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AMR seeks court approval for settlement paving way to US Airways merger

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

By Nick Brown

NEW YORK (Reuters) - The parent company of American Airlines on Monday asked a bankruptcy court to approve a settlement with U.S. regulators that would allow it to merge with rival US Airways Group and create the world's largest airline.

Stephen Karotkin, a lawyer for AMR Corp , said the settlement resolving the U.S. Justice Department's antitrust objections was not opposed by any of the company's creditors.

"Of the literally hundreds of thousands of creditors and shareholders - those entities with a legitimate economic interest in these cases - not one objection was filed," Karotkin said at a hearing in the U.S. Bankruptcy Court in Manhattan.

The only opposition came from a group of consumers who had sued the airlines in a separate case alleging the merger would lead to higher prices, more crowded planes and more expensive in-flight amenities. The group sought a temporary restraining order blocking the plan from going into effect.

Judge Sean Lane said he would aim to offer a ruling later on Monday, but said it could take 24 to 36 hours.

The planned merger is the basis for AMR's plan to end its two-year Chapter 11 and pay back its creditors, but the Justice Department sought to block it on antitrust grounds.

Earlier this month, the two airlines agreed to divest themselves of takeoff and landing rights and gates at Washington Reagan National, New York's LaGuardia and several other airports. The deal needs approval from Lane, who oversees AMR's bankruptcy.

The Justice Department has said that smaller and traditional discount carriers such as Southwest Airlines Co and JetBlue Airways Corp should be allowed to bid for the slots.

The leaders of the U.S. Senate and House transportation committees on Friday released a letter to U.S. Attorney General Eric Holder saying the slot bidding process should be open to all airlines, including global network carriers such as Delta Air Lines Inc , which has expressed an interest in buying slots at Reagan National and Dallas Love Field. The lawmakers said smaller communities could lose service if the allocation of divested slots is only to low-cost airlines.

"While low cost carriers may increase competition on commercial air service to larger markets, they do not generally provide service to smaller communities or rural areas, as only legacy air carriers have networks that encompass these areas," the lawmakers said in the letter.

The deal is expected to afford some recovery for shareholders of pre-bankruptcy AMR, a rarity in Chapter 11 for public companies. Overall, Karotkin said, stakeholders are on track to realize more than $13 billion in value.

(Reporting by Nick Brown; Editing by Krista Hughes)

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