Texas Settles Lawsuit to Block AMR-US Airways Merger

Texas Attorney General Greg Abbott, who joined a U.S. lawsuit to block the AMR Corp.-US Airways Group Inc. merger, reached a settlement with the carriers in the case, and said he now supports the tie-up.

Terms of the agreement include a commitment for AMR’s American Airlines to maintain a hub at the Dallas-Fort Worth airport and keep its headquarters in Fort Worth. The settlement also calls for the carrier to retain service to 22 airports in Texas, Abbott said today. Six states and the District of Columbia are still participating in the federal lawsuit.

“Our real concern that we articulated from the beginning was to ensure no interruption of service from rural areas of the state of Texas,” Abbott said at a news conference today at the airport. “That was our main goal going in, that’s our main accomplishment coming out.”

US Airways climbed 3.6 percent to $19.65 at 3:33 p.m. in New York after gaining as much 4.7 percent for the biggest intraday advance since Aug. 30. AMR rose 8 percent to $4.44 in over-the-counter trading.

The U.S. Justice Department antitrust suit to block the tie-up creating the world’s largest airline is heading for trial on Nov. 25. U.S. District Judge Colleen Kollar-Kotelly today rejected a bid for delay by the government because of what it said was short-staffing caused by the partial government shutdown.

Court Protection

AMR is counting on the merger as part of its plan to restructure in bankruptcy, after filing for court protection in November 2011. The two carriers had targeted a third-quarter closing for their deal before the Justice Department filed its lawsuit in August.

“It weakens the DOJ’s case and makes it more likely to reach out for a settlement that’s more fair than what they’ve been seeking,” said Jim Corridore, a New York-based analyst at Standard & Poor’s Capital IQ, who has a strong buy rating on US Airways. “The more setbacks they have and the less time they have to prepare, the more likely they are to try to find a face-saving resolution,” he said in a telephone interview.

A combination of American, the third-biggest U.S. airline, and No. 5 US Airways would hurt consumers by damping competition and paving the way for higher fares, the department said in its lawsuit.

The airlines said a merger would promote competition and create a stronger carrier able to take on United Continental Holdings Inc. and Delta Air Lines Inc., which rank first and second in the global industry by passenger traffic.

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

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