AMR Corp. and its intended merger partner, US Airways Group Inc., simultaneously tumbled the afternoon of Oct. 25 as reports cast doubt on the prospects for the combination, but with no news from the companies themselves.

AMR, the parent of American Airlines, fell as much as 25 percent on Oct. 25, in a slide that began about 2:15 p.m. and lasted about 20 minutes. The shares, which had traded as high as $7.19, closed at $6.22 in over-the-counter trading, a 9.9 percent drop on the day.

At about the same time on the New York Stock Exchange, US Airways fell as much as 4.5 percent to $21.65, compared with an intraday high of $23.08. The shares recovered enough to close at $22.15, a 2.3 percent drop for the day.

Global Competition Review on Oct. 25 published a story saying the U.S. Justice Department “will not bow” to pressure in the face of opposition to its lawsuit seeking to block the airline merger.

On Oct. 23, Kevin Starke, a managing director at CRT Capital Group LLC in Stamford, Connecticut, issued a report about the prospects for the Justice Department suit.

Starke wrote that there is “no reliable means for estimating” who will win the case and recommended that investors own something they “can live with the day after” a Justice Department victory. He identified so-called double-dip bonds as attractive no matter who comes out on top.

The antitrust suit is scheduled for trial next month.

Starke said he’s not a fan of AMR stock, except “as an adjunct to a bond/claim position.”

AMR has climbed more than 150 percent since a three-day plunge that followed the government’s filing in August. Starke attributed the rise to a “bandwagon effect.”

“Airline industry people” are “very convinced” the merger will pass muster, while “antitrust lawyers are not,” Starke said. Those who favor industry commentary have a “good chance of jumping on the optimistic bandwagon,” he said.

Starke reworked his analysis of the recovery by AMR creditors and stockholders in the event the merger is blocked. He said he still estimates double-dip bonds will recover the par amount plus interest “while single-dips receive only 82 percent.” He said AMR’s existing stock “could be worth $2.67.”

Starke was among the first to identify AMR stock as having value even before the merger was announced, because the parent holding company isn’t liable for all of the airline’s debt and has claims of its own against the airline.

The airlines and the government agreed to have a mediator attempt to work out a settlement. AMR’s official creditors’ committee told the antitrust judge in a court filing that barring the merger would put the airline’s bankruptcy back at “square one.” For the Bloomberg stories, click here and here.

AMR closed at a 12-month low of 36 cents on Nov. 9, rising to $1.30 before the merger was announced in February. The U.S. lawsuit in August sent the shares tumbling to $2.57 from a pre- filing price of $5.81. The stock, which reached a 12-month high of $6.90 on Oct. 24, climbed 5.1 percent yesterday to $6.54.

Fort Worth, Texas-based AMR listed assets of $24.7 billion and debt totaling $29.6 billion in the Chapter 11 reorganization begun in November 2011.

American Airlines entered bankruptcy with 600 aircraft in the mainline fleet and another 300 with American Eagle, the feeder airline.

The Chapter 11 case is In re AMR Corp., 11-bk-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The antitrust suit is U.S. v. US Airways Group Inc., 13-cv-01236, U.S. District Court, District of Columbia.

With assistance from Steve Ludsin in New York, David McLaughlin in Washington, and Michael Bathon, Steven Church and Dawn McCarty in Wilmington, Delaware. Editors: Andrew Dunn and Glenn Holdcraft.

To contact the reporter on this story: Bill Rochelle in New York at wrochelle@bloomberg.net. To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net.

Photo Credit: A US Airways Express plane departs from a gate past an American Airlines plane at the Ronald Reagan Washington National Airport in Virginia. Mike Theiler / Reuters