A US court has approved the bankruptcy plan of American Airlines’s parent company AMR, a key part of a proposed American-US Airways merger deal facing a government antitrust challenge.

US Bankruptcy Judge Sean Lane on Thursday approved AMR’s plan to emerge from bankruptcy, in spite of the pending Department of Justice lawsuit.

“This is yet another important milestone in completing one of the most successful turnarounds in commercial aviation,” said American spokesman Mike Trevino.

“We are focused on the antitrust case and will show that our planned merger with US Airways is good for consumers and competition.”

The AMR bankruptcy reorganisation, initially filed in November 2011, had been near completion in August when the Justice Department filed suit to block the American-US Airways merger.

At that point, Lane ordered briefs from American and other stakeholders on whether the department’s action should affect the reorganisation plan.

American argued that a failure by Lane to approve the reorganisation plan would have added a “destabilising factor” to its carefully negotiated agreements with unions and other parties involved in the bankruptcy.

The Justice Department did not take a position on whether the reorganisation should be approved.

However, the reorganisation plan holds that if American and US Airways fail to win or settle the antitrust litigation, the reorganisation plan would need to be reconsidered by the bankruptcy court.

The US antitrust complaint against the airlines is scheduled to be heard November 25 in Washington.

The government has argued the merger will lead to less competition and higher fares.

The airlines have argued that the merger will benefit consumers by creating a competitor to mega airlines United Airlines and Delta Air Lines that will offer more flights and better service.