American Airlines, a subsidiary of AMR Corporation is seeking
approval from a U.S. bankruptcy court for its legal settlement
with Department of Justice (DOJ) that will allow it to merge with
US Airways Group Inc.
). The carrier has argued that none of its creditors have opposed
the merger, which will create the largest airline company in the
Notably, Fort Worth, Texas-based AMR Corp. filed for
bankruptcy in Nov 2011, citing unmanageable labor issues that
drastically increased its expenses. In Feb 2013, the board of
directors of the aforesaid airlines gave the nod to merge, thus
providing a means to come out of chapter 11 bankruptcies and pay
back its creditors.
The merger received opposition from a small group of 40 travel
agents and business flyers though, who fear that the amalgamation
will increase fares and reduce competition. The group asked for a
restraining order to halt the merger, the ruling on which is
expected by this Wednesday.
Recently, both American Airlines and U.S. Airways cleared all
competition-related litigation raised by the DOJ along with
attorneys general of six states and the District of Columbia in
Aug 2013. As part of the clearance, the airlines will have to
give up 52 take-off and landing slots at Washington's Regan
National Airport (DCA) and 17 pairs at La Guardia airport in New
York (LGA). Further, the carriers have to divest two gates and
related facilities at each of the Boston, Chicago, Dallas, Los
Angeles and Miami airports.
The DOJ has claimed that opening up of slots to carriers will
likely induce more competition within the industry. The DOJ which
was earlier favouring the low cost carriers like
Southwest Airlines Co.
JetBlue Airways Corp.
), now have to include legacy carriers like
Delta Air Lines Inc.
) in the process.
Post-merger, the combined unit will likely have more than
6,500 daily flights to 336 destinations across 56 countries
generating annual revenues of roughly $40 billion.
Bankruptcy court clearance will bring some respite for AMR
shareholders, who can now expect to get back their investments.
Nevertheless, AMR still needs a single operating license from the
Federal Aviation Administrator before it could fly as a merged
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