Judge Approves AMR, US Air Settlement

A bankruptcy judge on Wednesday approved the antitrust settlement between the Justice Department and merging airlines AMR Corp. and US Airways Group Inc., clearing the last hurdle to a deal that will create the world's largest airline.

Judge Sean H. Lane of U.S. Bankruptcy Court in Manhattan signed off on the deal two days after the airlines made the case in court that the settlement didn't materially change the merger plan he signed off on earlier this year. The airlines hope to close the deal next month.

"Consistent with all these rulings, the court will grant that the merger be consummated without delay," Judge Lane said from the bench Wednesday. The settlement with the Justice Department "easily satisfies" the requirements for approval, he said.

Under current market prices, the merger gives stakeholders more than $13.1 billion in value, an AMR lawyer said at the Monday hearing on the settlement.

The judge overruled objections lodged by a lawyer representing airline customers, who spent more than an hour Monday arguing that the merger would hurt airline competition and customers. The judge also shot down an attempt by the lawyer, Joseph M. Alioto, to get a restraining order to block the merger.

Judge Lane Wednesday said Mr. Alioto presented insufficient evidence and "utterly failed to establish" that the merger would cause airline customers irreparable harm.

Although Judge Lane signed off on AMR's plan to exit bankruptcy through the merger in September, it was held up by the Justice Department's antitrust lawsuit, which was filed in August.

The Justice Department had argued that the deal would stifle competition and hurt customers, and the two sides prepared for a trial that would have begun Monday. But the airlines reached a settlement with the government earlier this month, agreeing to give up space at major airports in the U.S.

The carriers also pledged to retain the big hubs that underlie their combined network and to continue service to certain smaller cities.

AMR's merger-based Chapter 11 plan will pay bondholders in full and give the company's existing shareholders at least 3.5% of the combined airline, a rare outcome in Chapter 11 cases.

In all, the proposal would give 72% of the combined airline to AMR shareholders, unsecured creditors, labor unions and some employees. The rest would go to US Air's shareholders.

AMR filed for bankruptcy protection in November 2011, citing the need to cut operational and labor costs. The company negotiated deep concessions from its main labor unions after a lengthy trial, cutting about $1 billion in annual labor costs.

AMR initially planned to exit bankruptcy as an independent airline, but the company eventually succumbed to the advances of suitor US Airways.

The combined company will be called American Airlines Group Inc.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)

Joseph Checkler contributed to this article.

Write to Stephanie Gleason at [e-mail].

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