US Airways/American Merger Clears Final Legal Hurdle

  • Nov 27, 2013 8:24pm GMT

From the New York Times - With American Airlines’ exit from bankruptcy on Wednesday, the grunt work of merging the airline with US Airways can begin and it will most likely be a long-haul affair, analysts said.

It has already been a bumpy two years at American Airlines, which filed for bankruptcy protection in November 2011 and expected at the time to speed through its reorganization and emerge as a leaner, independent carrier. But a far different airline is coming out of the process now, and if history is any guide it will face a difficult transition as the two companies tie the knot, analysts said.

“Of course it is very good news that new American now can finally proceed with the merger, but life is short and so are honeymoons,” said Vicki Bryan, an analyst at Gimme Credit.

Previous big mergers — Delta Air Lines and Northwest, United Airlines and Continental — have taken more than two years to be fully integrated. Southwest Airlines’ purchase of AirTran, announced in May 2011, is still a work in progress.

A federal court cleared the way for American’s exit from bankruptcy on Wednesday, giving the go-ahead for the formation of the world’s largest airline.

A central feature of the reorganization plan was the merger with US Airways, which had the backing of American’s creditors and employees. But the plan was temporarily disrupted after a challenge over the summer from the Justice Department on the grounds that it would hurt competition and lead to higher fares.

Just weeks before the trial was scheduled to start, and after months of uncertainty, regulators and the airlines settled the suit on Nov. 12. Judge Sean H. Lane, of the United States Bankruptcy Court for the Southern District of New York, found that the settlement did not modify the plan of reorganization enough to warrant a new vote by creditors and shareholders and said the merger could proceed without delay.

American was the last of the legacy airlines to file for bankruptcy, stumbling from its perch as the nation’s top carrier after falling behind Delta and United.

American and US Airways said that a combination was the best hope to provide travelers with a similar global network capable of competing with Delta and United. But American will have to work hard to convince passengers that a larger carrier can offer better and more customer-friendly service.

Full story at the New York Times.

Photo courtesy Huffington Post