Judge hears newest objection to airline merger

The bankruptcy judge is overseeing American's plan to emerge from reorganization and merge with US Airways, a move set for the next few weeks.
The bankruptcy judge is overseeing American's plan to emerge from reorganization and merge with US Airways, a move set for the next few weeks. (AP)
Posted: November 27, 2013

NEW YORK - A federal bankruptcy judge overseeing American Airlines' plan to emerge from bankruptcy said Monday that he would rule before Thanksgiving on whether to approve a Justice Department settlement that would allow the merger with US Airways Group to go forward.

Judge Sean H. Lane had been expected to wrap up the case, but instead heard arguments from a San Francisco lawyer seeking a temporary restraining order on behalf of 40 consumers who contend the public would be hurt by the merger creating the world's largest airline.

The objection, by attorney Joseph M. Alioto, was filed Thursday, ahead of a noon deadline to oppose the settlement reached between the airlines and the Justice Department on Nov. 12.

Lane said he would rule from the bench, and possibly in writing, before Thursday on Alioto's request, and the request by American's creditors and shareholders to let the deal close in the next few weeks.

"I will communicate to the parties as quickly as I can," Lane said after a hearing.

US Airways transports 73 percent of air travelers in Philadelphia. The new American, as the combined carrier will be called, has pledged to maintain all the airlines' hubs, including Philadelphia.

American's lawyers asked Lane to "consummate" the merger, arguing the combination of the nation's third largest airline, American, and No. 5 US Airways would benefit passengers with more choices to more destinations as well as provide "unprecedented value" to creditors and shareholders.

American attorney Stephen Karotkin called Alioto's last-minute filing "frivolous" and a "charade."

Attorney Jack Butler, on behalf of an ad hoc American creditors' committee, said, "Mr. Alioto tries to scramble the eggs."

Alioto argued that the merger, creating the world's largest airline, would cause "irreparable harm," leading to higher fares, reduced capacity, fewer flights, more crowded planes, and added fees for amenities.

"What evidence do I have of the anticlimactic effects on your plaintiffs?" the judge asked Alioto. "I'm looking for evidence."

Alioto argued he had been denied the right to take depositions to gather evidence, and cited the negative impact of other recent airline megamergers in studies, including by the U.S. Government Accountability Office.

This proposed merger would result in 24 airports with monopoly markets, and more than 80 percent of travel concentrated in three large airlines - Delta, United and the new American, Alioto said. "The people who will be affected are over 53 million Americans."

Dan Wall, attorney for US Airways, said the temporary restraining order application was filed nine months after the merger was announced, and there "was no evidence" the 40 plaintiffs would be harmed. "We are here on a complete and total absence of proof," he said.

Butler, representing the creditors, said that further delaying the merger would harm "hundreds of thousands" of airline employees and stakeholders, and the "loss of benefit to consumers."

The Justice Department in August sued to block the deal. The parties settled after the airlines agreed to give low-cost competitors gates and take-off and landing slots at several key airports, including Washington Reagan National and New York's LaGuardia.


lloyd@phillynews.com

215-854-4822

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