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Federal Judge Delays Approval Of American Airlines Bankruptcy Plan

DALLAS (CBS 11 NEWS) - A federal judge has refused to approve American Airline's reorganization plan, which would allow it to exit bankruptcy.

Delaying the decision, a federal lawsuit filed by the Justice Department and six states, including Texas, that seeks to block the airline's proposed $14 billion merger with US Airways.

In Thursday morning's hearing,  American's lawyers and others asked the judge to approve the restructuring plan -- even though the airline can't fly out of bankruptcy until the merger is approved.

Besides the airline, stakeholders, American's flight attendants union, and the Transport Workers Union of America union also urged the judge to OK the plan.

The unions told the judge they were putting a human face on the merger.

The judge questioned whether he should approve the reorganization plan with the merger still up in the air, but he did say he's seen many other cases in which restructuring plans have been okayed -- subject to regulatory approval.

Ultimately, he delayed the decision and set another hearing for September 12.

The Justice Department, which has said the merger would hurt consumers by raising airfares and fees and reducing competition, told the judge it didn't have a position one way or the other on whether he should approve the bankruptcy plan.

Following the hearing, American Airlines released the following statement:

"We are pleased the judge found our arguments in favor of confirmation persuasive. While we await the Court's decision on our Plan of Reorganization, we are focused on the need for a mid-November trial and challenging the DOJ's position so we can complete our planned merger with US Airways."

Now the focus turns to a Washington D.C. courtroom for a hearing on Friday morning, where a judge will likely set a date for the trial on the government's lawsuit to block the merger.

The airlines want a mid-November date, while the Justice Department has asked for a date next March.

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