NEW YORK- U.S. Bankruptcy Judge Sean Lane didn't decide Thursday whether to confirm the plan of reorganization for American Airlines and parent AMR Corp.
NEW YORK— U.S. Bankruptcy Judge Sean Lane didn’t decide Thursday whether to confirm the plan of reorganization for American Airlines and parent AMR Corp.
But he made clear that he is leaning that way.
“My thought is that I’m not going to rule today,” Lane said at the end of an hourlong hearing in his New York City courtroom. “I will say I find the arguments in favor of confirmation to be fairly persuasive. But I’d like to reflect on that, and go back and read the transcripts.”
The big question that Lane is wrestling with is an antitrust lawsuit filed Aug. 13 by the U.S. Department of Justice, six state attorneys general and the District of Columbia.
The lawsuit seeks to block the merger of Fort Worth, Texas-based American and US Airways — the centerpiece of the plan of reorganization — contending that it would hurt consumers and be anti-competitive.
At Thursday’s hearing, lawyers for American, its unsecured creditors committee and two of its unions, the Transport Workers Union and the Association of Professional Flight Attendants, urged the judge to confirm the plan.
They said the plan’s language contemplates exactly the type of circumstance as the antitrust lawsuit. The plan doesn’t go into effect unless there’s a merger, and the plan will go back to the judge if the merger is disallowed or a settlement changes its terms.
Arguing the other side was David Cook, a San Francisco lawyer who said that Lane should wait until the merger lawsuit is concluded. Cook and fellow San Francisco lawyer Joseph Alioto have filed a private lawsuit alleging the same issues with the merger as the Justice lawsuit.
It appears there’ll be no decision before Sept. 12, when Lane is calling all interested parties before him for a scheduling conference.
In addition, he expects the U.S. trustee’s office and American’s lawyers to keep talking before that hearing about the trustee’s objections to the plan. Foremost is the trustee’s opposition to a nearly $20 million payout that American Chairman and CEO Tom Horton would receive if the merger takes place and he leaves his job as CEO.
After the hearing, participants expressed satisfaction with what they heard.
“We are pleased the judge found our arguments in favor of confirmation persuasive,” American spokesman Mike Trevino said in a prepared statement.
“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,” he said.
Jack Butler, lead counsel for the creditors committee, took note of the judge’s comments that he found the arguments in favor of confirming the plan without waiting for a decision in the antitrust case to be persuasive.
“We were pleased with the hearing. We believe in our arguments. We believe the confirmation order should be entered now, at this juncture,” Butler said.
Laura Glading, president of the Association of Professional Flight Attendants, which represents American employees, said the judge’s comments were “very encouraging.”
“I felt very good about it. He said the arguments for confirmation were very persuasive. I’m looking forward to the 12th and getting this behind us and move on with the DOJ piece,” Glading said.
APFA attorney Rob Clayman asked Lane to consider the carrier’s employees, who have been waiting for the bankruptcy case to be over. The antitrust lawsuit now brings more uncertainty into their lives, he said.
“Rather than exacerbating the uncertainty that was caused by this litigation, you have the opportunity to quell some of that uncertainty,” Clayman said.
Sharon Levine, representing the Transport Workers Union, urged the judge to confirm the plan quickly. “We just want to put a human face on how important this is to people of the airline,” she told Lane.
In Washington, D.C., U.S. District Judge Colleen Kollar-Kotelly will hold a hearing Friday to decide when the Justice Department lawsuit will be tried. Justice lawyers want the trial to begin March 3 or thereafter, while the airlines are pushing for a Nov. 12 start.
One airline analyst concluded in a report Thursday that the prospect for a settlement between the airlines and the Justice Department is unlikely.
Dan McKenzie, airline analyst at Buckingham Research Group, said that “a settlement is highly unlikely simply because the hurdle that US/AA must leap to reach a settlement is too high.”
But another analyst, GimmeCredit’s Vicki Bryan, predicted that the case “will never go to trial, and instead will be resolved with a negotiated settlement. … First, of course, the drama must be played out.”
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