.1 billion of equity in the new company, American attorney Stephen Karotkin said.

“This hearing represents the culmination of perhaps one of the most successful airline Chapter 11 cases in recent history, if not ever,” Karotkin told the judge.

If Lane approves the deal, it would allow American’s parent company, AMR Corp., to emerge from bankruptcy and merge with US Airways, likely by mid-December. Lane compared the complex legal issues at Monday’s hearing to nesting dolls.

“Every time we raise one issue, another one pops out. But that’s okay,” Lane said.

Alioto, who has filed antitrust suits against other airline mergers in the past, argued in his objection last week that the government settlement does not alleviate antitrust concerns.

“The DOJ settlement is cosmetic, as debtors readily admitted. The debtors will not suffer any significant divestiture of assets, nor significant change of their business operations,” the filing said.

Jack Butler, representing the unsecured creditors committee, said delaying the merger would create risk for all economic stakeholders in the bankruptcy case. He said the committee spent several months evaluating restructuring plans for American and concluded that a merger with US Airways provided the most benefit for all stakeholders and was the “best way” for American to turn into a “sustainable and profitable” airline.

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