Newspaper article THE JOURNAL RECORD

Report: No Easy Route for AA, US Airways Merger

Newspaper article THE JOURNAL RECORD

Report: No Easy Route for AA, US Airways Merger

Article excerpt

AMR Corp. could exit bankruptcy in September, if not sooner, according to a written decision from the judge handling the air carrier's bankruptcy case. The path to a merger with US Airways, however, is not as clear.

"We are pleased the judge found our arguments in favor of confirmation persuasive," said Andrea Huguely, spokeswoman for American Airlines. "While we await the court's decision on our plan of reorganization, we are focused on the need for a mid-November trial and challenging the DOJ's position so we can complete our planned merger with US Airways."

Meanwhile, Buckingham Research said in a research note on Thursday that a quick deal between the U.S. Department of Justice and the carriers was highly unlikely because of high concessions the DOJ is seeking, plus the difficulty in getting six state attorneys general and the District of Columbia to sign off on any deal.

On Aug. 13, the U.S. Department of Justice, AGs from six states and the District of Columbia filed a lawsuit to block the merger between American Airlines and US Airways. The lawsuit was filed in U.S. District Court in Washington, D.C.

The two sides are too far apart and a settlement would likely need to provide relief that extends across the country, said analyst Dan McKenzie of Buckingham Research.

"The DOJ views the merger as unlawful and anticompetitive," he said.

A key issue is market concentration in smaller markets, McKenzie said.

"Southwest's network tentacles simply don't extend into a sufficient number of the smaller markets needed to resolve DOJ's concerns," he said.

Also, the judge would need to make a compelling case for why the settlement is in the public interest, and therefore is a good settlement, McKenzie said.

"The problem is the DOJ has seven partners in its lawsuit (six states and the District of Columbia) which will object vociferously if the settlement does not address their geography," he said.

At the same time, a market analyst said a request by American Airlines and US Airways for an expedited hearing to start Nov. 12 is reasonable.

Lawyers for the airlines sought a November court date with the U.S. Department of Justice, which requested for a trial date of March 3, 2014. …

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