News Column

AA, US Airways Merger Gets Court Approval

May 11, 2013
AA, US Airways, Merger, Judge's Approval

May 11--The judge in the American Airlines bankruptcy case officially signed off on the proposed merger agreement with US Airways, moving over another barrier toward the end of a court journey now 17 months old and counting.

The move clears the way for American Airlines to continue to gather support for the bankruptcy reorganization plan that it submitted to the court last month. The $11 billion merger with US Airways is central to that plan, creating the world's largest airline with nearly 100,000 employees.

U.S. Judge Sean Lane's signature comes more than six weeks after he heard the motion during a March 27 hearing, in which he also struck down the part of the agreement giving AMR Corp. CEO Thomas Horton a $20 million severance package.

In the order Lane said again that he was not approving the $20 million deal that would see Horton step down as CEO of the company and make way for US Airways CEO Doug Parker when the companies combine.

"The CEO Letter Agreement is not approved," Lane wrote.

U.S. Trustee Tracy Hope Davis objected to the payout for Horton on grounds that it violates bankruptcy law that limits payouts and severances to executive management.

Lane agreed and said in a previous ruling that he couldn't approve it as part of the bankruptcy process but that Horton and the new company would be free to make their own deal at a later time.

American Airlines has continued to push the court to make the severance an official part of the bankruptcy process and has resubmitted the payout proposal as part of its bankruptcy reorganization plan.

The court has scheduled a June 4 hearing for American Airlines to officially present its reorganization plan, and then it will have 60 days to persuade creditors to endorse the deal.

American Airlines officials have indicated that they still plan to emerge from bankruptcy, gain regulatory approval and officially merge with US Airways by the end of September.


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