NEW YORK (
has been forced back to the hangar following an antitrust lawsuit from the Department of Justice, which challenged a planned $11 billion merger with
US Airways Group
Following a confirmation hearing on Thursday, Aug. 15, Judge Sean H. Lane of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan gave parties in the case until Aug. 23 to file briefs either supporting or opposing confirmation and set a new confirmation hearing for Aug. 29.
Lane told the courtroom he had to "strongly consider" canceling the Thursday hearing, as all parties had just two days to respond to the DOJ's suit, but he decided that "might have created unhelpful confusion and uncertainty."
The DOJ was joined in its action Tuesday by attorneys general from six states and the District of Columbia. The government plaintiffs asserted the merger, which would form the world's largest airline, would substantially lessen competition for commercial air travel in local markets throughout the U.S. and result in passengers paying higher airfares and fees for ancillary services and receiving less service overall.
The DOJ said AMR's American Airlines and US Airways compete directly on more than 1,000 routes where one or both offer connecting service, representing tens of billions of dollars in annual revenue. They engage in head-to-head competition with nonstop service on routes worth about $2 billion in annual routewide revenue.
John Butler Jr. of
Skadden, Arps, Slate, Meagher & Flom
, counsel to AMR's official committee of unsecured creditors, and debtor counsel Stephen Karotkin of
Weil, Gotshal & Manges
said in court they had anticipated a lawsuit while forming the plan, but they requested Lane confirm the plan anyway, asserting it was best to submit the result of months of negotiations to the DOJ even if the agency later rejected it. Karotkin said the parties supporting the plan believe the merger is the best outcome for all creditors and that Lane can confirm it now even though he does not have the power to consummate it.
Butler said the committee is "unhappy" with the DOJ's objection to the merger but not surprised.