PARTIES FILE LEGAL OBJECTIONS TO AMERICAN AIRLINES RE-ORGANIZATION & ANTI-TRUST, ANTI-COMPETITIVE MERGER WITH U.S. AIRWAYS

PARTIES FILE LEGAL OBJECTIONS TO AMERICAN AIRLINES RE-ORGANIZATION & ANTI-TRUST, ANTI-COMPETITIVE MERGER WITH U.S. AIRWAYS

By Terry Mason, Dallas News, 07/30/13

One day after stakeholders finished voting on the American Airlines plan of reorganization, Tuesday marked the deadline for parties to file objections to the plan.

Here are summaries of a number of the objections, filed in advance of an Aug. 15 hearing by U.S. Bankruptcy Judge Sean Lane to consider confirming the plan:

1. The plaintiffs challenging the merger of US Airways and American Airlines on antitrust grounds want Lane to delay the hearing.

In a July 2 lawsuit filed in U.S. District Court in San Francisco, the plaintiffs alleged that the merger was anti-competitive and violated the Clayton Act. They asked Judge Lane to continue the hearing until they get a decision on their lawsuit, which they said would have a “normal turnaround time of anywhere between 90-180 days” as court scheduling would allow.

2. The American Independent Cockpit Alliance, which represents former Trans World Airlines pilots, wants the plan’s confirmation delayed until the AICA wraps up its appeal of a Lane decision from December.

The AICA lost its effort to block American and the Allied Pilots Association from signing a new contract, which eliminated protections for the ex-TWA pilots based in St. Louis. The AICA appealed that decision to U.S. District Judge Colleen McMahon in New York. The AICA said all briefing in McMahon’s court had been completed April 30.

3. “Supplement B” pilots also wanted Lane to delay a decision until their case in Judge McMahon’s court is decided.

Supplement B refers to contract language that protected American Airlines pilots who were at the carrier as of Nov. 1, 1983. Management agreed to protect pilots then at the airline from concessions that would apply to new pilots. The commitment was contained in Supplement B to the contract.

However, when the company negotiated a new contract with the union last year, it did away with Supplement B and its provisions, such as the right for a retiring pilot to take his or her pension in a lump sum.

The Supplement B pilots, of which there somewhere over 100 remaining at American, also appealed Lane’s decision to Judge McMahon’s court.

4. The US Airline Pilots Association, which represents US Airways pilots, filed a “limited objection” which said that “the plan currently fails to demonstrate its feasibility.”

In particular, American, parent AMR, etc. “fail to establish a business plan for their regional carriers, most importantly American Eagle, one of the core components of their business,” USAPA said in its filing.

USAPA also objected to the plan’s release of claims against non-debtors, i.e. merger partner US Airways.

“The Nondebtor Release not only would discharge claims against non-debtors arising from their own misconduct, but would also shield non-debtors – most notably, US Airways – from liability if they were to breach the terms of the MOU approved by this Court,” the USAPA filing said.

The MOU is a memorandum of understanding that spells out how the merger would treat USAPA members and American pilots, represented by the Allied Pilots Association.

USAPA also objected to a payment of nearly $20 million in cash and stock to outgoing American Airlines CEO Tom Horton, saying it wasn’t permitted under federal law.

That’s an issue that’s been argued a couple of times since the airlines announced the merger in February.

5. Cantor Fitzgerald, which lost 658 employees and its primary offices when an American Airlines jet struck the north tower of the World Trade Center on Sept. 11, 2001, filed a limited objection to make sure it can still proceed with its lawsuit against American.

Judge Lane in early 2012 granted Cantor Fitzgerald the right to pursue its liability lawsuit against American, with damages limited to what American’s insurance might pay. The case is set to go to trial in January 2014, the CF filing said.

The firm worried that the plan of reorganization seemed to preclude its lawsuit from proceeding, despite Lane’s ruling in 2012. It asked that the plan add language to make clear that the lawsuit can go on.

6. Fort Worth and the Alliance Airport Authority had a limited objection and reservation of rights to make sure that American fulfills its obligations dating from more than 20 years ago when it occupied a big maintenance base at the airport. The airline has shut down most of its Alliance operations.

7. There have been some limited objections and reservation of rights came from trustees for creditors and equipment lessors.

8. Tax officials from Miami, Los Angeles, Waco and Brazos County, Midland and Taylor County and Denton and Denton County filed objections seeking to make sure they get paid the taxes owed their jurisdictions.

9. Allegheny County, Pa., which owns the Pittsburgh airport, said their claims for $30.5 million owed them by American and American Eagle isn’t being handled fairly. Its payment would have to come from a reserve fund for all such disputed claims that American wants limited to a maximum $331 million.

Creditors like Allegheny County only found out they and others with similar dispute claims might not get all their money back when American filed a motion to set the reserve fund’s limit at $331 million.

“That motion made clear that, although the Debtors project $2.63 billion in Allowed Single-Dip General Unsecured Claims, there are an additional $4.7 billion in Disputed Claims, for which the Debtors intend to reserve a mere $331 million. Further, the implication of a distribution of less than 100% to Single-Dip General Unsecured Claims is that no distribution may be made to equity in the event Debtors seek nonconsensual confirmation.”