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American Airlines/US Airways merger scuppered?

American Airlines’ merger with US Airways could be in doubt after the US Justice Department filed a lawsuit saying it would restrict competition.

The merger was to have been given the stamp of approval by a judge on Thursday, creating one of the world’s largest carriers by the end of the month. However, in a surprise move, the Department argued in a submission to a federal court in Washington that the deal breached anti-trust laws because it would lead to less competition in the industry.

American Airlines had planned to use the deal to mark its exit from bankruptcy protection under the US Chapter 11 laws, which allows it to reorganise and seek funding while it is protected from its creditors. The announcement is a huge blow to these plans, particularly as the European Union waved through the deal earlier this month. Earlier mergers between Delta and Northwest and United and Continental were also rubber stamped by the US authorities. It is thought that the emergence from Chapter 11, scheduled for Thursday, will not be affected.

American Airlines and its prospective merger partner had recently agreed to concessions, including allowing a competitor onto the Heathrow-Philadelphia service. Shareholders and creditors had also given their approval. American Airlines said it would make a statement later.

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