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Brighter Skies for American Airlines? Not So Sunny

Bankruptcy

American Airlines Bankruptcy

Today was supposed to be the day that US Bankruptcy Judge Sean H. Lane in Manhattan approved American Airlines’ bankruptcy exit strategy.  The exit strategy involved an $11 billion merger between American Airlines and US Airways.  This in turn would create which would create the world’s largest airline carrier.  Instead, the U.S. Justice Department filed an antitrust lawsuit against the merger.  Moreover, Judge Lane ordered  the parties to file briefs in the bankruptcy case arguing whether the Judge Lane should still confirm the exit plan in light of the lawsuit.

Judge Lane explained “I still have lingering doubts whether this approach is the most efficient and prudent under the circumstances.”  Despite arguments from American Airlines and their creditors and approval of the merger by shareholders, unions and European regulators, Judge Lane gave until August 23 to file their briefs.

The Justice Department filed the lawsuit Tuesday to block the deal.  Attorneys general from six states as well as the District of Columbia joined the suit.  This move is part of the Department’s close scrutiny of all mergers as the economy recovers.

However, little resistance was expected due to the acceptance of many mergers in recent years among airlines.  These airlines include Delta and Northwest, United and Continental as well as the most recent between Southwest and AirTran.

In any case, American Airlines faces another battle in this lengthy bankruptcy case.  The case is almost two years old and likely to stay open until the end of this year.