August 30, 2013
Credit: American Airlines
American Airlines and US Airways have won their first battle against the U.S. Department of Justice (DOJ), getting a tentative start date of Nov. 25 for the trial that would hear DOJ’s challenge against the carriers’ proposed merger.
U.S. District Judge Colleen Kollar-Kotelly granted the airlines’ desire for an expedited schedule, ruling that DOJ’s request for an early March 2014 start date was not reasonable. “March 3, I think, is too far off,” the judge said in a hearing on the issue. “It needs to be a tighter, expedited schedule.”
The carriers, which proposed a Nov. 12 start, are satisfied with the judge’s decision. “We are pleased the court has set a schedule that will enable us to resolve this litigation in a reasonable time frame,” said US Airways CEO Doug Parker and American CEO Tom Horton in a joint statement.
A DOJ spokesman said its side would be ready to present its case on Nov. 25.
Under the merger agreement, either airliner could theoretically walk away if a deal isn’t done by Dec. 13. While both sides insist they want to see the deal through, wrapping the trial up before that date can only help, though there’s no guarantee proceedings won’t continue into mid-December. The trial’s next court date is Oct. 1, when each side will present a status update.
The lawsuit’s stakes are high. Earlier this week, American signaled that a prolonged delay in its exit from bankruptcy — which a 2014 trial date would have guaranteed — would threaten a long-planned regional jet order.
“American had completed much of the negotiations on business terms for the acquisition of a substantial number of regional jets to replace smaller regional jets or to replace older, inefficient, larger jets with large, modern regional aircraft,” American wrote in an Aug. 28 court filing. “American intended to finance the purchases of these new aircraft with favorable export credit financing. However, this type of financing will only be available to American after it emerges from bankruptcy,” which won’t happen before the suit is settled.
American argues that any other financing that it might have access to in bankruptcy would cost it much more than the export credit agreements. The airline has been looking at an order for around 60 Bombardier CRJ900s or Embraer 175s.
Both the airlines and DOJ have indicated that an out-of-court settlement is possible. DOJ pointed out, however, that the airlines haven’t presented a formal offer that would address its antitrust concerns. Those concerns appear to center around upholding competition at Ronald Reagan Washington-National Airport, but DOJ has also raised broader issues around competition in one-stop markets and the US Airways Advantage Fares scheme of discount prices.