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Texas Will Back US Airways/AMR Merger, Sources Say (Update 1)

Story updated to say that U.S. District Court judge denies Justice Department request for a stay in merger hearing.

CHARLOTTE, N.C. ( TheStreet) -- The U.S. Justice Department lost two battles Tuesday in its effort to prevent a merger between American (AAMRQ) and US Airways (LCC).

The department lost the support of Greg Abbott, Texas attorney general, for its lawsuit opposing the merger, sources said. Also, a U.S. District Court judge denied the DOJ's effort to delay the scheduled Nov. 25 trial date.

The airlines and Abbott scheduled a joint announcement for 3 p.m. EDT at Dallas/Fort Worth International Airport. They promised "an important development related to the merger of the two airlines." Abbott will withdraw his support for the Justice Department lawsuit opposing the merger, sources said. He will appear with American CEO Tom Horton at the news conference.

Additionally, U.S. District Court Judge Colleen Kollar-Kotelly quickly rejected the department's request to stay the case.

The Justice Department reacted quickly on Tuesday morning to the government shutdown, saying it needs more time to prepare for a U.S. District Court hearing on its lawsuit opposing the merger.

But in a hearing prior to the conference, Kollar-Kotelly "indicated she is aware of the merger expiration deadline of January 18, 2014 and will do her best to render a decision prior to that time," according to a newsletter for US Airways pilots issued by their union, the U.S. Airline Pilots Association.

The Justice Department had argued that the shutdown "is creating difficulties for the department to perform the functions necessary to support its litigation efforts and, accordingly, the department's policy is to seek a stay in all pending civil litigation."

In mid-afternoon trading US Airways shares were up 68 cents to $19.64.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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