A federal judge has approved American Airlines' plan to emerge from bankruptcy protection and merge with US Airways, although the airlines must still resolve a lawsuit filed by the federal government seeking to block the merger.
A trial over that lawsuit is scheduled for November.
Thursday's ruling by federal bankruptcy Judge Sean Lane in New York provides at least the perception that the merger is still moving forward.
The airlines had originally hoped to close the merger this month and create the world's biggest carrier. They're now shooting for the end of the year, if they can either settle the antitrust lawsuit with the U.S. Justice Department or win the case in court.
Last month, Lane openly wondered whether he could approve American parent AMR Corp.'s reorganization plan before the merger won regulatory approval. On Thursday, he said he could if the turnaround plan looked financially sound.
Lawyers for AMR, based in Fort Worth, Texas, had argued that delaying approval of the plan would put ongoing support for the merger at risk.
Lane said that if the airlines lose the antitrust case, AMR will have to write a new restructuring plan that doesn't include the merger. If the airlines settle with the Justice Department — perhaps by giving up takeoff and landing slots at Reagan National Airport outside Washington — Lane would review terms of the settlement.
The judge also said that a proposed severance payment of $20 million to AMR CEO Tom Horton should not be part of the restructuring plan. Lane has noted that nothing would stop American and US Airways from approving the payment after the merger is completed. Under the deal, US Airways Group Inc. CEO Doug Parker would run the combined company and Horton would leave after a short stint as chairman.
The airlines argue that their merger will make them more financially stable and a stronger competitor to United and Delta, currently the two biggest airlines. The Justice Department says it would concentrate too much power in four airlines and cause prices to rise for consumers.
The Justice Department also is worried that a combined American and US Airways would be too dominant at Reagan National Airport. The department could push them to give some of their takeoff and landing slots there to other airlines, an idea advocated by JetBlue Airways.
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