A federal court approved American Airlines’ reorganization plan on Wednesday, clearing the way for the airline’s exit from bankruptcy and removing the final hurdle to its merger with US Airways to form the world’s largest airline.
The ruling by Judge Sean H. Lane of the United States Bankruptcy Court for the Southern District of New York puts an end to a rocky two-year period for the airline, which sought court protection to reorganize its business, shed debt and rewrite labor agreements.
A central feature of the reorganization plan was the merger with US Airways, a prospect that had the backing of American’s creditors and employees. But the plan was temporarily disrupted after a challenge from the Justice Department over the summer on the grounds that it would hurt competition and lead to higher fares.
The airline as well as labor groups welcomed the ruling, which offers a chance for American to reclaim a top spot among the nation’s carriers. The merged airline will have 6,700 daily flights, 1,500 airplanes and about 100,000 employees. Its combined annual revenue will reach about $38 billion.
American, which has lagged rivals in recent years, was the last of the legacy airlines to file for bankruptcy, stumbling from its perch as the nation’s top carrier after falling behind Delta Air Lines and United Airlines. Both of those airlines had already reorganized their businesses in recent years and had expanded through mergers of their own.
American and US Airways argued that a combination was the best hope to provide travelers with a similar global network capable of competing with Delta and United or risk being left behind.
But American will have to work hard to convince passengers that a larger carrier can offer better and more customer-friendly service. Airline mergers are usually bumpy events, often marred by reservation problems and computer glitches. United, for example, suffered repeated flight delays and disruptions last year because of problems associated with its merger with Continental Airlines.
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