Countdown Begins To US Airline Merger Trial
American Airlines and US Airways voiced a fresh sense of optimism on Friday after a US judge granted their request for a speedy trial to determine whether the two carriers are allowed to form the world's largest airline.
US District Judge Colleen Kollar-Kotelly said a trial pitting the airlines against the US Justice Department and several states would begin on Monday, November 25.
The trial date is close to what the airlines wanted and months earlier than the Justice Department requested, meaning the government will need to work faster than it thought if it hopes to succeed in blocking the USD$11 billion merger.
"We are confident in our case and eager to get to court," the airlines said in a joint statement. "We are pleased to have a trial date that will enable us to resolve this litigation in a reasonable time frame."
Justice Department spokesman Peter Carr said in a statement: "We appreciate the court's careful consideration of the scheduling issues and will be ready to present our case."
The Justice Department sued on August 13 to block the deal, saying it would lead to higher prices for customers, while the companies said it would make them more competitive and strengthen the market.
Barring a settlement, which both sides said they are open to, lawyers will spend the next three months in intense preparation that will involve most of the US commercial airline industry.
Executives of American and US Air will be asked to sit for pre-trial depositions, lawyers said during a court hearing on Friday. Rivals including Delta Air Lines and Southwest Airlines will be asked to turn over documents related to how the industry sets fares and fees.
The Justice Department proposes depositions of 50 people in all, while the airlines said they want to depose 10 people. Lawyers said they could exchange millions of documents.
Kollar-Kotelly will appoint a special master to help the discovery process move along faster. She set a status conference for October 1.
The judge will try the case without a jury. It was expected to last 10 to 12 business days, lawyers for the two sides said. The Justice Department plans to call about 15 witnesses and the airlines plan to call approximately six.
MARCH Vs. NOVEMBER
The US Justice Department had asked for a March trial. The airlines had pushed for November because holding a deal together for months puts a strain on the parties. During the merger review and challenge process, the companies said they are essentially in limbo, unable to merge but unable to make independent long-range plans.
"March 3, I think, is too far off. It needs to be a tighter, expedited schedule," Kollar-Kotelly said in court.
The trial date sets up "an aggressive schedule to be sure," said Diana Moss, vice president of the American Antitrust Institute, which has been critical of the deal. But, she wrote in an email, "given the depth and strength of the DOJ's case, the government should be ready."
In its complaint, the Justice Department focused on Washington's Reagan National Airport, where the two companies control a combined 69 percent of takeoff and landing slots. It also listed more than 1,000 city pairs where the two airlines dominate the market.
The two airlines and the Justice Department indicated in a joint court filing on Wednesday they were open to settling the matter. The government said it was, too, but added that it had not been given an offer from US Airways and American that "addresses the anticompetitive harms posed by the merger."
In response, a US Airways spokesman said in a statement in part: "The concessions we were willing to offer were designed to address competitive concerns that DOJ had raised during the investigation. We continue to believe there ought to be a realistic possibility of settlement."
The companies have said that the deal is critical for American Airlines, whose parent, AMR, has been operating under Chapter 11 bankruptcy protection since late 2011.
A US bankruptcy judge on Thursday hinted he would approve AMR's bankruptcy exit plan despite the government's challenge to its main component - the planned merger. Judge Sean Lane said he found "arguments in favour of confirmation to be fairly persuasive."
Comments from the antitrust and bankruptcy case judges were positive for the airlines' shares because they suggested a speedy trial process and bankruptcy-court approval incorporating the merger, said George Hamlin, president of Hamlin Transportation Consulting.
It was surprising that the Justice Department wanted a lengthy period before trial, because its suit implied it had a slam-dunk case, Hamlin said. "They had the element of surprise. The airlines weren't expecting this. Why wouldn't you want to do it sooner rather than later?"