American-US Airways merger formally approved by bankruptcy judge

Posted Friday, May. 10, 2013  comments  Print Reprints

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U.S. Bankruptcy Judge Sean Lane officially approved American Airlines’ merger agreement with US Airways on Friday, signing a court order that affirmed his decision at a March 27 hearing.

And in keeping with his decision, the written order did not approve a $20 million severance package proposed for American Chief Executive Tom Horton — a plan that the bankruptcy trustee had objected to.

The two carriers had originally agreed to pay Horton $9.9375 million in cash and $9.9375 million in shares of the new company’s common stock once the merger closed. Bankruptcy trustee Tracy Hope Davis argued that the payment did not conform to restrictions placed on executive compensation by the U.S. bankruptcy code.

In a written decision last month, Lane said bankruptcy laws prohibit him from approving the severance, which he said would also be premature because the companies had not filed a reorganization plan.

With Lane’s blessing, the merger now needs to be approved by government regulators and US Airways shareholders.

The carriers expect to close the deal this fall. But it will then take at least 18 months for the new company to receive its single-operating certificate from the Federal Aviation Administration, executives said in a letter to employees Friday.

US Airways’ chief operating officer, Robert Isom, and American’s treasurer, Bev Goulet, said thousands of systems and procedures will need to be integrated. A new executive team will be named in late May or early June, they said.

“Consider the numbers: Our integration will include more than 110,000 people serving 187 million customers a year flying to and from 336 destinations on more than 1,500 planes. Boil that down, and we will need to align thousands of systems, applications, procedures and policies as we implement the merger. And we want to get every one of them right,” the letter said.

Andrea Ahles, 817-390-7631 Twitter: @Sky_Talk

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