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Bankrupt American Airlines Merges with US Airways

When it comes to massive companies, few are larger in terms of costs, revenues, or global influence on commerce and even lifestyle than the airlines. American Airlines enjoyed its status as an aviation giant since its inception in 1930 nearly a century ago. US Airways, founded just under a decade later in 1939, was another popular heavyweight with commuters and recreational travelers alike. Now, following a multi-billion dollar bankruptcy, the two companies have merged — and together, they’re poised to become the biggest airline in the world.

Plane Takeoff - Bankrupt American Airlines Merges with US Airways

American Airlines Files for Bankruptcy

In the post-9/11 landscape, flying has changed. The days of open cockpits, in-flight meals, and even sometimes pillows and blankets have become a sorely-missed thing of the past. As the luxury drained out of commercial aviation — and extra travel money drained out of the U.S. economy in the throes of a devastating recession — the entire industry, like so many others, was thrown for a loop. (Delta in particular struggled with seemingly endless strikes and layoffs.) Some players within the industry, such as American Airlines, fell into a financial stall from which no pilot could ever hope to recover.

American Airlines’ parent company, AMR Corp., filed for bankruptcy on November 29, 2011, almost exactly two years ago to date. The company had over $25 billion in assets… and over $29 billion in debt. Now, some 24 months later, a merger between American and US Airways has finally been approved by U.S. Bankruptcy Judge Sean Lane — but the path to the merger was a turbulent one.

Bankruptcy and Federal Antitrust Laws

In the pursuit of obtaining legal clearance for a merger, US Airways and American Airlines first had to jump the hurdle of federal antitrust laws. Joseph Alioto, a San Francisco attorney, attempted to prevent the merger on behalf of 40 plaintiffs by filing a restraining order. Alioto argued that permitting US and American to merge would result in a titanic entity that looked suspiciously like a monopoly — exactly what federal antitrust laws are in place to prevent, in the interest of consumer protection.

It’s true that the merger between AA and US Airways will result in a giant that dwarfs its former split selves: the new company, which will be named American Airlines Group, Inc., will become the largest airline in the world, boasting over 100,000 employees — and over $38 billion in annual revenue. Alioto pointed out that the new company would keep some 80% of U.S. air travel in a stranglehold that ran counter to public benefit, as well as antitrust legislature.

Judge Lane, however, rejected Alioto’s arguments, saying that Alioto failed to establish that such a merger would result in “irreparable harm” to the American public. Thinking of the future — and of the recent, disastrous past — Lane also pointed out that slapping the new company with a restraining order would drag down stock prices, not exactly an auspicious beginning for the new enterprise.

Despite Alioto’s protests, the merger is proceeding with the legal blessings of both Judge Lane and the U.S. Department of Justice. As for carving up capital, 28% of American Airlines Group, Inc. will go to US Airways shareholders, and the remaining 72% will go to AMR Corp.

Filing for Bankruptcy? Call Our Pennsylvania Bankruptcy Lawyers Today

As this story demonstrates, sometimes bankruptcy can be the best step toward financial recovery. If you or a loved one is interested in filing for bankruptcy, call the bankruptcy attorneys at the law offices of Young, Marr & Associates at (609) 755-3115 in New Jersey or (215) 701-6519 in Pennsylvania, or contact us online.

Have You:

Been paying credit card balances that seem to never go down?

Lost your job and are now having trouble keeping up?

Attempted to work out a payment arrangement to no avail?

Been notified of a mortgage foreclosure action?

Been denied for a mortgage or other line of credit?

If the answer to any of these questions is “yes” then bankruptcy may be an option that you should consider.

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