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Expert: Lawsuit Will Likely Delay AA Bankruptcy By Months

NORTH TEXAS (CBS 11 NEWS) - We know the merger between American Airlines and US Airways is being delayed from next month until at least the end of the year.

But Jeffrey Erler, a bankruptcy attorney in Dallas, now believes American's take-off from bankruptcy could also be postponed. "I certainly expect it to go for several more months."

On Thursday, a judge was widely expected to approve American's reorganization plan, allowing the airline to set a date to leave bankruptcy and merge with US Airways.

But all of that was thrown in doubt Tuesday when the Justice Department and attorneys general from Texas and five others states filed a lawsuit to block the merger.

Erler says the problem for American is that its reorganization plan is directly tied to the $14 billion merger with US Airways. "I think it's very difficult for the judge to confirm the plan until there's some certainty as to whether the merger will be allowed to happen."

Attorneys for both airlines didn't respond to a question on a conference call about Thursday's bankruptcy court hearing in New York, except to say it's proceeding.

Rich Parker, attorney for US Airways called the government's case weak. "They got this one very wrong. The DOJ can not stop a merger. They have to ask a federal judge to rule in their favor, and that is something that has happened exactly once in the past eight years."

The Justice Department argues an American-US Airways merger will reduce competition and increase airfares and fees.

The Texas Attorney General worries the combined carrier would drop flights from small Texas cities.

But the airlines' attorneys say consumers will benefit because there will be more flights to more destinations, including smaller communities.
The airlines' lawyers also say a merger will allow them to compete with United and Delta, which the Justice Department allowed to merge with other airlines.

Brigham McCown, a former Department of Transportation attorney, who's now in private practice in Southlake, says the Government needs to be fair. "When you've allowed other airlines to merge, it's a little hard to stand before a judge and credibly articulate the merger should be blocked."

Governor Rick Perry hasn't commented publicly since the lawsuit was filed by the Justice Department and the Texas Attorney General.
A spokesman says the Governor supports the merger.

The state's Attorney General, Greg Abbott, who's running for Governor, isn't commenting on the lawsuit.

Attorneys for the airlines say they don't believe politics had anything to do with the lawsuits.

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