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US Airways, American and DOJ Agree To Mediation In Merger Case

Oct 29, 2013 3:00 am

Skift Take

Mediation is routine in cases of this magnitude and the parties said earlier they didn’t think such a move would be productive. Still, you never know.

— Dennis Schaal

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/LM Otero  / Associated Press

U.S. Airways and American Airlines planes are shown at gates at DFW International Airport on February 14, 2013. /LM Otero / Associated Press


American Airlines, US Airways Group Inc. and the U.S. Justice Department agreed to go to a mediator to possibly resolve the government’s lawsuit seeking to block the proposed merger of the airlines.

Both sides said in a filing today in federal court in Washington that they agreed to a mediator “suggested by the court” without providing further details. The filing provides an update about the status of the case.

The appointment of mediator in complex civil lawsuits is not unusual, said Seth Bloom, a former trial attorney with the Justice Department’s antitrust division. In most federal civil litigation, courts require parties to engage in settlement talks before trial, he said.

“The nature of the complaint makes it a difficult one to settle, which isn’t to say these won’t be good-faith talks, but it’s nothing shocking,” said Bloom, president of Bloom Strategic Counsel in Washington. “They were always going to engage in these talks.”

The Justice Department sued American parent AMR Corp. and US Airways in August, claiming the planned merger, which would create the world’s largest airline, would reduce competition and lead to higher prices. A status conference is set for Oct. 30.

AMR and US Airways declined to comment on the mediator. Gina Talamona, a Justice Department spokeswoman, also declined to comment.

‘Proceeding Apace’

“The case is proceeding apace and is on-track to commence trial on Nov. 25, 2013, as scheduled,” both sides said in their joint filing to U.S. District Judge Colleen Kollar-Kotelly, who is overseeing the litigation.

American, which has been in bankruptcy since November 2011, was set to exit court protection by merging with Tempe, Arizona- based US Airways when the Justice Department and a group of states sued to block the deal.

AMR would have to start over in its reorganization if the U.S. is successful in winning a court order stopping the tie-up, the committee representing the carrier’s unsecured creditors said in a court filing today.

“An injunction here would return the AMR bankruptcy to square one with likely disruption and disarray among numerous, financially unaligned stakeholders,” the committee said.

Dispute Resolution

Kollar-Kotelly signed an order in August saying she “encourages the use of alternative dispute resolution.” Both sides said in a filing on Aug. 28 that the case “would not likely benefit” from that process.

“The question in a settlement is always who makes the first step, and that’s where the mediator can be helpful with formulating hypothetical solutions,” said Robert Mann, president of aviation consultant R.W. Mann & Co. in Port Washington, New York.

AMR gained 5 percent today, closing at $6.54 in over-the- counter trading. US Airways rose as much as 4.2 percent in after-hours trading.

The case is U.S. v. US Airways Group Inc., 13-cv-01236, U.S. District Court, District of Columbia (Washington).

–With assistance from Mary Schlangenstein in Dallas and Caroline Chen in New York. Editor: Peter Blumberg

To contact the reporter on this story: David McLaughlin in Washington at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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