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Trial date of November 25 set for U.S. challenge to AMR-US Airways merger

An American Airlines jet takes off while U.S. Airways jets are lined up at Reagan National Airport in Washington July 12, 2013. REUTERS/Larry Downing

By David Ingram and Diane Bartz

WASHINGTON (Reuters) - A federal judge on Friday set a tentative November 25 trial date for the U.S. government's legal challenge to the merger of American Airlines (AAMRQ.PK) and U.S. Airways Group Inc (LCC).

Judge Colleen Kollar-Kotelly, who will try the case without a jury, announced the date at a hearing in U.S. district court.

The U.S. Justice Department had asked for a March trial. The airlines had been pushing 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," the judge said in court.

Both airline stocks got a boost from the news. US Airways shares were up 4.4 percent at $16.66 in New York Stock Exchange trading on Friday, against a flat-to-lower market. Shares of AMR Corp, American's parent, were up 9.7 percent at $3.72 in thin over-the-counter trading.

The Justice Department sued on August 13 to block the deal, which would create the world's biggest air carrier. The government said the merger would lead to higher prices for customers, while the companies said it would make them more competitive and strengthen the market.

Justice Department spokesman Peter Carr said in a statement after the hearing: "We appreciate the court's careful consideration of the scheduling issues and will be ready to present our case on November 25, 2013."

"What we got here was assurance that we will have our day in court," Richard Parker, a lawyer representing US Airways, told a news conference outside the courthouse on Friday. He declined to comment when asked how specific the settlement discussions had been.

A joint statement from the airlines said in part: "We are confident in our case and eager to get to court. We are pleased to have a trial date that will enable us to resolve this litigation in a reasonable time frame."

In its complaint, the Justice Department focused on Ronald Reagan National Airport, outside Washington, D.C., 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.

10 to 12 DAY TRIAL

Lawyers for the two sides said the trial was expected to last 10 to 12 business days. The judge will appoint a special master to help the discovery process move along faster. She set a status conference for October 1.

The Justice Department plans to call about 15 witnesses and the airlines plan to call approximately six. The department proposes to conduct pre-trial depositions of as many as 50 people. The airlines said they want to depose about 10 people. Lawyers said they could exchange millions of documents.

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 said in an email, "given the depth and strength of the DOJ's case, the government should be ready."

The two airlines and the Justice Department indicated in a joint court filing on Wednesday that they were open to settling the matter without a court fight.

The government, however, said that while it was prepared to settle, 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 Corp, has been operating under Chapter 11 protection since late 2011.


A U.S. bankruptcy judge on Thursday hinted he would approve AMR's bankruptcy exit plan despite the government's challenge to its main component - AMR's planned merger with US Airways.

If the Justice Department succeeds in blocking the merger it would put AMR's restructuring back at square one, requiring it to forge new strategies for repaying creditors.

Comments from the antitrust and bankruptcy judges were positive for the airlines' shares since they suggest moving forward the trial date and bankruptcy-court approval incorporating the merger, said George Hamlin, president of Hamlin Transportation Consulting, in Fairfax, Virginia.

Concluding the merger is critical to investors, because delay benefits rival airlines Delta and United, he said.

"It looks like there's some negotiating going on," Hamlin said, referring to Judge Kollar-Kotelly's statements on Friday.

It was surprising that the Justice Department wanted a lengthy period before trial, since 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?"

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

(Additional reporting by Alwyn Scott and Nick Brown; Writing by Howard Goller; Editing by Steve Orlofsky)