American Airlines (AAMRQ) and US Airways Group Inc. (LCC) won a fast-track schedule they requested when the judge overseeing the U.S. government’s lawsuit seeking to block the airlines’ merger set a Nov. 25 trial date.
U.S. District Judge Colleen Kollar-Kotelly, during a hearing in federal court in Washington today, said that the March date proposed by the government was “too far off” and urged both parties to be a “lean, mean machine” in preparing for trial. The airlines had sought a Nov. 12 trial date.
“I’m going to set a schedule that enables both parties to get all of the information that you need to adequately prosecute or defend the case, but I’m going to do it on an expedited basis,” Kollar-Kotelly said during the hearing.
US Airways rose 4.1 percent to $16.62 at 12:15 p.m. in New York after the judge’s decision, the highest intraday price since the U.S. filed its suit on Aug. 13. AMR gained 8.6 percent to $3.68 in over-the-counter trading.
AMR’s $460 million of 6.25 percent convertible notes due in October 2014 rose 0.625 cent to 100.875 cents on the dollar at 10:22 a.m. in New York, according to Trace, the bond-price reporting service of the Financial Industry Regulatory Authority. They traded at 116.125 cents on the dollar on Aug. 9.
Hit Impasse
The government and the airlines had hit an impasse over the trial date. The Justice Department had sought a March trial, while the airlines had pressed for November to resolve the case that is keeping American parent AMR Corp. stuck in bankruptcy.
Lawyers for the airlines said they were pleased with the trial schedule in a briefing with reporters after the hearing.
“We are very confident that at the end of the day the judge is going to believe as we do that this is good for the traveling public,” said Rich Parker, a lawyer for US Airways at O’Melveny & Myers LLP in Washington.
Peter Carr, a spokesman for the Justice Department, said in an e-mail that “we appreciate the court’s careful consideration of the scheduling issues and will be ready to present our case on Nov. 25.”
Lawyers for both sides proposed a 10- to 12-day bench trial that will involve both live and videotaped testimony. The carriers told Kollar-Kotelly today they are planning to call six live witnesses, which include airline executives. The government plans to call to the stand 12 fact witnesses and three experts.
Each Side
The airlines had argued waiting until March to start the trial would cause “significant harm” and put their merger at risk. Rushing to try the antitrust lawsuit isn’t a good idea given the case’s complexity, the volume of material that needs to be exchanged between each side and the potential for the merger to hurt competition and consumers, according to the Justice Department.
“It’s good for everybody to get it done soon,” said Michael Derchin, an analyst at CRT Capital Group LLC in Stamford, Connecticut, who recommends buying US Airways shares. “A delay would have been pretty disastrous. This is a recognition that times is money, not only in legal fees but interest on bonds and the uncertainty.”
The U.S., joined by six states and the District of Columbia, sued the airlines on Aug. 13 to block the merger arguing the tie-up, which would create the world’s largest airline, would lessen competition and hurt consumers. The case upended the merger agreement that came together in February and stalled American’s exit from bankruptcy protection. AMR is based in Fort Worth,Texas, while US Airways is in Tempe, Arizona.
Delayed Approval
U.S. Bankruptcy Judge Sean Lane, who is overseeing AMR’s bankruptcy case, delayed approval of the company’s reorganization plan at a hearing yesterday during which he said arguments in favor of approval were “fairly persuasive.” He set the next hearing date for Sept. 12.
The government lawsuit causes “serious and needless uncertainty” over the future structure and business plans of the two airlines, the two carriers said.
Parker, the US Airways lawyer, said today that the airlines are still interested in having settlement talks with the Justice Department.
“We put something on that table before we got sued and the government responded with a complaint not with a counteroffer,” he said.
The antitrust case is U.S. v. US Airways Group Inc., 13-cv-01236, U.S. District Court, District of Columbia (Washington). The bankruptcy case is In re AMR Corp., 11-bk-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporters on this story: Tom Schoenberg in Washington attschoenberg@bloomberg.net; Sara Forden in Washington at sforden@bloomberg.net; David McLaughlin in New York at dmclaughlin9@bloomberg.net.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net