Aug. 24 (Bloomberg) -- AMR Corp. told a bankruptcy judge that its reorganization plan should be approved even though the U.S. Justice Department has sued to block a merger with US Airways Group Inc. that it depends on.
Waiting to resolve the government’s antitrust case would be “destabilizing,” AMR, the parent company of American Airlines, said yesterday in a court filing in U.S. Bankruptcy Court in Manhattan.
The U.S. said yesterday that it took no position on whether the bankruptcy court should approve the plan before the antitrust question is resolved. The government has asked a federal judge in Washington to set a February trial for the antitrust case.
Failure to confirm the plan when all other conditions have been met under bankruptcy law would “add an unwarranted element of uncertainty to the administration of the Chapter 11 cases and would introduce a destabilizing factor,” Fort Worth, Texas- based AMR said. The expectations of customers, vendors, suppliers, employees and business partners all need to be met, the airline company said.
AMR and US Airways have said they want the antitrust case tried in November. Both sides have asked U.S. District Judge Colleen Kollar-Kotelly in Washington for a hearing to set a timetable for the trial. A February proceeding would “cause serious harm and cannot be justified,” the airlines said in a joint filing.
The U.S. lawsuit threw up a roadblock to American Airlines’ plan to exit bankruptcy through a merger that would create the world’s biggest airline. It surprised industry executives and analysts after the Justice Department allowed six airlines to merge during the past five years as the companies sought to cut costs and end losses.
Even if the reorganization plan is confirmed by the bankruptcy judge, the company would have to postpone its exit from bankruptcy until the antitrust case is resolved, according to the AMR filing yesterday. If AMR can’t get clearance to merge, its plan would become null and void, and its bankruptcy would continue, according to the filing.
The committee of unsecured creditors said in a separate filing yesterday it supported immediate confirmation of the plan as the path forward chosen by all the company’s stakeholders after “an 18-month restructuring process and a thorough assessment of all reasonable restructuring alternatives.”
The risk of a regulatory issue arising had already been considered, as had the possibility of a long delay until the plan was effective, the creditors said in their filing.
The Association of Professional Flight Attendants also said it supports confirming a plan now.
The Justice Department said it was notified of the airlines’ merger plans on Jan. 31 and asked by the airlines to make a decision before the bankruptcy court’s Aug. 15 confirmation hearing.
The airlines in May produced the bulk of the material requested by the Justice Department, according to the U.S. filing yesterday.
“Throughout its investigation, the department engaged with the airlines on the concerns raised by the proposed merger; these discussions culminated in a series of meetings in late July and early August,” the Justice Department said.
A meeting requested by the airlines with Bill Baer, the head of the antitrust division, took place Aug. 6, a week before the division filed its lawsuit.
As the proceedings heat up, the Justice Department yesterday named David Gelfand, a partner at Cleary, Gottlieb, Steen & Hamilton LLP in Washington, as head of litigation for the antitrust division.
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).
--With assistance from Mary Schlangenstein in Dallas. Editors: Andrew Dunn, Fred Strasser