Bloomberg Business Week says that American Airlines will be seeking an extension (90 days) to have an exclusive right to present a reorganization plan to the court.   This would nominally prevent US Airways from making its own proposal in late September.

It’s quite likely that this extension will be granted given what has been going on with the Section 1113 hearings in that a ruling on abrogating the union contracts has been extended to August.  The bankruptcy judge is likely to cooperate with American Airlines on this extension as it grants American the reasonable opportunity to put its plan together once it knows what its labor costs are likely to be.

Expect to see many unsecured creditors (unions in particular) object to this extension.

To a degree, this works in US Airways favor.  It allows them to make their case stronger with unsecured creditors and point to AA’s inability to get its house in order.

I think this a mistake on AA’s part as it signals that it is now reacting to US Airways instead of its own problems.  To creditors, directors on its board and others, this isn’t what you want to see in a bankruptcy.

Filed under: Airline News by ajax