Bankruptcy judge clears way for airline merger

American Airlines and US Airways intend to close their deal Dec. 9

U.S. bankruptcy Judge Sean Lane on Wednesday approved American Airlines' and US Airways' antitrust settlement with the U.S. Department of Justice, clearing the legal path for the two airlines to complete their merger.

The carriers announced they will close their merger Dec. 9. The deal will create the largest airline in the world with more than $38 billion in annual revenues, over 6,500 daily flights to 336 destinations and more than 100,000 employees.

Lane rejected a request for a temporary restraining order from San Francisco attorney Joseph Alioto, who represents about 40 plaintiffs in a civil antitrust suit trying to stop the merger. Alioto had asked the court for the temporary restraining order while his case went to trial, arguing the merger was anti-competitive and would concentrate 80 percent of the U.S. air travel market amongst three airlines.

In denying the temporary restraining order, Lane said the plaintiffs "had failed to establish irreparable harm." He added that if Alioto is successful in his antitrust case, he could get additional divestitures from the new airline after the merger closes. Therefore, a restraining order is not necessary, Lane said, while granting it would hurt American Airlines and its creditors, leading to a decrease in the stock price and a decline in shareholder value.

Fort Worth, Texas-based AMR Corp., American's corporate parent, filed for bankruptcy almost two years ago on Nov. 29, 2011, declaring $24.7 billion in assets and $29.6 billion in debt. While in bankruptcy, the carrier trimmed its labor costs by 17 percent

The new company, American Airlines Group Inc., will be headquartered in Fort Worth and will trade on the NASDAQ exchange under the ticker symbol AAL. The last day of trading for AMR shares and US Airways shares will be Dec. 6.

Shareholders of US Airways will receive 28 percent of the new company, while AMR creditors and shareholders will receive 72 percent. The AMR portion will be divided between creditors, labor unions and non-union workers and shareholders.

AMR shareholders will receive at least 3.5 percent of the new company, with the possibility for more depending on the trading value of the AAL stock in the first 120 days. The company's shares have soared since August as the prospects of a payoff to shareholders rose.


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