US court clears American Airlines' reorganisation plan

The approval by a judge of American Airlines' reorganisation plan yesterday, is expected to pave the way for the airline's exit from bankruptcy and clearing the final hurdle to its merger with US Airways to form the world's largest airline.

Judge Sean H Lane of US Bankruptcy Court, has given a two-year period to the carrier which sought court protection to reorganise its business, shed debt, and rewrite labour agreements.

A central feature of the reorganisation was the merger with US Airways, a prospect backed by American's creditors and employees.

The plan hit a road bump with a challenge by the justice department over the summer. Just weeks ahead of the trial, however, regulators and the airlines settled the suit on 12 November.

According to the court, the settlement did not modify the reorganisation plan to the extent as to  warrant a new vote by creditors and shareholders.

The merged airline would retain the name American Airlines, operate 6,700 daily flights, have 1,500 airplanes, and around 100,000 employees. The combine annual revenue would amount to around $38 billion.

The justice department had sued to block the merger in August, as it feared it would hurt competition and lead to higher prices (see: American Airlines US Airways merger faces consumer challenge).

Regulators however, settled their case in exchange for the carrier's promise to surrender some landing rights at Reagan National Airport near Washington and LaGuardia Airport in New York, as also a few gates at five other airports.

The new entity would be slightly larger in revenue and passenger traffic than United Airlines, and four airlines - American, United, Delta and Southwest and would control over 80 per cent of the US market (See: American Airlines, US Airways merging to form world's biggest airline).

Since 2005, mergers have cut the industry from nine big airlines to four.

Judge Lane had approved the American parent AMR's merger plan for emerging from bankruptcy in September conditioned on the company winning or settling the lawsuit filed by the government.