Judge OKs US Airways' Request on Bidding

ALEXANDRIA, Va. (AP) -- A judge on Tuesday began outlining a roadmap for the proposed merger of US Airways and America West through the bankruptcy process, limiting to 30 days any potential competing bids.

Bankrupt US Airways Group Inc. sought the window to ''shake the tree and see if there's any higher, better offer.''

If no other suitors emerged, the two air carriers would exclusively negotiate a merger.

The judge was also considering a proposed retention plan to stop the exodus of US Airways' management employees.

US Airways, which filed for bankruptcy last year, has proposed a marriage with America West Holdings Corp., based in Tempe, Ariz., that would allow it to emerge from its second trip to bankruptcy court since 2002

In another order Tuesday, U.S. Bankruptcy Judge Stephen Mitchell allowed a provision that either airline receive a $15 million breakup fee if either party walks away from the deal.

The Pension Benefit Guaranty Corp., the largest US Airways creditor, had objected to that provision, saying it would stifle potential competing bids.

Mitchell also struck language that would have prohibited the airline's unions from speaking out or taking action in opposition to the merger. The unions said in court Tuesday they do not oppose the merger but simply want to preserve their rights in the future.

US Airways had said it had not intended for the specific provision to impinge on the unions' advocacy rights.

Tuesday's hearing was scheduled to establish a framework and timeline for approval of the proposed merger between the nation's seventh- and eighth-largest airlines.

US Airways argued that a program is needed to staunch attrition while the air carrier moves forward on a merger that likely would result in the elimination of many US Airways management jobs.

''This is a big, long, complicated process and we're going to need to keep management and salaried employees around ...,'' said Brian Leitch, an attorney representing US Airways. ''If we screw up the integration, it could be a disaster. We could fail.''

But the retention plan was opposed by union officials, who noted workers' deep concessions during the bankruptcy, and the U.S. trustee overseeing the bankruptcy case.

''The debtors' financial performance has been inconsistent at best and dismal at worst,'' trustee Jack Franklin told Mitchell.

The two airlines have a combined fleet of about 400 jets.

The merger would need the approval of U.S. Bankruptcy Court when a final reorganization plan is submitted, as well as American West shareholders and federal regulators.