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Airline merger approved by bankruptcy court

A key obstacle to a merger that will likely impact Virginia airline passengers has been cleared. A federal bankruptcy court has signed off on an agreement that had previously been reached between AMR Corp., the parent of American Airlines, and the U.S. Department of Justice regarding American's proposed merger with US Airways Group. The government had previously challenged the transaction on antitrust grounds, but had withdrawn its objection after the airlines agreed to give up some gate slots at several airports to low-fare competitors. The agreement required bankruptcy court approval due to the 2011 Chapter 11 filing by AMR.

The merger is now expected to close in December, and will create the world's largest airline. AMR had filed for bankruptcy due to massive labor costs and rising debt and is the last of the largest domestic carriers to undergo restructuring.

Another ruling by the bankruptcy court will allow the transaction to proceed in spite of the fact that a group of businesses had filed an anti-trust lawsuit in August, claiming that the transaction could hurt consumers by causing rising prices and lack of competition. The plaintiffs in that action have yet to comment publicly on the bankruptcy court ruling.

Consummation of the merger was the key part of AMR's Chapter 11 restructuring plan, and the company deemed its approval necessary for its survival. In addition to bankruptcy issues, the transaction presented antitrust and other regulatory considerations, which is often the case with business acquisitions and mergers involving companies in certain industries and of significant size. An attorney with experience in these types of transactions may prove invaluable in helping to prepare and review the complex agreements that are usually necessary.

Source: FOX, "Bankruptcy Judge Approves AMR Merger Settlement", Dunstan Prial, November 27, 2013

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