Bankruptcy judge clears airline merger pending legal challenge

A bankruptcy judge in New York has endorsed a plan to merge American Airlines and US Airways, pending the outcome of a legal challenge by the U.S. Department of Justice.

Judge Sean Lane approved the merger plan Thursday at a hearing in U.S. bankruptcy court. AMR Corp., the parent company of American Airlines, filed for bankruptcy in November 2011.

But the merger that would create the nation’s largest carrier must still overcome a lawsuit filed last month by the Justice Department, which claims the merger would cut competition and lead to higher fares.


Lane has been reluctant to approve the merger plan because it could change significantly as a result of the Justice Department’s lawsuit. But on Thursday he said his job was to consider the feasibility of the plan regardless of the lawsuit.

“The question is whether it will succeed once consummated, not whether it will be consummated,” Lane said. “Here, there can be no dispute that the plan is feasible, if allowed to proceed.”

The trial for the Justice Department’s legal challenge is scheduled to begin Nov. 25. If the lawsuit succeeds in blocking the merger, AMR must return to bankruptcy court to get approval of a new plan to pay off creditors.

Meanwhile, AMR officials removed from the merger plan a $20-million severance package for AMR Chief Executive Tom Horton after the judge indicated he would reject the payout.


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