By Nick Brown
NEW YORK Aug 15 A U.S. bankruptcy judge on
Thursday held off approval of a restructuring plan for American
Airlines, citing a U.S. government challenge this week to the
airline's proposed merger with US Airways Group Inc.
American's parent company, AMR Corp, worked out
the $11 billion merger with US Airways as part of a plan to exit
bankruptcy, where it has been since 2011.
Judge Sean Lane had been expected to approve the plan at a
hearing on Thursday. But, two days before the hearing, the U.S.
Justice Department sued to block the merger, saying it would
lead to higher fares and hurt consumers.
Instead of approving the plan, Lane gave AMR and its
creditors until Aug. 23 to submit briefs on how he should
Lane said he needed more information about the
appropriateness of approving the restructuring plan in light of
the antitrust challenge.
AMR and US Airways, which have said they will fight the
antitrust lawsuit, and their lawyers argued on Thursday that
Lane should still approve the bankruptcy plan.
A lawyer for US Airways, Daniel Wall, said the Justice
Department's timing, just two days before the final hearing, was
"Don't allow the bankruptcy issues, which are complicated
enough on their own, to be held hostage to very late-filed
antitrust issues," Wall told the judge.
But Lane cited "lingering doubts" about the benefits of
approving a bankruptcy plan before the antitrust issue is
resolved. "What would be the point of entering a confirmation
order ... if, in fact, there's a lot more work to be done?" he
Under the restructuring plan, a reorganization cannot go
ahead without antitrust approval for the merger, which could
If the Justice Department ultimately succeeds in blocking
the merger, it would put AMR's restructuring back at square one,
requiring it to forge new strategies for paying back creditors.
AMR shareholders, who stand to receive a 3.5 percent stake
in the new entity under the merger, would likely be wiped out
under any plan that excludes a merger, restructuring experts
Lane said he had strongly considered canceling Thursday's
hearing but decided to give parties an open forum to discuss the
The bankruptcy plan has the support of nearly all of AMR's
key creditors, and Lane had already signed off on the merger and
an initial outline of the restructuring plan that incorporates
Absent the antitrust challenge, Thursday's hearing would
have been the final step in AMR's exiting bankruptcy and
implementing its merger.