AMR Regional-Jet Order Delayed as Suit Imperils Financing

American Airlines (AAMRQ)’ pending order for larger regional jets has been delayed by a U.S. lawsuit seeking to stop the merger with US Airways Group Inc. (LCC) that would allow the carrier to exit bankruptcy.

An agreement to buy a “substantial” number of planes was near when the U.S. Justice Department sued to block the US Airways deal on Aug. 13, AMR Corp.’s American said in a court filing, which didn’t specify its supplier. Embraer SA (EMBR3) said in July that it was in talks for an order of 76-seat jets.

Bigger, more-fuel efficient regional aircraft are part of Fort Worth, Texas-based American’s plan to cut operating costs by shedding models with 50 or fewer seats. Backstop financing from the manufacturer and favorable export credit funding are only available upon leaving court protection, the airline said.

“Any alternative financing for a company still in bankruptcy would almost certainly be under considerably less favorable terms, and would result in additional costs to American,” the airline said yesterday in the filing.

Michael Trevino, an American spokesman, declined to confirm a pending order with Sao Paulo-based Embraer. Calls left with Embraer after regular business hours in Brazil weren’t immediately returned.

American and Tempe, Arizona-based US Airways expected to close their merger by the end of September before the U.S. challenge was filed.

The case is U.S. v. US Airways Group Inc., 13-cv-01236, U.S. District Court, District of Columbia (Washington).

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Christiana Sciaudone in Sao Paulo at csciaudone@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.