“A federal bankruptcy judge gave approval on Wednesday for US Airways and American Airlines to proceed with their planned merger, according to a source familiar with the situation.
In addition to the bankruptcy court, the merger still needs approval from federal regulators before it’s finalized, which is expected to happen in the third quarter of this year.
The combined US Airways-American company will join United Continental, Delta Air Lines and Southwest Airlines as the industry’s dominant players in the United States. Together, they accounted for 83% of U.S. airline passengers last year.
“U.S. Bankruptcy Judge Sean Lane today questioned American Airlines’ request for approval of a $20 million severance package for its chief executive as part of its proposed merger with US Airways, according to Bloomberg News.
American CEO Tom Horton would become chairman of the merged company for a limited time and would receive a severance of cash and stock when the merger closes.
Lane asked why the request shouldn’t be postponed and considered as part of a bankruptcy plan for the company
“Lane’s decision was complicated by objections to the timing of a $20 million severance package for outgoing American CEO Tom Horton. Horton has agreed to step down as CEO and leave the company within a year of the merger’s closing. The U.S. trustee objected to Horton’s severance, saying it is in excess of limits set under the bankruptcy code.
Lane decided not to approve that payment as part of his decision and plans to issue a written decision at a later date detailing his reasoning.
“Approving it today is just not appropriate,” Lane said.
Horton spent nearly his entire career at American, becoming CEO when the company filed for bankruptcy on Nov. 29, 2011.