American regional aircraft order delayed by DOJ challenge

Washington DC
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A planned order by American Airlines for new Bombardier or Embraer regional jets has been delayed, as it fights a US Department of Justice (DOJ) challenge to its proposed merger with US Airways.

The postponing of the Fort Worth, Texas-based carrier's exit from Chapter 11 bankruptcy as a result of the challenge is cited as the official cause of the delay, in a US District Court for the District of Columbia filing on 28 August.

"American intended to finance the purchases of these new aircraft with favourable export credit financing," American says. "However, this type of financing will only be available to American after it emerges from bankruptcy."

It adds that alternative sources of financing are only available at "considerably less favourable terms" while it operates under court protection.

American will continue to operate under bankruptcy protection until either a settlement or court ruling in the DOJ's challenge to its proposed merger. It is seeking a 12 November trial date while the federal agency has requested a 3 March 2014 date.

DC district court judge Coleen Kollar-Kotelly will hold a trial scheduling conference with American, US Airways and the DOJ on 30 August.

American is in discussions with both Bombardier and Embraer for an order of roughly 60 76-seat CRJ900s or E-175s, Flightglobal reported in July.

Deliveries would begin as early as June 2014 with the aircraft used to either replace smaller regional jets at AMR-subsidiary American Eagle Airlines or "older, inefficient larger jets" in American's mainline fleet, according to the filing.

Brazilian development bank BNDES confirms that it would offer export credit financing to American if it orders E-175s.

"The government of Brazil will be happy to assist regardless of history or mergers," says a source at the bank. "We're permanently available."

Export Development Canada (EDC) declines to comment on whether it has offered support for a potential CRJ900 order.

"The whole process has been much delayed by this complaint by the DOJ," says a source familiar with the order negotiations.

They add that both BNDES and EDC have at least verbally offered export credit financing for a potential order, while backstop financing is also available from both OEMs.

American has been in discussions with Bombardier and Embraer on the deal, which is dubbed "project Panama" internally, since at least the first quarter.

The new large regional jets would join 47 E-175s operated by Republic Airlines that began flying under the American Eagle name on 1 August.

SkyWorks Capital is advising American on the potential order.