Airline merger gets OK of court

NEW YORK — American Airlines won bankruptcy court approval Wednesday to combine with US Airways and form the world’s biggest airline.

“The merger is an excellent result. I don’t think anybody disputes that,” Judge Sean H. Lane said before issuing his decision.

But the judge declined to sign off on a proposed $20 million severance package for Tom Horton, currently the CEO of American’s parent AMR Corp.

The approval is an important milestone for American, which filed for Chapter 11 in November 2011 after having long resisted using the bankruptcy process to cut labor and other costs. The merger still needs approval from Department of Justice antitrust regulators and US Airways shareholders. It is expected to close by the fall.

The combined airline will have 6,700 daily flights and annual revenue of roughly $40 billion. The new American Airlines will fly slightly more passengers than United, the current No. 1. It will be run by Doug Parker, the CEO of US Airways Group Inc., who began pursuing a merger shortly after American entered bankruptcy protection.

The U.S. trustee, a federal bankruptcy watchdog, had objected to the severance package for Horton. While he didn’t question the amount, Lane agreed that the timing of it seemed to violate prohibitions in the bankruptcy law.

“Approving it today is just not appropriate,” Lane said. The judge plans to issue a written decision at a later date detailing his reasoning.

Horton has spent nearly his entire career at American, becoming CEO when the company filed for bankruptcy. Horton will cede the CEO position to Parker when the deal closes, and has agreed to leave the company’s board within a year of the closing date.

In 2011, Horton was paid a salary of $618,135. He also got stock awards and options that were valued that year at nearly $2.7 million, but the company argued those could be nearly worthless after the bankruptcy reorganization. Figures for 2012 aren’t yet available.

The proposed severance package includes $19.9 million in cash and stock as well as a lifetime of free first-class tickets on American for Horton and his wife.

Horton could still receive the payout. American’s lawyers offered a possible solution during the hearing: American and US Airways would amend their merger agreement to say that Horton’s severance would be subject to ratification of the board of directors of the new airline, after the merger closes.

Jack Butler, a lawyer with Skadden, Arps, Slate, Meagher &Flom, said he expects Horton to eventually get his payout. Butler’s firm represents American’s creditors, who support the merger.

“Tom has never made this case about himself, and I don’t expect him to start now,” Butler said.

In most bankruptcy cases, creditors lose part of the money they are owed. Thanks in part to the merger, creditors in this case will get back what they are owed. Onetime shareholders of AMR Corp. are slated to get a 3.5 percent of the new airline.

Separately, Lane approved a motion to extend American’s exclusive period for filing a reorganization plan until May 29, the last such extension allowed under law. There is then a 60-day waiting period for creditors to object to the plan before Lane can sign off on American’s emergence from bankruptcy protection.

——

Airlines Writer David Koenig in Dallas contributed to this article.

——

Scott Mayerowitz can be reached at http://twitter.com/GlobeTrotScott.

.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Black Press Media operates Sound Publishing, the largest community news organization in Washington State with dailies and community news outlets in Alaska.
Black Press Media concludes transition of ownership

Black Press Media, which operates Sound Publishing, completed its sale Monday (March 25), following the formerly announced corporate restructuring.

Maygen Hetherington, executive director of the Historic Downtown Snohomish Association, laughs during an interview in her office on Thursday, Feb. 15, 2024, in Snohomish, Washington. (Ryan Berry / The Herald)
Maygen Hetherington: tireless advocate for the city of Snohomish

Historic Downtown Snohomish Association receives the Opportunity Lives Here award from Economic Alliance.

FILE - Washington Secretary of State Steve Hobbs poses in front of photos of the 15 people who previously held the office on Nov. 22, 2021, after he was sworn in at the Capitol in Olympia, Wash. Hobbs faces several challengers as he runs for election to the office he was appointed to last fall. (AP Photo/Ted S. Warren, File)
Secretary of State Steve Hobbs: ‘I wanted to serve my country’

Hobbs, a former Lake Stevens senator, is the recipient of the Henry M. Jackson Award from Economic Alliance Snohomish County.

Mark Duffy poses for a photo in his office at the Mountain Pacific Bank headquarters on Wednesday, Feb. 14, 2024 in Everett, Washington. (Annie Barker / The Herald)
Mark Duffy: Building a hometown bank; giving kids an opportunity

Mountain Pacific Bank’s founder is the recipient of the Fluke Award from Economic Alliance Snohomish County.

Barb Tolbert poses for a photo at Silver Scoop Ice Cream on Thursday, Feb. 29, 2024 in Arlington, Washington. (Annie Barker / The Herald)
Barb Tolbert: Former mayor piloted Arlington out of economic brink

Tolbert won the Elson S. Floyd Award, honoring a leader who has “created lasting opportunities” for the underserved.

Photo provided by 
Economic Alliance
Economic Alliance presented one of the Washington Rising Stem Awards to Katie Larios, a senior at Mountlake Terrace High School.
Mountlake Terrace High School senior wins state STEM award

Katie Larios was honored at an Economic Alliance gathering: “A champion for other young women of color in STEM.”

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.