When the Justice Department and a handful of state attorneys general filed suit last week to halt the American-US Airways merger, it took most of us by surprise.
My own thinking ran something like this: “Wow, that could change everything. But surely the high-priced legal teams counseling American and US Airways had considered the possibility of a challenge to the merger and have a backup plan ready to deploy.”
But in yet another surprising development in this story, it turns out there was no Plan B.
In a Dallas Morning News interview, American’s general counsel, Gary Kennedy, admitted to being blindsided by the suit. “We knew Justice had some issues or views on the transaction, but we were still surprised and disappointed.” He was particularly flummoxed by the participation in the suit of Texas’s own attorney general. “I was totally surprised and disappointed with the Texas AG,” he said. “We are a Texas-based company and the new, merged company will be stronger and more influential and still based right here in Texas. I do not understand his position on this at all.”
And that Plan B I assumed American had tucked in its hip pocket? “We are focusing all of our efforts and energies on winning this lawsuit. There’s no Plan B.”
Bear in mind that the merger is the centerpiece of American’s reorganization plan that must be approved by a federal judge for American to exit bankruptcy protection. So American has all its eggs in a single basket, a basket that’s looking none too secure.
According to the article, American has been spending around $500,000 per day in legal expenses since filing for bankruptcy in November 2011. For that kind of money, you’d think the lawyers could have thrown in a backup plan.
You know, just in case.
This article originally appeared on FrequentFlier.com.
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