August 15, 2013

Airlines confident in merger lawsuit

The Justice Department filed suit Tuesday to block a merger of US Airways and American.

By DAVID KOENIG The Associated Press

(Continued from page 1)

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An American Airlines jet passes the Washington Monument as it lands at Ronald Reagan National Airport, in Washington, D.C. American and US Airways say that a merger between them would eliminate the service gaps and weaknesses they have as individual airlines.

The Associated Press

"US Airways by itself doesn't have the money to go out and create trans-Pacific routes," said Robert Mittelstaedt, dean emeritus of the business school at Arizona State University and a longtime observer of the airline industry.

Executives for American and US Airways have declined to say yet what they would do if the merger is blocked. AMR would have to file a new reorganization plan with the bankruptcy court, because the merger is the key element of its current plan. It would then have to get its creditors, who were instrumental in steering American toward a merger, to support the changes. The creditors expected to be fully repaid under the merger plan but might get less if American remains on its own.

If AMR must go ahead without the merger, it can point to improving financial results. It has cut labor and other costs in bankruptcy, and it posted a $220 million profit in the second quarter, its first profit for the period in six years. An important measure of performance, revenue per mile, hit a record in July.

The merged airline would be run by US Airways CEO Doug Parker. Several top executives at American (and some at US Airways) were not offered jobs at the new company and had planned to leave.

Some departing American managers might have to pull their resumes off job websites, but they haven't left yet -- they are due to get severance deals if they stay until the merger is completed.

 

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