AMR's CEO to get nearly $20 million severance package

Posted Thursday, Feb. 14, 2013  comments  Print Reprints
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The deal

New company will be called American Airlines Group, based in Fort Worth.

Doug Parker will become chief executive officer; Tom Horton will become non-executive chairman for about a year.

AMR creditors will own 72 percent of new company; US Airways owners will get 28 percent.

AMR unions will have 23.6 percent equity stake.

Approval required from regulators and Bankruptcy Court.

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AMR Chief Executive Tom Horton had a difficult task.

Horton, who served twice as chief financial officer at American Airlines' parent company, was elevated to the top spot the night before AMR filed for bankruptcy in late 2011. And now that it appears the carrier will emerge successfully from bankruptcy as part of a merged airline with US Airways, Horton will be departing.

For shepherding the Fort Worth-based carrier through bankruptcy, Horton will receive $19.875 million in cash and stock as a severance package when the merger closes, according to a Securities and Exchange Commission filing made Thursday afternoon. He will stay on as chairman of the new American Airlines Group until the new company holds its first annual meeting of stockholders, likely in mid-2014.

Horton was all smiles Thursday as he announced the merger with US Airways Chief Executive Doug Parker, who will run the combined company.

He joked with Parker in front of employees and the media and was steadfast that his initial reluctance to pursue a merger in early 2012 was so he could get the best value for American's owners.

"When there was talk of a merger right when we were at the outset of our restructuring, I thought that was unwise," Horton said. "I didn't think that would create an outcome that maximized value for our owners. I didn't think it would create a good outcome for our people."

By rebuffing an initial offer of a 50-50 equity split between the two carriers and developing a stand-alone plan for American to compare against alternatives like a merger, Horton believes he was able to negotiate a better deal for the creditors and the stockholders.

He also did well for himself. Upon closing the merger, Horton will receive $9,937,500 in cash and $9,937,500 in shares of the new company's common stock, the SEC filing states. He will also receive lifetime flight and travel benefits, and an office for two years.

Parker thanked Horton during his comments on Thursday, saying Horton knows the airline business and will be crucial to the success of the integration of the two carriers.

"What he cares about is American Airlines," Parker said at the news conference. "Throughout this entire process, he's had one concern, not himself, but what's best for American."

While American has operated in bankruptcy, Horton has improved the carrier's financial position. AMR reported a record $24.85 billion in revenues in 2012 and unit revenues grew year-over-year.

Thomas Roberts, a corporate partner with Weil, Gotshal & Manges, AMR's lead counsel, said Horton believed his job was to get American restructured and do what was best for the company.

That included stepping down from the chief executive spot and handing it over to Parker.

"During the last month, he had to decide what he wanted to do about governance and all along he was very sensitive to making sure he was treated like the other employees," Roberts said. "He left a lot sitting on the table."

Horton said he will be involved in a transition team with Parker to set up a new management team before the merger closes and then assume the usual duties of a chairman of the board.

"I am pretty passionate about American Airlines and its success," Horton said. "We're going to be very candid with one another about the things that will make American a success going forward."

Andrea Ahles,

817-390-7631

Twitter: @Sky_Talk

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