Judge Approves Merger of US Airways and American Airlines; Severance for Horton Declined

The merger between US Airways and American Airlines — creating the largest airline in the world — was approved today by Judge Sean H. Lane in bankruptcy court in New York, believing that the merger is an “excellent result” which he does not think anyone disputes.

Tom Horton — the current chief executive officer of American Airlines — may not be celebrating just yet, however, as Lane declined to approve a severance package reportedly worth approximately 20 million dollars. This does not mean that he will not receive a severance; rather, the proposed severance — as well as the final exact amount — may be determined by an entity other than the judge at a later date.

Think about it — how would you like to be a creditor of a company still under bankruptcy protection, only to find out that that chief executive officer of that company receives approval for nearly 20 million dollars in severance before the company emerges from said bankruptcy protection? I do not blame the judge of the bankruptcy court for declining to rule on a decision which could incur wrath from stakeholders awaiting their money.

The merger of US Airways and American Airlines was first announced back in February earlier this year. AMR Corporation — the current parent of American Airlines — is still currently under Chapter 11 bankruptcy protection since November of 2011 and still is required to create and submit a formal restructuring plan incorporating the merger which meets approval by the bankruptcy court and creditors before American Airlines can emerge from bankruptcy protection.

Doug Parker — the current chief executive officer of US Airways who has been longing to run the largest airline in the world since at least 2006 — is one step closer to realizing his dream. The merger is not considered a “done deal” just yet, as regulatory approval by the Department of Justice of the United States is still required — but approval of the merger by the bankruptcy judge is a significantly important step.

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