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AMR Returns to ’Square One’ If Merger Blocked, Creditors

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Oct. 28 (Bloomberg) -- American Airlines would have to start over in its effort to restructure in bankruptcy after two years if the U.S. succeeds in blocking the carrier’s planned merger with US Airways Group Inc., creditors said.

The bankruptcy would go back “to square one with likely disruption and disarray among numerous, financially unaligned stakeholders,” the committee representing American’s unsecured creditors said in a court filing today in Washington.

American parent AMR Corp., which filed for bankruptcy on Nov. 29, 2011, was set to exit court protection by merging with Tempe, Arizona-based US Airways when the U.S. Justice Department and a group of states sued the carriers in August.

The government says the merger would reduce competition while the airlines defend the deal as benefiting consumers. The trial is set to begin Nov. 25 in Washington.

The airlines and the Justice Department have agreed to talk with a mediator, as suggested by the court, to see if they can resolve the antitrust case, according to a separate filing today. Both sides said in a filing in August they didn’t expect a court dispute resolution process to “benefit” the case

The creditors committee of Fort Worth, Texas-based American is seeking permission to file a brief with U.S. District Judge Colleen Kollar-Kotelly explaining the “relative merits of the merger in comparison to starting over in the bankruptcy process.”

The antitrust case is U.S. v. US Airways Group Inc., 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 reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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