AMR-US Airways Seeks Trial Soon With U.S. to Revive Merger

AMR Corp. (AAMRQ) and US Airways Group Inc. are confident they will prevail in court over federal objections to their $14 billion merger and hope to begin a trial as soon as possible, attorneys for the carriers said.

The U.S. Justice Department was wrong in asserting that the combination of AMR’s American Airlines and US Airways would reduce competition and raise fares, the lawyers said today on a conference call. The agency filed a lawsuit yesterday seeking to block the deal, which would create the world’s largest carrier.

“They got this one very wrong,” Rich Parker, an attorney for US Airways and a partner at O’Melveny & Myers LLP, told reporters and analysts on the call. “Both of these companies are looking forward with confidence to our day in court.”

Today’s call offered the airlines’ fullest explanation of how they plan to contest a lawsuit that threatens AMR’s plan to leave bankruptcy protection through the merger with US Airways. The suit was filed in federal court in Washington about 48 hours before a court hearing to confirm AMR’s reorganization plan. That hearing still is set for tomorrow.

“It is the view of both of these companies that we want to get this to trial as soon as we possibly can, certainly before the end of the year,” Parker said.

The Justice Department said it wants to permanently block any combination of the two airlines because it would hurt competition across the industry and raise prices for consumers. Six states and the District of Columbia joined the lawsuit.

The department declined to comment on remarks made today by the airlines’ attorneys.

‘Lower Costs’

“The result of this transaction will be lower costs and those lower costs in a competitive industry will in large part be passed on to consumers in the form of lower prices, better service and more routes,” said Joe Sims, an AMR attorney and partner at Jones Day. “They have to prove this merger is anti-competitive. I don’t think anyone should assume that this transaction is not going to happen.”

The airlines are talking with the government about a potential trial date and are preparing for court instead of crafting offers to settle, the attorneys said. The carriers would listen to any proposals from the government, Parker said.

“We’re litigating this case, period,” said Paul Denis, an attorney for US Airways from Dechert LLP.

The government’s argument that both American and US Airways would survive without a merger is irrelevant, as are e-mails among some airline executives about pricing and competition that were cited in the complaint, the attorneys said.

Monopoly Concern

The merger would give the new American a monopoly in service at Washington’s Reagan National Airport, Assistant U.S. Attorney Bill Baer said yesterday.

American, based in Fort Worth, Texas, won’t be able to effectively compete with larger rivals United Continental Holdings Inc. and Delta Air Lines Inc. if the tie-up isn’t allowed to proceed, Sims said.

The antitrust case is U.S. v. US Airways Group Inc. (LCC), 13-cv-01236, U.S. District Court, District of Columbia (Washington). The bankruptcy case is In re AMR Corp., 11-bk-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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