Are American, US Airways Making It Easy to Back Out of Merger?
AMR Corp.’s (AAMRQ.PK) American Airlines and US Airways (NYSE:LCC) agreed to extend the possible termination date of their proposed merger, which has been blocked by a suit from the U.S. Department of Justice. According to a report from The Wall Street Journal, the two airlines have agreed to move the date by which either airline can decide not to pursue the merger from December 17 to January 18.
The trial between American Airlines, US Airways, and the Justice Department is set to begin November 25. The DoJ had wanted a much later trial date, but a judge sided with the airlines in granting a November start date. U.S. District Judge Colleen Kollar-Kotelly said the DoJ’s request for a March start date was “too far off,” and the DoJ subsequently said that it will be prepared for the case by November.
“Our focus is on mounting a vigorous defense and winning our court case so the new American can enhance competition, provide better service to our customers and create more opportunities for our employees,” Tom Horton, chief executive officer of AMR, and Doug Parker, CEO of US Airways, said in a statement seen by the Journal.
The Justice Department believes that the merger will cut down too much on competition within the airline industry and lead to increased prices for consumers. American Airlines and US Airways have said that merging will allow them to better compete with other larger airlines that have benefited from recent mergers in the industry, like the merger that created United Continental (NYSE:UAL) and Delta Air Line’s (NYSE:DAL) acquisition of Northwest Airlines. The airlines have accused the Justice Department of treating their merger unfairly, since the DoJ allowed the other mergers in the industry to happen.
AMR Corp. needs the merger to get out of bankruptcy. The merger with US Airways is the only proposition that AMR Corp. has presented to pull itself out of bankruptcy, and that was one factor in Kollar-Kotelly’s decision to proceed with the earlier trial date.
The merger has already received approval from the airlines’ shareholders, AMR Corp.’s creditors, and European regulators. Despite the arguments, American Airlines, US Airways, and the DoJ have said they’d be willing to work out an agreement that would allow the deal to go through.
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