- Daily Zen
American Airlines and US Airways got their slot; permission to take off. From 9th December merging of their wings will be complete. After this week’s pronouncement of a federal bankruptcy judge American Airlines and US Airways are free to complete their merger and become the world’s largest airline. The judge rejected a request by a group of consumers to block the deal between airlines. Merged wings will hopefully justify reasons of the merging and won’t let down all the people who were worried about their business plan in the first place.
Flying on the wings of justice
It all started in August when Justice Department blocked the merger, with explanation that this deal would hurt the competition on the market and by doing so, lead to higher prices for passengers. Seems the regulators settled their case in exchange for the airlines’ promise to surrender some coveted landing rights at Reagan National near Washington and LaGuardia in New York and a few gates at five other airports, so part of the deal is their obligatory to fulfill these conditions.
The new American Airlines after their wings are merged will be slightly larger in revenue and passenger traffic than United Airlines, and four airlines; American, United, Delta and Southwest will control more than 80 percent of the U.S. market. It happened already in September that District Court Judge Sean Lane had approved the merge-and-emerge-from-bankruptcy plan of American parent AMR Corp, but with the condition that the company winning or settling the lawsuit filed by the government. This Monday at hearing in Lane’s courtroom, a lawyer for a group of consumers also had something to add, asking the judge to block the merger until a trial could be held on his antitrust lawsuit, but many of the arguments by him were almost the same as the one which were raised by the government and ended being drooped, so Lane denied request by the lawyer as well. Lane said that clients the lawyer was representing had failed in showing that merging of the airlines would hurt them. He also explained that if they had won their lawsuit, he could demand additional divestitures by the two airlines but they couldn’t hold up the merger.
Who will benefit?
AMR creditors pushed hard for the merger, while they believe to be repaid in full. There is also one thing specific about this business plan, since shareholders are usually wiped out in bankruptcy cases and AMR’s shareholders could owe more than 30 percent of the new company, what will depend on the future stock prices. Even though AMR management was initially wasn’t too thrilled about the deal, the merging deal with US airways was announced in February 2013. American Airlines Group Inc. will be the name of the new company while based in Fort Worth, Texas.