August 27, 2013 / 9:14 PM / 6 years ago

U.S. asks for March trial in airline merger challenge

WASHINGTON (Reuters) - The U.S. Justice Department asked a federal court on Tuesday to set a March 3 trial date to hear arguments over whether it should stop a planned merger between US Airways LCC.N and American Airlines AAMRQ.PK.

U.S. Airways jets are seen at Reagan National Airport in Washington July 12, 2013. REUTERS/Larry Downing

The companies had requested a 10-day trial that would begin on November 12.

The Justice Department filed a lawsuit on August 13, asking a federal court to order the companies to abandon plans for a deal to create the world’s largest carrier.

The department has argued that the deal would reduce competition and lead to higher air fares.

The companies have said that the deal was critical for American Airlines, which has been operating under Chapter 11 protection since late 2011. They also argue that consumers would benefit because the new, merged airline would give Delta Air Lines Inc (DAL.N) and United Continental UAL.N stiffer competition.

Companies generally push for an expedited trials in merger challenges. Holding a deal together for months puts a strain on the parties because they are essentially in limbo, unable to merge and hampered in making independent long-range plans.

US Airways, based in Tempe, Arizona, and American, based in Fort Worth, Texas, had argued in their filing that they faced “unusual and pronounced burdens while they await their day in court,” with American particularly vulnerable since it is in the process of emerging from bankruptcy.

They also noted that the merger agreement included a termination clause that would allow either carrier to scrap the deal as of December 13.

The Justice Department, for its part, argued that American Airlines’ restructuring effort had been “extraordinarily successful and had positioned the company to compete as a strong and vibrant standalone firm.”

And it dismissed the importance of the December 13 date. “They (the companies) can change this self-imposed deadline with the stroke of a pen,” the Justice Department said in its filing.

The airlines, in a joint statement, said on Tuesday that the government’s request for a March 2014 trial is “entirely unreasonable” and said it looked forward to “vigorously defending the merits of this transaction.”

“Further, unnecessary delays also prevent American’s financial stakeholders, which includes creditors, shareholders and employees, from realizing the benefits and improved certainty that will come from American’s emergence from Chapter 11. The government cannot justify its slow trial schedule,” the companies said in a statement.

The case at the U.S. District Court for the District of Columbia is No. 1:13-cv-012346-CKK.

Reporting by Diane Bartz; Editing by Ros Krasny and Bernard Orr

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