American Airlines Merger: Still Up in the Air


We talked earlier about action taken by the Justice Department to halt the proposed merger of American Airlines and U.S. Airways, which would form the largest airline in the world. Since that time, this interesting case has continued to develop.

In the last decade, several major air carriers have used bankruptcy and merger to remain competitive, and in doing so, have made air travel pricing less competitive for consumers. Concerns over this lack of competitiveness led the Justice Department to intervene in the proposed merger of American Airlines and U.S. Airways in August of this year.

Since that time, the following developments have occurred:

  • Trial in the matter is scheduled to begin Nov. 25.
  • Discovery, depositions and interviews in the matter have been mostly completed.
  • Four airports directly affected by service were allowed to file briefs in support of the merger.
  • The airlines have stated they are open to negotiation of the merger but have been unsuccessful so far in closed-door negotiation.
  • States involved in the lawsuit include Michigan, Virginia, Arizona, Pennsylvania, Florida and the District of Columbia.
  • Even without the merger, American Airlines just completed its most profitable quarter in its history, a condition that echoes earlier statements by the Justice Department that American Airlines is capable of thriving on its own outside of bankruptcy court.
  • In late October, the airlines and the Justice Department agreed to the appointment of a negotiator, a move that could presage settlement of the matter.

The matter seems fit to settle, as most cases do, short of trial. Both airlines indicated they would consider giving up coveted landing slots at Ronald Reagan National Airport in an effort to convince the Justice Department to approve the merger.

So far, the airlines have employed bankruptcy, merger, litigation and negotiation to achieve business ends.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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