AMR Merger Settlement Approved by Bankruptcy Judge

American Airlines parent AMR Corp. (AAMRQ) won bankruptcy court approval of the deal it reached with regulators to complete its $17.2 billion merger with US Airways Group Inc. (LCC) and create the world’s biggest airline.

The accord with the U.S. Justice Department, which agreed on Nov. 12 to drop its antitrust challenge if the carriers gave up some airport slots, was approved today by U.S. Bankruptcy Judge Sean Lane in Manhattan.

“The settlement easily satisfies” bankruptcy requirements and the merger may be consummated without delay, Lane said at a hearing. A group that sued to block the deal “utterly failed” to prove the merger would harm them, he said.

AMR, based in Fort Worth, Texas, intends to complete the merger on Dec. 9 and rename the company American Airlines Group Inc. The last day of trading of all outstanding securities of AMR and the common stock of US Airways will be Dec. 6, according to a company statement.

In his ruling, Lane denied a bid by the group of private plaintiffs opposing the merger to temporarily block the deal. He said the plaintiffs made “sweeping” claims without showing proof and relied heavily on the Justice Department’s allegations in its now-settled lawsuit.

Photographer: Andrew Harrer/Bloomberg

US Airways and AMR Corp.'s American Airlines said a merger was the only way they could compete with United Continental Holdings Inc. and Delta Air Lines Inc., the industry’s biggest carriers. Close

US Airways and AMR Corp.'s American Airlines said a merger was the only way they could... Read More

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Photographer: Andrew Harrer/Bloomberg

US Airways and AMR Corp.'s American Airlines said a merger was the only way they could compete with United Continental Holdings Inc. and Delta Air Lines Inc., the industry’s biggest carriers.

The plaintiffs, who weren’t identified in court filings, used a provision of U.S. antitrust law that allows private individuals to sue companies over claims they’ll face “irreparable harm” from merger activity.

‘No Evidence’

The group, represented by attorney Joseph Alioto, provided a “puzzling” lack of evidence in court filings and during hearings, Lane said in a written ruling. “The court has no evidence whatsoever regarding who the plaintiffs are, what the nature of their interest in the airline industry is, or how they will be individually harmed by the proposed merger.”

The plan was supported in filings by groups of pilots, flight attendants, transportation union workers and creditors. There were no objections by parties involved in the case.

The Washington judge in the antitrust case must also approve the terms of the proposed settlement after a public comment period that runs through Feb. 7.

“Today’s rulings by the court are another important step in our path toward emerging from restructuring and closing our planned merger with US Airways,” Mike Trevino, an American spokesman, said in an e-mail.

Two Years

The deal with US Airways is the linchpin of American’s bid to emerge from bankruptcy after two years and repay creditors. Lane approved American’s bankruptcy reorganization plan in September, while barring it from taking effect until the underlying merger won regulatory clearance.

The Justice Department filed its antitrust lawsuit in August to block the merger of American and Tempe, Arizona-based US Airways, arguing the combination would raise prices and harm consumers. American could emerge from bankruptcy and compete on its own without the merger, the U.S. said.

To resolve regulators’ concerns that the deal would give the merged airline too much clout at Washington’s Ronald Reagan National Airport and boost prices, American and US Airways agreed to divest 52 pairs of takeoff and landing slots there. The combined carrier will also give up 34 slots at New York’s LaGuardia Airport and make smaller concessions at five other airports.

Passenger Choices

American and US Airways said a merger was the only way they could compete with United Continental Holdings Inc. (UAL) and Delta Air Lines Inc. (DAL), the industry’s biggest carriers. They argued the deal would give passengers more choices and generate more than $500 million a year in benefits.

AMR’s total value for its stakeholders under the reorganization plan is about $13.1 billion based on current trading, representing an increase of $2.7 billion since Aug. 7, when a valuation was last completed, Stephen Karotkin, a lawyer for the company, told Lane at a Nov. 25 hearing.

“This hearing represents the culmination of perhaps the most successful Chapter 11 case for an airline in recent history,” he said at that hearing, calling the value created for creditors a “remarkable achievement.”

“We are pleased with the judge’s ruling,” Karotkin said after today’s hearing.

After the merger, US Airways Chief Executive Officer Doug Parker will hold the same title at the combined airline, while AMR CEO Tom Horton would serve as chairman until the first annual meeting of the merged carrier.

The merger agreement gives 28 percent of the stock of the combined company to US Airways shareholders, with the remaining 72 percent going to AMR creditors, unions, certain employees and shareholders.

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

To contact the reporter on this story: Erik Larson in U.S. Bankruptcy Court in Manhattan at

elarson4@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net

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