US Airways One Step Closer to Merger with American Airlines

Michael Teague  |

The American Airlines-US Airways (LCC) merger that was announced last month came one step closer to approval on Wednesday as a Manhattan bankruptcy judge approved AMR Corp’s plan for the deal.

American Airlines filed for chapter 11 in November of 2011 after long difficulties in implementing effective cost-cutting measures.  The deal will still need the approval from antitrust regulators at the Department of Justice, as well as US Airways shareholders, with both decisions expected before the end of the year.

The new airline will be run by US Airways CEO Douglas Parker, and is set to surpass the current top ranking US airline United in terms of passenger volume, with 6,700 flights each day.

The deal is also a particularly good one for shareholders of the now-bankrupt AMR Corp., former proprietor of American Airlines, who will retain 3.5 percent of the end product of the merger, which is predicted to bring in revenues of $40 billion per year.

One part of the deal that was rejected, for the moment at least, was former American CEO Tom Horton’s severance package.  Horton would receive just under $20 million in cash and stock, plus am lifetime of free first-class tickets for him and his wife.  Judge Sean Lane, who presided over the hearing, took no issue either way with the payout itself, but said its timing would run contrary to bankruptcy laws.

American Airlines will still have to submit a reorganization plan, but judge Lane gave the former company two additional months to do this.  They now have until May 29th to do so.

US Airways Group closed Wednesday at a gain of t 0.85 percent to $16.65.

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