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Judge Approves American Airlines’ Bankruptcy Plan, Pending Merger Approval

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(credit: American Airlines)

(credit: American Airlines)

DALLAS (CBSDFW.COM/AP) -  Nearly two years after filing for bankruptcy, a judge approved American Airlines’ reorganization plan.

It would allow the airline to leave bankruptcy.

Randy Ray, a Dallas attorney who specializes in mergers, says Judge Sean Lane’s ruling gives the airline and its tens of thousands of employees a psychological boost.  “It gives a clear signal that the merger was viable. I think that was the most critical thing. It gives it some momentum.”

American Airlines praised the ruling saying it shows its “heading in the right direction.”

Tom Hoban, a spokesman for the Allied Pilots Association, which represents American’s pilots says,

“It’s a positive sign that the bankruptcy court saw the feasibility of this merger going forward.”

But American still faces legal headwinds.

It won’t be cleared to take-off from bankruptcy until it receives approval for its proposed $14 billion dollar merger with US Airways.

But that won’t be easy because the U.S. Justice Department, Texas Attorney General and six other states are trying to block the airlines from joining forces.

They say the merger will reduce competition and lead to higher airfares and fees.

But the airlines say without a merger, they won’t be able to attract as many customers as Delta and United — which received the government’s blessing to merge with other airlines.

Hoban says, “He or she wants that flexibility to get from point A to point B with a minimum of connections, and a merger with US Airways greatly expands that.”

Both airlines are headed for a showdown in court against the government.

Their trial begins November 25th in Washington, D.C.

If the merger is grounded for good, American would have to go back to the bankruptcy judge.

Randy Ray says, “They’d have to start from ground zero again with the development of a stand-alone plan which they abandoned.”

But most analysts believe American and US Airways will be allowed to merge after giving up some take-off and landing slots at key airports such as Reagan National in Washington.Latest News:

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